<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
[___] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ TO _______
Commission file number 1-10389
-------
WESTERN GAS RESOURCES, INC.
- - -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 84-1127613
- - ------------------------------- ------------------------
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
12200 N. Pecos Street, Denver, Colorado 80234-3439
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(303) 452-5603
- - --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
No Changes
- - --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report).
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 .
----- -----
As of November 1, 1994, there were 25,703,456 shares of the Registrant's Common
Stock outstanding.
Reference is made to the listing beginning on page 28 of all exhibits filied as
a part of this report.
1 of 138
<PAGE>
WESTERN GAS RESOURCES, INC.
INDEX TO FORM 10-Q
------------------
<TABLE>
<CAPTION>
PART I - Financial Information Page
- - ------------------------------ ----
<S> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet -
September 30, 1994 and December 31, 1993 ........ 3
Consolidated Statement of Cash Flows -
Nine months ended September 30, 1994 and 1993 ... 5
Consolidated Statement of Operations - Quarters
and nine months ended September 30, 1994 and 1993 7
Consolidated Statement of Changes in Stockholders'
Equity - Nine months ended September 30, 1994 ... 8
Notes to Consolidated Financial Statements ...... 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............. 14
PART II - Other Information
- - ---------------------------
Item 1. Legal Proceedings ............................... 24
Item 5. Other Events .................................... 27
Item 6. Exhibits and Reports on Form 8-K ................ 28
Signatures ............................................... 29
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
--------------------
WESTERN GAS RESOURCES, INC.
CONSOLIDATED BALANCE SHEET
($000s)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1994 1993
------ ------------- ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash................................ $ 19,701 $ 4,666
Trade accounts receivable, net...... 110,187 142,336
Product inventory................... 49,860 20,850
Parts inventory..................... 2,327 2,161
Other............................... 2,867 1,544
---------- ----------
Total current assets.............. 184,942 171,557
---------- ----------
Property and equipment, at cost:
Gas gathering, processing, storage
and transmission.................. 824,412 684,964
Oil and gas properties and
equipment......................... 142,429 134,638
Construction in progress............ 65,441 148,918
---------- ----------
1,032,282 968,520
Less: Accumulated depreciation,
depletion and amortization......... (164,185) (123,351)
---------- ----------
Total property and equipment, net 868,097 845,169
---------- ----------
Other assets:
Gas purchase contracts (net of
accumulated amortization of $13,942
and $10,756, respectively)........ 34,670 37,556
Other............................... 45,361 60,466
---------- ----------
Total other assets................ 80,031 98,022
---------- ----------
Total assets.......................... $1,133,070 $1,114,748
========== ==========
</TABLE>
- Continued on following page -
3
<PAGE>
WESTERN GAS RESOURCES, INC.
CONSOLIDATED BALANCE SHEET
($000s, except share amounts)
- Continued from previous page -
<TABLE>
<CAPTION>
September 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993
- - ------------------------------------ ------------- ------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable................. $ 129,759 $ 160,956
Short-term debt.................. 75,000 --
Accrued expenses................. 18,961 17,667
Dividends payable................ 3,895 2,080
Income taxes payable............. 854 --
---------- ----------
Total current liabilities...... 228,469 180,703
Long-term debt..................... 393,400 547,000
Deferred income taxes payable...... 67,857 66,481
Other long-term liabilities........ 7,121 7,695
---------- ----------
Total liabilities.............. 696,847 801,879
---------- ----------
Commitments and contingent liabilities
Stockholders' equity:
Common stock, par value $.10;
100,000,000 shares authorized;
25,702,430 and 25,651,722 shares
issued and outstanding, respectively 2,573 2,565
Treasury stock, at cost, 25,016 and no
shares in treasury, respectively, (788) --
Preferred Stock; 10,000,000 shares
authorized:
$2.625 cumulative convertible preferred
stock, par value $.10; 2,760,000 and
no shares issued and outstanding,
respectively ($138,000 aggregate
liquidation preference)...... 276 --
$2.28 cumulative preferred stock,
par value $.10; 1,400,000 shares
issued and outstanding ($35,000
aggregate liquidation preference) 140 140
7.25% cumulative senior perpetual
convertible preferred stock, par
value $.10; 400,000 shares issued
and outstanding ($40,000 aggregate
liquidation preference)...... 40 40
Additional paid-in capital....... 337,267 204,176
Notes receivable from key employees
secured by common stock........ (1,479) (1,985)
Retained earnings................ 98,194 107,933
---------- ----------
Total stockholders' equity..... 436,223 312,869
---------- ----------
Total liabilities and stockholders'
equity........................... $1,133,070 $1,114,748
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
WESTERN GAS RESOURCES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
($000s)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
----------------------
1994 1993
--------- ---------
Reconciliation of net income to net cash
- - ----------------------------------------
provided by operating activities
--------------------------------
<S> <C> <C>
Net income........................... $ 3,898 $ 28,314
Add income items that do not affect
working capital:
Depreciation, depletion and
amortization................. 46,823 28,439
Deferred income taxes........... 1,376 6,516
Other non-cash items............ (790) 414
--------- ---------
51,307 63,683
--------- ---------
Adjustments to working capital
to arrive at net cash provided
by operating activities:
(Increase) decrease in trade
accounts receivable.......... 32,149 (21,204)
Increase in product inventory... (29,010) (9,114)
Increase in parts inventory..... (166) (303)
Increase in other current assets (1,323) (242)
Increase in other assets and
liabilities, net............. (447) (4,413)
Increase (decrease) in accounts
payable...................... (31,197) 50,355
Increase (decrease)in accrued
expenses..................... 1,287 (226)
Increase in income taxes payable 854 --
--------- ---------
Total adjustments.................... (27,853) 14,853
--------- ---------
Net cash provided by operating
activities................... $ 23,454 $ 78,536
========= =========
</TABLE>
- Continued on following page -
5
<PAGE>
WESTERN GAS RESOURCES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
($000s)
- Continued from previous page -
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
---------------------
1994 1993
--------- ---------
<S> <C> <C>
Net cash provided by operating
activities........................ $ 23,454 $ 78,536
--------- ---------
Cash flows from investing activities:
Payments for business acquisitions (3,881) (324,585)
Payments for additions to property
and equipment.................. (58,368) (72,273)
Dispositions of property and
equipment...................... 11,327 14,258
Contributions to equity investments 132 (300)
Gas purchase contracts acquired... (300) (27,476)
--------- ---------
Net cash used in investing
activities.................. (51,090) (410,376)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of
preferred stock................ 132,729 --
Proceeds from exercise of common
stock options.................. 646 806
Notes receivable from key employees
secured by common stock, net... 506 (462)
Acquisition of treasury stock..... (788) --
Proceeds from short-term
borrowings..................... 75,000 --
Net borrowings (payments) under
revolving credit facility...... (153,600) 336,000
Dividends paid to holders of common
stock.......................... (3,851) (3,836)
Dividends paid to holders of
preferred stock................ (7,971) (4,143)
--------- ---------
Net cash provided by financing
activities..................... 42,671 328,365
--------- ---------
Net increase (decrease) in cash... 15,035 (3,475)
Cash at beginning of period....... 4,666 13,160
--------- ---------
Cash at end of period............. $ 19,701 $ 9,685
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE>
WESTERN GAS RESOURCES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
($000s, except share and per share amounts)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
----------------------- -----------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Sale of residue gas......... $ 173,992 $ 181,850 $ 523,263 $ 365,639
Sale of natural gas liquids. 73,920 81,294 222,459 249,848
Processing and transportation
revenues................. 8,861 8,116 24,856 17,767
Other, net.................. 2,896 2,099 9,265 7,429
---------- ---------- ---------- ----------
Total revenues........... 259,669 273,359 779,843 640,683
---------- ---------- ---------- ----------
Costs and expenses:
Product purchases........... 208,346 218,343 627,805 497,522
Plant operating expense..... 15,459 15,706 47,489 42,671
Oil and gas exploration and
production costs......... 977 886 3,397 2,074
Selling and administrative
expense.................. 7,605 5,762 25,053 18,968
Depreciation, depletion and
amortization............. 14,239 13,440 46,823 28,439
Interest expense............ 8,801 3,568 23,148 7,829
---------- ---------- ---------- ----------
Total costs and expenses. 255,427 257,705 773,715 597,503
---------- ---------- ---------- ----------
Income before taxes........... 4,242 15,654 6,128 43,180
Provision for income taxes:
Current..................... 529 2,686 854 8,350
Deferred.................... 1,007 3,234 1,376 6,516
---------- ---------- ---------- ----------
1,536 5,920 2,230 14,866
---------- ---------- ---------- ----------
Net income.................... $ 2,706 $ 9,734 $ 3,898 $ 28,314
========== ========== ========== ==========
Weighted average shares of
common stock outstanding.... 25,699,084 25,623,242 25,692,483 25,597,812
========== ========== ========== ==========
Earnings (loss) per share
of common stock............. $ (.02) $ .32 $ (.19) $ .93
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
7
<PAGE>
WESTERN GAS RESOURCES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
(Unaudited)
($000s, except share amounts)
<TABLE>
<CAPTION>
Shares of
7.25%
Cumulative Shares of
Senior Shares of $2.625
Perpetual $2.28 Cumulative
Shares Shares of Convertible Cumulative Convertible
of Common Common Stock Preferred Preferred Preferred Common Treasury
Stock in Treasury Stock Stock Stock Stock Stock
---------- ----------- ----------- ---------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993................ 25,651,722 -- 400,000 1,400,000 -- $ 2,565 $ --
Net income for the nine months
ended September 30,1994................... -- -- -- -- -- -- --
Stock options exercised..................... 75,724 -- -- -- -- 8 --
Treasury stock, at cost..................... (25,016) 25,016 -- -- -- -- (788)
Issuance of $2.625 Cumulative
Convertible Preferred Stock............... -- -- -- -- 2,760,000 -- --
Dividends declared on Common Stock.......... -- -- -- -- -- -- --
Dividends declared on 7.25% Cumulative Senior
Perpetual Convertible Preferred Stock..... -- -- -- -- -- -- --
Dividends declared on $2.28
Cumulative Preferred Stock................ -- -- -- -- -- -- --
Dividends declared on $2.625 Cumulative
Convertible Preferred Stock............... -- -- -- -- -- -- --
---------- ------ ------- --------- --------- --------- --------
Balance at September 30, 1994............... 25,702,430 25,016 400,000 1,400,000 2,760,000 $ 2,573 $ (788)
---------- ------ ------- --------- --------- --------- --------
<CAPTION>
7.25%
Cumulative
Senior $2.625
Perpetual $2.28 Cumulative Notes Total
Convertible Cumulative Convertible Additional Receivable Stock-
Preferred Preferred Preferred Paid-In from Key Retained holders'
Stock Stock Stock Capital Employees Earnings Equity
----------- ---------- ----------- ---------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993................ $ 40 $ 140 $ -- $ 204,176 $ (1,985) $107,933 $312,869
Net income for the nine months
ended September 30,1994................... -- -- -- -- -- 3,898 3,898
Stock options exercised..................... -- -- -- 636 (282) -- 362
Treasury stock, at cost..................... -- -- -- -- 788 -- --
Issuance of $2.625 Cumulative
Convertible Preferred Stock............... -- -- 276 132,455 -- -- 132,731
Dividends declared on Common Stock.......... -- -- -- -- -- (3,854) (3,854)
Dividends declared on 7.25% Cumulative Senior
Perpetual Convertible Preferred Stock..... -- -- -- -- -- (2,175) (2,175)
Dividends declared on $2.28
Cumulative Preferred Stock................ -- -- -- -- -- (2,394) (2,394)
Dividends declared on $2.625 Cumulative
Convertible Preferred Stock............... -- -- -- -- -- (5,214) (5,214)
------ ------ ------- --------- -------- -------- --------
Balance at September 30, 1994............... $ 40 $ 140 $ 276 $ 337,267 $ (1,479) $ 98,194 $436,223
====== ====== ======= ========= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
8
<PAGE>
WESTERN GAS RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The interim consolidated financial statements presented herein should be read
in conjunction with the Consolidated Financial Statements and Notes thereto
included in the Company's Form 10-K for the year ended December 31, 1993.
The interim consolidated financial statements as of September 30, 1994 and for
the quarters and nine months ended September 30, 1994 and 1993 included herein
are unaudited, but reflect, in the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to fairly present
the results for such periods.
Certain prior period amounts in the consolidated financial statements have
been reclassified to conform to the presentation used in 1994.
Earnings Per Share of Common Stock
-----------------------------------
Earnings per share of common stock is computed by dividing net income
available to shares of common stock by the weighted average number of shares
of common stock outstanding. Net income available to shares of common stock
is net income less dividends declared and attributable to the corresponding
periods on the 7.25% Cumulative Senior Perpetual Convertible Preferred Stock,
$2.28 Cumulative Preferred Stock and $2.625 Cumulative Convertible Preferred
Stock. The computation of fully diluted earnings per share of common stock for
the quarters and nine months ended September 30, 1994 and 1993 was
antidilutive, therefore, only primary earnings per share of common stock is
presented.
Supplementary Cash Flow Information
------------------------------------
Interest paid for the nine months ended September 30, 1994 and 1993 was
approximately $23.2 million and $8.1 million, respectively.
Income taxes paid during the nine months ended September 30, 1993 were
approximately $7.1 million. No income taxes were paid during the nine months
ended September 30, 1994.
Financing Activities
--------------------
On November 12, 1993, the Company's Registration Statement with the Securities
and Exchange Commission (the "Registration") on Form S-3 (Registration
No. 33-66516) was declared effective. The Registration provided for the sale
of up to $200 million of debt securities and preferred stock and up to 4
million shares of common stock. Pursuant to the Registration, on February 28,
1994, the Company sold 2,760,000 shares of $2.625 Convertible Preferred Stock
for net proceeds of $132.7 million, which have been used to repay
9
<PAGE>
a portion of the debt incurred under the Company's Revolving Credit facility
to acquire Mountain Gas Resources, Inc. ("Mountain Gas") and the Black Lake
gas processing plant and related reserves ("Black Lake"). On July 26, 1994 the
Company filed a Registration Statement on Form S-3 (Registration No. 33-54741)
which provides for the sale of up to $138 million of debt securities and
preferred stock. This Registration Statement was declared effective on
September 22, 1994. The amount provided for in this filing, in addition to the
unused portion of the previous filing, allows for the sale of up to a total of
$200 million of debt securities and preferred stock and up to four million
shares of common stock.
Treasury Stock
--------------
During July 1990, the Company loaned Bill M. Sanderson, President, Chief
Operating Officer and a Director $748,000 to purchase 294,524 shares of Common
Stock in the Company. In February 1994, the loan and all accrued interest was
repaid in full by Mr. Sanderson who surrendered 25,016 shares of the Company's
Common Stock, which were valued at $31.50 per share based upon the February
22, 1994 closing price.
Subsequent Events
-----------------
The Company has given notice to the holder of all of the issued and
outstanding shares of the Company's 7.25% Cumulative Senior Perpetual
Convertible Preferred Stock, with a liquidation preference of $40 million,
that the Company will redeem all such shares on November 30, 1994 at an
aggregate redemption price of $42 million plus accrued dividends. The holder
has the right on or prior to such redemption date to convert the preferred
stock into an aggregate of 2,090,000 shares of the Company's common stock. The
Company is unable to predict whether redemption or conversion will occur.
On October 27, 1994, under the terms of the Company's Master Shelf Agreement
with the Prudential Life Insurance Company of America, the Company sold $25
million of 9.05% Senior Notes due in a single payment on October 27, 2001 and
$25 million of 9.24% Senior Notes due in a single payment on Octoer 27, 2004.
Legal Proceedings
-----------------
Edgewood
On January 16, 1991, problems at the Company's Edgewood Plant relating to both
equipment that removes hydrogen sulfide from unprocessed natural gas and the
monitoring equipment owned by the purchaser of the residue gas, Enserch
Corporation, doing business as Lone Star Gas Company ("Lone Star"), allowed
residue gas con-taining hydrogen sulfide to enter Lone Star's transmission
line supplying residue gas to Emory, Texas.
10
<PAGE>
The Company has been named as a co-defendant, along with Lone Star, in the
following complaints relating to the incident: Gary Prather, et al. v. Enserch
-------------------------------
Corporation, et al., filed March 15, 1993, Barbara Rogers, et al., v. Enserch
------------------- ----------------------------------
Corporation, et al. filed March 16, 1993, Judy Silvey, et al. v. Enserch, et
------------------- ----------------------------------
al., filed May 13, 1993, Floyd Rogers, et al. v. Enserch, et al., filed May
--- ---------------------------------------
14, 1993, Blair Schamlain, et al. v. Enserch, et al., filed May 25, 1993,
------------------------------------------
Betty Adair v. Enserch, et al., filed on July 14, 1993, Doris Hass v. Enserch
------------------------------ ---------------------
Corporation, et al., filed on December 17, 1993, Allie Ruth Harris v. Enserch
------------------- ----------------------------
Corporation, et al., filed on December 17, 1993, Sandra Parker, et al. v
------------------- -----------------------
Enserch Corporation, et al., filed on January 13, 1994, and Carma Brumit v.
--------------------------- ---------------
Enserch, et al., filed on January 18, 1994.
---------------
All the cases, which have subsequently been consolidated, were filed in the
District Court, Rains County, Texas, 354th Judicial District, and make similar
claims, asserting, among other things, that the defendants breached an implied
warranty of merchantability, falsely represented that the residue gas was
safe, were negligent and are liable under a strict liability theory. The
plaintiffs have alleged a variety of respiratory and neurological illnesses
and are seeking treble damages, exemplary damages and attorneys' fees. Prior
to the filing of the complaints, the Company received demand letters from the
plaintiffs that sought, in the aggregate, approximately $36 million. Damages
claimed in the lawsuits are in excess of $13.5 million.
The Company believes that it has meritorious defenses to the claims and
intends to defend vigorously against any such claims. The underwriters of the
Company's general liability insurance policy have indicated preliminarily that
the Company's policy appears to cover the types of claims that have been
asserted, subject to the underwriters' right to deny coverage based upon,
among other things, final determination of causation and the exact nature of
the damages.
Mountain Gas
On December 6, 1993, Green River Gathering Company ("Green River") and
Mountain Gas filed a complaint against Washington Energy Exploration, Inc.
("Washington Energy") in District Court in Arapahoe County, Colorado seeking
the payment of certain outstanding receivables from Washington Energy and a
declaratory judgment that the gathering agreement between Washington Energy
and Green River is in full force and effect. Mountain Gas is a wholly-owned
subsidiary of the Company and Green River is a partnership owned by the
Company and Mountain Gas. Washington Energy is the operator of wells
producing approximately 33% of the natural gas transported through the Green
River Gathering system to Mountain Gas' Granger facility.
11
<PAGE>
On December 27, 1993, Washington Energy filed an answer, counterclaim,
crossclaim and request for trial by jury, denying the substance of the
allegations and asserting certain affirmative defenses. Washington Energy has
also made certain counterclaims seeking monetary damages relating to Green
River's performance under the gathering agreement and under a processing
agreement between the parties, along with a declaratory judgment that both
agreements have been terminated. In addition, Washington Energy has made a
crossclaim against two unaffiliated entities, each of which owned a portion of
Green River during a portion of the period in question.
The Company believes that Green River is in compliance with the gathering
agreement and the processing agreement and that both are in full force and
effect. The Company believes that it has meritorious defenses to the
counterclaims and intends to defend vigorously against any such claims.
On July 28, 1994, the Company and its wholly-owned subsidiary Mountain Gas
filed a complaint in United States District Court, Denver, Colorado against
Morgan Stanley Leveraged Equity Fund II, L.P., Morgan Stanley Leveraged Equity
Fund II, Inc., Morgan Stanley & Co., Incorporated and certain former directors
and officers of Mountain Gas seeking money damages. The complaint alleges
certain acts and omissions that violated federal and state securities laws by
the defendants in connection with the Company's July 1993 purchase of the
stock of Mountain Gas from Morgan Stanley Leveraged Equity Fund II, L.P. The
acts and omissions set forth in the complaint relate primarily to defendants'
failure to disclose adequately the nature and scope of the dispute between
Mountain Gas and Washington Energy. In addition, the Company and Mountain Gas
have raised fraud, misrepresentation and breach of contract claims against
certain of the defendants.
Katy
Commencing in March 1993 and continuing through July 1993, Western Gas
Resources Storage, Inc. ("Storage"), a wholly-owned subsidiary of the Company,
filed a total of 165 condemnation actions in the County Court at Law No. 1 and
No. 2 of Fort Bend County, Texas, to obtain certain storage rights and rights-
of-way relating to its Katy Gas Storage Facility and the related underground
reservoir ("Katy"). The County Court appointed panels of Special
Commissioners which awarded compensation to the owners whose rights were
condemned. Condemnation awards are a capital cost of the Katy project.
A majority of the land and mineral owners involved in the condemnation
proceedings appealed to County Court, seeking a declaration that Storage did
not possess the right to condemn, or, in the alternative, that they should be
awarded more compensation than previously awarded by the Special
Commissioners. In all but
12
<PAGE>
one of those appeals, the right to condemn issue has been resolved in favor of
Storage although factual issues in individual cases remain open as to whether
that right was exercised properly.
In August 1994, in the only appeals in which the compensation issue has been
determined, a jury awarded a landowner adjacent to the 82 acre site where the
compression facilities are located a total of $214,000 and another jury
awarded a landowner within 1,000 feet of the 82 acre site a total of $38,000,
for storage rights and damages to property not taken. The Special
Commissioners had previously awarded these landowners a total of approximately
$2,000 and $600, respectively. The Company does not believe that these jury
verdicts are representative of what will occur in subsequent trials, although
there is no assurance of this. In addition, the Company believes that several
reversible errors were committed at trial and it intends to appeal the awards.
The Company is involved in various other litigation and administrative
proceedings arising in the normal course of business. In the opinion of
management, any liabilities that may result from these claims will not,
individually or in the aggregate, have a material adverse effect on the
Company's financial position or results of operations.
13
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
General
-------
The Company owns and operates natural gas gathering, processing and storage
facilities and markets and transports natural gas and NGLs. Its gathering
systems, processing and storage facilities are located in major gas-producing
basins in the Rocky Mountain, Gulf Coast and Southwestern regions of the
United States.
The following discussion and analysis relates to factors which have affected
the consolidated financial condition and results of operations of the Company
for the quarters and nine months ended September 30, 1994 and 1993. Certain
prior year amounts have been reclassified to conform to the presentation used
in 1994. Reference should also be made to the Company's Consolidated Financial
Statements and related Notes thereto included elsewhere in this document.
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
------------------------------------- --------------------------------------
% %
1994 1993 Change 1994 1993 Change
---------- ---------- ------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Financial results ($000s
except per share amounts):
Revenues .................... $ 259,669 $ 273,359 (5.0) $ 779,843 $ 640,683 21.7
Gross profit ................ 20,648 24,984 (17.4) 54,329 69,977 (22.4)
Net income .................. 2,706 9,734 (72.2) 3,898 28,314 (86.2)
Earnings (loss) per share of
common stock .............. (.02) .32 -- (.19) .93 --
Net cash provided by
operating activities ...... 2,973 11,032 (73.1) 23,454 78,536 (70.1)
Operating data:
Average gas sales (MMcf/D)... 1,158.7 923.5 25.5 1,039.6 645.8 61.0
Average NGL sales (MGal/D)... 2,773.4 2,930.0 (5.3) 2,922.9 2,794.1 4.6
Average gas prices ($/Mcf)... $ 1.63 $ 2.03 (19.7) $ 1.84 $ 2.00 (8.0)
Average NGL prices ($/Gal)... $ .29 $ .30 (3.3) $ .27 $ .32 (15.6)
</TABLE>
Net income decreased $7.0 million and $24.4 million, respectively, and net cash
provided by operating activities decreased $8.1 million and $55.1 million,
respectively, for the quarter and nine months ended September 30, 1994 compared
to the same periods in 1993. Overall, throughput and sales volumes at the
Company's facilities have remained comparable to historical levels. The
Company's decrease in net income and net cash provided by operating activities
is primarily attributable to a decline in NGL and residue gas prices and higher
interest, selling and administrative and depreciation costs associated with the
Company's 1993
14
<PAGE>
acquisitions of Black Lake and Mountain Gas and the completion of construction
of the Katy facility. In addition, no significant revenues from Katy are
expected to offset the related interest, depreciation and operating costs until
the upcoming winter heating season. The aforementioned items are discussed in
further detail below.
Revenues from the sale of residue gas decreased approximately $7.9 million for
the quarter ended September 30, 1994 compared to the same period in 1993 as a
volume increase of approximately 235 MMcf per day was more than offset by a
decrease in average residue gas sales prices of $.40 per Mcf. The volume
increase is primarily attributable to an increase in the sale of residue gas
purchased from third parties.
Revenues from the sale of residue gas increased approximately $157.6 million for
the nine months ended September 30, 1994 compared to the same period in 1993 due
to an increase in sales volumes of approximately 395 MMcf per day, which was
somewhat offset by an average residue gas sales price decrease of $.16 per Mcf.
The volume increase is primarily attributable to an increase in the sale of
residue gas purchased from third parties, primarily due to the acquisition of
the assets of Citizens National Gas Company in the third quarter of 1993.
Revenues from the sale of NGLs decreased approximately $7.4 million for the
quarter ended September 30, 1994 compared to the same period in 1993 due to a
decrease in NGL sales volumes of approximately 160 MGal per day and a $.01 per
gallon decrease in the average NGL sales price. Of the volume decrease,
approximately 70 MGal per day is attributable to a decrease in the sale of NGLs
purchased from third parties. The remaining volume decrease is primarily
attributable to the curtailment of NGL production at Black Lake during the third
quarter of 1994 while plant improvements were completed.
Revenues from the sale of NGLs decreased approximately $27.4 million for the
nine months ended September 30, 1994 compared to the same period in 1993 as a
volume increase of approximately 130 MGal per day was more than offset by a $.05
per gallon decrease in the average NGL sales price. Of the volume increase,
approximately 90 MGal per day is attributable to an increase in the sale of NGLs
purchased from third parties. The remaining volume increase is primarily
attributable to the acquisitions of Mountain Gas and Black Lake, new well
connect activity and consolidations with smaller gathering systems. This volume
increase was somewhat offset by the unfavorable economics of ethane and propane
extraction in the first quarter of 1994 and by limited NGL volumes at the
Granger facility resulting primarily from the December 1993 fire, and by the
curtailment of production during the third quarter of 1994 at Black Lake while
plant improvements were completed.
15
<PAGE>
Processing and transportation revenues remained constant for the quarter ended
September 30, 1994 and increased $7.1 million for the nine months ended
September 30, 1994 compared to the same periods in 1993. The increase during
the nine month period is due to additional gathering revenue associated with the
Company's Granger gathering system acquired in the Mountain Gas acquisition in
July 1993 and the recognition of demand fees associated with a contract at the
Company's Katy facility in the second and third quarter of 1994.
Other revenue, net remained constant for the quarter ended September 30, 1994
and increased $1.8 million for the nine months ended September 30, 1994
compared to the same periods in 1993. For the nine months ended September 30,
1994, the Company accrued approximately $3.2 million as an amount to be
recovered under its business interruption insurance policy for business losses
related to the December 1993 fire at the Company's Granger facility and
approximately $1.4 million in rate refunds from a pipeline company, both of
which were somewhat offset by a $2.2 million gain recorded as a result of the
termination of an interest rate swap agreement in 1993.
Historically, product purchases as a percentage of residue gas and NGL sales
from the Company's plant production approximates 70%. Product purchases as a
percentage of residue gas and NGL sales from third-party purchases is
substantially higher and approximates 95%. Total product purchases as a
percentage of residue gas and NGL sales increased approximately 1% and 3% to 84%
for the quarter and nine months ended September 30, 1994, respectively, compared
to the same periods in 1993. The increase in the Company's combined percentage
is primarily due to a significantly larger increase in the sales volume of
products purchased from third parties compared to the sales volume sold from the
Company's facilities.
Plant operating expense remained constant for the quarter ended September 30,
1994 and increased approximately $4.8 million for the nine months ended
September 30, 1994 compared to the same periods in 1993. This increase was
primarily due to the additional operating costs associated with three gas
processing facilities acquired from Mountain Gas and Black Lake in July 1993,
and Katy, which commenced operations in January 1994.
Selling and administrative expense increased approximately $1.8 million and $6.1
million, respectively, for the quarter and nine months ended September 30, 1994
compared to the same periods in 1993 primarily due to administrative expenses
necessitated by the 1993 acquisitions, overall increased insurance expenditures
and a reduction in the amount of overhead capitalized to the Company's
construction projects.
16
<PAGE>
Depreciation, depletion and amortization expense increased approximately
$800,000 and $18.4 million, respectively, for the quarter and nine months ended
September 30, 1994 compared to the same periods in 1993. This increase is
primarily due to the acquisitions of Mountain Gas and Black Lake in July 1993
and Katy, which commenced operations in January 1994, and is partially offset by
an adjustment to depreciation and depletion expense resulting from the addition
of approximately 10 Bcf of recoverable reserves at Black Lake as a result of the
completion of an in-fill production well. The adjustment, which was retroactive
to January 1, 1994, totaled approximately $1.4 million.
Interest expense increased approximately $5.2 million and $15.3 million,
respectively, for the quarter and nine months ended September 30, 1994 compared
to the same periods in 1993, primarily due to additional borrowings related to
the Mountain Gas and Black Lake acquisitions, a reduction in the amount of
interest capitalized to the Katy project and an increase in the Company's
variable borrowing rate.
Liquidity and Capital Resources
The Company's sources of liquidity and capital resources historically have been
net cash provided by operating activities, funds available under its financing
facilities and proceeds from offerings of equity securities. In the past, these
sources have been sufficient to meet the needs and finance the growth of the
Company's business. Net cash provided by operating activities has been
primarily affected by product prices, the Company's success in increasing the
number and efficiency of its facilities, the volumes of natural gas processed by
such facilities and the margin on third party residue gas purchased for resale.
The Company's continued growth will be dependent upon success in the areas of
additions to dedicated plant reserves, acquisitions, new project development and
marketing.
For the nine months ended September 30, 1994, the Company's total sources of
funds aggregated $243.7 million and was comprised of net proceeds from the
issuance of the $2.625 Convertible Preferred Stock of $132.7 million, proceeds
from short-term borrowings of $75.0 million, net cash provided by operating
activities of $23.5 million, net proceeds received from the disposition of
property and equipment of $11.3 million, net proceeds received from the exercise
of common stock options of $646,000 and net repayment of notes receivable from
key employees of $506,000. During the same period, the Company's use of such
funds aggregated $228.7 million which were used primarily to make payments of
$153.6 million under its revolving credit facility, to make capital investments
of $62.5 million, to pay dividends to holders of 7.25% Convertible Preferred
Stock, $2.28 Cumulative Preferred Stock and $2.625 Convertible Preferred Stock
of $8.0 million, to pay dividends to holders of
17
<PAGE>
Common Stock of $3.8 million and to acquire Treasury Stock for $788,000.
On November 12, 1993, the Company's Registration Statement (the "Registration")
on Form S-3 (Registration No. 33-66516) was declared effective. The
Registration provided for the sale of up to $200 million of debt securities and
preferred stock and up to four million shares of common stock. Pursuant to the
Registration, on February 28, 1994, the Company sold 2,760,000 shares of $2.625
Cumulative Convertible Preferred Stock for net proceeds of $132.7 million, which
have been used to repay a portion of the debt incurred under the Company's
Revolving Credit facility in the Mountain Gas and Black Lake acquisitions. On
July 26, 1994, the Company filed a Registration Statement on Form S-3
(Registration No. 33-54741) which provides for the sale of up to $138 million of
debt securities and preferred stock. This Registration Statement was declared
effective on September 22, 1994. The amount provided for in this filing, in
addition to the unused portion of the previous filing, allows for the sale of up
to a total of $200 million of debt securities and preferred stock and up to four
million shares of common stock.
An additional source of liquidity to the Company is volumes of residue gas and
NGLs in storage facilities. The Company stores volumes of residue gas and NGLs
primarily to assure an adequate supply for long-term sales contracts and for
resale during periods of favorable prices. At September 30, 1994, the Company
held in storage approximately 12.2 million gallons of NGLs at an average cost of
$.30 per gallon and approximately 20.8 Bcf of residue gas (of which 16.0 Bcf is
stored at Katy) at an average cost of $2.22 per Mcf ($1.97 per MMbtu).
In order to take advantage of favorable pricing and minimize the impact of
pricing fluctuations on the Company's financial results, the Company has pre-
sold through futures transactions approximately 70 MMcf per day, or
approximately 50% of its processor's share of 1995 natural gas production at an
average price of approximately $2.02 per MMBtu (or approximately $2.06 per Mcf).
Including other sales commitments at fixed or above market pricing, the Company
has committed approximately 90 MMcf per day, or 64%, of its share of 1995
natural gas production.
At September 30, 1994, 1,081 net contracts (10,000 MMbtus per contract) for the
sale of residue gas in November 1994 through December 1995 at prices ranging
from $1.66 per Mcf to $2.55 per Mcf were outstanding.
In October, the Company sold 20,000 barrels per month, or 25% of its processor's
share of condensate and crude oil production, for the period
March through December 1995 through futures transactions at a price of $18.04
per Bbl. At September 30, 1994, no such contracts were outstanding.
18
<PAGE>
Capital Investment Program
The Company anticipates spending approximately $115 million in 1994 for
maintenance capital, new well connections, the completion of the Katy project,
the acquisitions discussed below and small consolidating acquisitions. Through
September 30, 1994 approximately $62.5 million has been expended.
On November 3, 1994, the Company announced two acquisitions in the Permian Basin
of West Texas. The Company has signed a definitive agreement to purchase the
West Texas gathering and treating assets of Oasis Pipe Line Company ("Oasis")
for approximately $26.0 million. Closing is expected to occur on November 30,
1994 with an effective date of December 1, 1994. This closing is subject to the
termination of the Hart Scott Rodino Act waiting period. Included in this
purchase are 14 gathering systems with approximately 600 miles of pipeline and
two treating facilities with current throughput of approximately 140 MMcf per
day. In addition, the Company has entered into a long term agreement for 100
MMcf per day of firm transportation service with Oasis and will install a 220
MMcf per day pipeline interconnection between Oasis and Katy. The Company also
completed the acquisition of the 15 MMcf per day Middle Concho Plant from Enron
Gas Processing Co. for approximately $1.3 million, with an effective date of
October 1, 1994. The Company plans to consolidate this facility with its
Midkiff/Benedum complex.
Financing Facilities
Revolving Credit Facility. The Company's Variable Rate Revolving Credit
Facility, as restated on September 2, 1994, with a syndicate of eight banks,
provides for a maximum borrowing of $325 million, of which $193.4 million was
outstanding at September 30, 1994. If the facility is not renewed, on January
1, 1997 any outstanding balance thereunder converts to a four-year term during
which such balance will be repaid in equal quarterly installments. At the
Company's option, the Revolving Credit Facility bears interest at certain
spreads over the Eurodollar rate or at the agent bank's prime rate. The
interest rate spreads are adjusted based on the Company's debt to capitalization
ratio. At September 30, 1994, the spread was 1.0% for the Eurodollar rate
resulting in an interest rate of 6.18%.
The Company pays a commitment fee on the unused commitment of .375% if the debt
to captializaton ratio is greater than or equal to .50 to 1.0 or .30% if the
ratio is less than .40 to 1.0. At September 30, 1994, the Company's debt to
capitalization ratio was slightly less than .50 to 1.0.
Term Loan Facility. The Company also has a Term Loan Facility with four banks
for $50 million which bears interest at 9.87%. Payments
19
<PAGE>
on the Term Loan Facility of $25 million, $12.5 million and $12.5 million are
due in September 1995, 1996 and 1997, respectively.
The Company's Revolving Credit and Term Loan Facilities are subject to certain
mandatory prepayment terms. If funded debt of the Company exceeds five times
the sum of the Company's last four quarters' cash flow (as defined in the
agreement) less preferred stock dividends, the overage must be repaid in no more
than six monthly payments commencing 90 days from notification. This mandatory
prepayment threshold will be reduced to 4.0 to 1.0 at September 1, 1995 and 3.50
to 1.0 at September 1, 1998. At September 30, 1994, the Company had
approximately $73 million of available borrowing capacity.
The Term Loan Facility and Revolving Credit Facility are unsecured. The Company
is required to maintain a current ratio of at least 1.0 to 1.0 (as defined in
the agreement), a tangible net worth of at least $401 million, a debt to
capitalization ratio of no more than 60% through October 31, 1995 and 55%
thereafter and an EBITDA/interest ratio of not less than 3.25 to 1.0 until
October 31, 1995 and 3.75 to 1.0 thereafter. The Company is prohibited from
declaring or paying dividends that exceed the sum of $35 million plus 50% of
consolidated net income earned after March 31, 1994 plus 50% of the cumulative
net proceeds received from the sale of any equity securities sold after March
31, 1994. At September 30, 1994, this threshold amounted to approximately $30
million. The Company generally utilizes excess daily funds to reduce any
outstanding revolving credit balances to minimize interest expense and intends
to continue such practice. The $19.7 million cash balance at September 30, 1994
is temporary and is due to the timing of cash receipts.
Master Shelf Agreement. In December 1991, the Company entered into a Master
Shelf Agreement (the "Master Shelf") with The Prudential Insurance Company of
America ("Prudential") pursuant to which Prudential agreed to quote, from time-
to-time, an interest rate at which Prudential or its nominee would be willing to
purchase up to $100 million of the Company's senior promissory notes (the
"Senior Notes"). Any such Senior Notes must mature in no more than 12 years,
with an average life not in excess of 10 years, and will be unsecured. On
October 27, 1992, the Company sold $25 million of 7.51% Senior Notes due 2000
and $25 million of 7.99% Senior Notes due 2003. Principal payments on the $50
million of Senior Notes of $8.3 million will be due on October 27 of each year
from 1998 through 2003. On September 22, 1993, the Company sold $25 million of
6.77% Senior Notes due in a single payment on September 22, 2003 and on December
27, 1993, the Company sold $25 million of 7.23% Senior Notes due in a single
payment on December 27, 2003. The Master Shelf contains certain financial
covenants which conform with those contained in the Revolving Credit Facility,
as restated. In July 1993, Prudential and the Company amended the Master Shelf
to provide for an additional $50 million of borrowing capacity (for
20
<PAGE>
a total borrowing capacity of $150 million) and to extend the term of the Master
Shelf to October 31, 1995. On October 27, 1994, the Company sold $25 million of
9.05% Senior Notes due in a single payment on October 27, 2001 and $25 million
of 9.24% Senior Notes due in a single payment on October 27, 2004.
Senior Notes. On April 28, 1993 the Company sold $50 million of 7.65% Senior
Notes due 2003 to a group of insurance companies led by Connecticut General Life
Insurance Company. Principal payments on the $50 million of Senior Notes of
$7.1 million will be due on April 30th of each year from 1997 through 2002 with
any remaining principal and interest outstanding due on April 30, 2003. The
Senior Notes contain certain financial covenants which conform with those
contained in the Revolving Credit Facility.
Additional Borrowings. The Company anticipates entering into an agreement with
Receivables Capital Corporation ("RCC"), as administered by Bank of America
National Trust and Savings Association ("BA") to sell an undivided interest in
the Company's trade receivables for a maximum borrowing of $75 million bearing
interest at RCC's commercial paper rate plus .325%. Specific terms of this
agreement have not yet been negotiated, however, the Company anticipates
completion of this agreement in the fourth quarter of 1994. On September 2,
1994, in advance of completing the agreement with RCC, BA entered into a Master
Note agreement with the Company and advanced the Company $75 million bearing
interest at the Eurodollar rate plus .50%. The $75 million received under the
Master Note was used to reduce borrowings under the revolving credit facility
and has been included in short-term borrowings on the Company's Consolidated
Balance Sheet at September 30, 1994. The Master Note will be repaid with
proceeds from RCC.
Covenant Compliance. At September 30, 1994, the Company was in compliance with
all covenants.
Interest Rate Swap Agreements. From time to time, the Company enters into
interest rate swap agreements to manage exposure to changes in interest rates.
The transactions generally involve the exchange of fixed and floating interest
payment obligations without the exchange of the underlying principal amounts.
The Company believes that the amounts available to be borrowed under the
Revolving Credit Facility and the Master Shelf together with cash provided from
operations, will provide it with sufficient financing to connect new reserves,
maintain its existing facilities and complete its current capital improvement
projects. The Company also believes that cash provided from
operations will be sufficient to meet its debt service and preferred stock
dividend requirements.
21
<PAGE>
Principal Facilities
The following table provides information concerning the Company's principal
facilities. The Company also owns and operates several smaller treating and
processing facilities located in the same areas as its other facilities.
<TABLE>
<CAPTION>
Average for Nine Months Ended
September 30, 1994
Gas Gas -------------------------------------------
Gathering Throughput Gas Gas NGL
Year Placed Systems Capacity Throughput Production Production
Facility(1) In Service Miles(2) (MMcf/D)(2) (MMcf/D)(3) (MMcf/D)(4) (MGal/D)(4)
- - -------------------- ---------- -------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Southern Region:
Texas
Midkiff and Benedum................... 1955 1,921 135 119.9 76.5 774.3
Giddings Gathering System............. 1979 636 80 75.8 65.6 111.9
Edgewood(5)........................... 1964 85 65 33.1 15.6 76.9
Perkins and Noel...................... 1975 2,535 55 22.9 12.3 150.3
Walnut Bend........................... 1978 402 8 3.4 1.5 19.6
Katy(7)............................... 1994 -- -- -- -- --
Mid--Continent Region:
Louisiana
Black Lake(8)......................... 1966 55 180 76.1 56.9 113.7
Toca(6)(9)............................ 1958 -- 160 92.5 87.8 62.7
Pointe a la Hache(6)(14).............. 1962 -- 20 -- -- --
Cox Bay(6)(14)........................ 1962 -- 20 -- -- --
Oklahoma
Chaney Dell/Lamont.................... 1966 1,995 158 94.1 69.9 308.5
Westana............................... 1986 241 37 64.0 56.5 55.4
Rocky Mountain Region:
Wyoming
Granger(9)(10)........................ 1987 219 230 144.1 137.2 127.4
Red Desert(10)........................ 1979 108 40 32.5 29.5 46.2
Lincoln Road.......................... 1988 144 50 48.5 45.1 43.8
Hilight Complex(9)(11)................ 1969 606 80 20.3 13.7 94.9
Amos Draw............................. 1983 79 30 6.1 4.9 19.4
Kitty(9).............................. 1969 225 17 7.1 4.6 37.4
Newcastle(9).......................... 1981 142 5 2.6 1.7 19.5
Reno Junction(12)..................... 1991 -- -- -- -- 30.4
New Mexico
San Juan River(5)..................... 1955 122 60 23.5 20.2 .5
North Dakota
Williston(5)(9)(13)................... 1981 381 -- 6.1 4.6 16.1
Temple(5)............................. 1984 65 7 3.1 2.1 10.4
Teddy Roosevelt and Alexander
Gathering System(5)(9)(13).......... 1979 332 -- 2.9 1.8 12.0
Utah
Four Corners.......................... 1988 95 15 4.8 3.9 10.7
Montana
Baker(5)(9)........................... 1981 8 3 1.6 1.0 11.7
------ ----- ----- ----- -------
Total............................... 10,396 1,455 885.0 713.1 2,153.7
====== ===== ===== ===== =======
</TABLE>
- - -------------
Footnotes on following page
22
<PAGE>
(1) The Company's interest in all facilities is 100% except for Midkiff and
Benedum (76%); Black Lake (69%); Lincoln Road (72%); Williston (50%);
Westana (Chester) (50%); Newcastle (50%) and Walnut Bend (67%). All
facilities are operated by the Company and all data include interests of
the Company, other joint interest owners and producers of gas volumes
dedicated to the facility.
(2) Gas gathering systems miles and gas throughput capacity are as of
September 30,1994.
(3) Aggregate wellhead natural gas volumes collected by a gathering system.
(4) Volumes of residue gas and NGLs are allocated to a facility when a well is
dedicated to that facility; volumes exclude NGLs fractionated for third
parties.
(5) Sour gas facility (capable of processing gas containing hydrogen sulfide).
(6) Straddle plant.
(7) Operations commenced in February 1994.
(8) Acquired in the Black Lake acquisition.
(9) Fractionation facility (capable of fractionating raw NGLs).
(10) Acquired in the Mountain Gas acquisition.
(11) Includes production volumes from the Hartzog and Spearhead Ranch
facilities.
(12) NGL production represents conversion of third-party feedstock to iso-
butane.
(13) Processing facilities were shut-in during August 1993. The gas dedicated
to these facilities is processed by a third-party under a contractual
arrangement.
(14) Temporarily shut-in during 1993.
23
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Edgewood
On January 16, 1991, problems at the Company's Edgewood Plant relating to both
equipment that removes hydrogen sulfide from unprocessed natural gas and the
monitoring equipment owned by the purchaser of the residue gas, Enserch
Corporation, doing business as Lone Star Gas Company ("Lone Star"), allowed
residue gas containing hydrogen sulfide to enter Lone Star's transmission line
supplying residue gas to Emory, Texas.
The Company has been named as a co-defendant, along with Lone Star, in the
following complaints relating to the incident: Gary Prather, et al. v. Enserch
-------------------------------
Corporation, et al., filed March 15, 1993, Barbara Rogers, et al., v. Enserch
------------------- ----------------------------------
Corporation, et al. filed March 16, 1993, Judy Silvey, et al. v. Enserch, et
------------------- ----------------------------------
al., filed May 13, 1993, Floyd Rogers, et al. v. Enserch, et al., filed May
--- ---------------------------------------
14, 1993, Blair Schamlain, et al. v. Enserch, et al., filed May 25, 1993,
------------------------------------------
Betty Adair v. Enserch, et al., filed on July 14, 1993, Doris Hass v. Enserch
------------------------------ ---------------------
Corporation, et al., filed on December 17, 1993, Allie Ruth Harris v. Enserch
------------------- ----------------------------
Corporation, et al., filed on December 17, 1993, Sandra Parker, et al. v
------------------- -----------------------
Enserch Corporation, et al., filed on January 13, 1994, and Carma Brumit v.
--------------------------- ---------------
Enserch, et al., filed on January 18, 1994.
---------------
All the cases, which have subsequently been consolidated, were filed in the
District Court, Rains County, Texas, 354th Judicial District, and make similar
claims, asserting, among other things, that the defendants breached an implied
warranty of merchantability, falsely represented that the residue gas was
safe, were negligent and are liable under a strict liability theory. The
plaintiffs have alleged a variety of respiratory and neurological illnesses
and are seeking treble damages, exemplary damages and attorneys' fees. Prior
to the filing of the complaints, the Company received demand letters from the
plaintiffs that sought, in the aggregate, approximately $36 million. Damages
claimed in the lawsuits are in excess of $13.5 million.
The Company believes that it has meritorious defenses to the claims and
intends to defend vigorously against any such claims. The underwriters of the
Company's general liability insurance policy have indicated preliminarily that
the Company's policy appears to cover the types of claims that have been
asserted, subject to the underwriters' right to deny coverage based upon,
among other things, final determination of causation and the exact nature of
the damages.
24
<PAGE>
Mountain Gas
On December 6, 1993, Green River Gathering Company ("Green River") and
Mountain Gas Resources, Inc. ("Mountain Gas") filed a complaint against
Washington Energy Exploration, Inc. ("Washington Energy") in District Court in
Arapahoe County, Colorado seeking the payment of certain outstanding
receivables from Washington Energy and a declaratory judgment that the
gathering agreement between Washington Energy and Green River is in full force
and effect. Mountain Gas is a wholly-owned subsidiary of the Company and
Green River is a partnership owned by the Company and Mountain Gas.
Washington Energy is the operator of wells producing approximately 33% of the
natural gas transported through the Green River Gathering system to Mountain
Gas' Granger facility.
On December 27, 1993, Washington Energy filed an answer, counterclaim,
crossclaim and request for trial by jury, denying the substance of the
allegations and asserting certain affirmative defenses. Washington Energy has
also made certain counterclaims seeking monetary damages relating to Green
River's performance under the gathering agreement and under a processing
agreement between the parties, along with a declaratory judgment that both
agreements have been terminated. In addition, Washington Energy has made a
crossclaim against two unaffiliated entities, each of which owned a portion of
Green River during a portion of the period in question.
The Company believes that Green River is in compliance with the gathering
agreement and the processing agreement and that both are in full force and
effect. The Company believes that it has meritorious defenses to the
counterclaims and intends to defend vigorously against any such claims.
On July 28, 1994, the Company and its wholly-owned subsidiary Mountain Gas
filed a complaint in United States District Court, Denver, Colorado against
Morgan Stanley Leveraged Equity Fund II, L.P., Morgan Stanley Leveraged Equity
Fund II, Inc., Morgan Stanley & Co., Incorporated and certain former directors
and officers of Mountain Gas seeking money damages. The complaint alleges
certain acts and omissions that violated federal and state securities laws by
the defendants in connection with the Company's July 1993 purchase of the
stock of Mountain Gas from Morgan Stanley Leveraged Equity Fund II, L.P. The
acts and omissions set forth in the complaint relate primarily to defendants'
failure to disclose adequately the nature and scope of the dispute between
Mountain Gas and Washington Energy. In addition, the Company and Mountain Gas
have raised fraud, misrepresentation and breach of contract claims against
certain of the defendants.
25
<PAGE>
Katy
Commencing in March 1993 and continuing through July 1993, Western Gas
Resources Storage, Inc. ("Storage"), a wholly-owned subsidiary of the Company,
filed a total of 165 condemnation actions in the County Court at Law No. 1 and
No. 2 of Fort Bend County, Texas, to obtain certain storage rights and rights-
of-way relating to its Katy Gas Storage Facility and the related underground
reservoir ("Katy"). The County Court appointed panels of Special
Commissioners which awarded compensation to the owners whose rights were
condemned. Condemnation awards are a capital cost of the Katy project.
A majority of the land and mineral owners involved in the condemnation
proceedings appealed to County Court, seeking a declaration that Storage did
not possess the right to condemn, or, in the alternative, that they should be
awarded more compensation than previously awarded by the Special
Commissioners. In all but one of those appeals, the right to condemn issue
has been resolved in favor of Storage although factual issues in individual
cases remain open as to whether that right was exercised properly.
In August 1994, in the only appeals in which the compensation issue has been
determined, a jury awarded a landowner adjacent to the 82 acre site where the
compression facilities are located a total of $214,000 and another jury
awarded a landowner within 1,000 feet of the 82 acre site a total of $38,000,
for storage rights and damages to property not taken. The Special
Commissioners had previously awarded these landowners a total of approximately
$2,000 and $600, respectively. The Company does not believe that these jury
verdicts are representative of what will occur in subsequent trials, although
there is no assurance of this. In addition, the Company believes that several
reversible errors were committed at trial and it intends to appeal the awards.
The Company is involved in various other litigation and administrative
proceedings arising in the normal course of business. In the opinion of
management, any liabilities that may result from these claims will not,
individually or in the aggregate, have a material adverse effect on the
Company's financial position or results of operations.
26
<PAGE>
Item 5. Other Events
------------
The Company has given notice to the holder of all of the issued and
outstanding shares of the Company's 7.25% Cumulative Senior Perpetual
Convertible Preferred Stock, with a liquidation preference of $40 million,
that the Company will redeem all such shares on November 30, 1994 at an
aggregate redemption price of $42 million plus accrued dividends. The holder
has the right on or prior to such redemption date to convert the preferred
stock into an aggregate of 2,090,000 shares of the Company's common stock.
The Company is unable to predict whether redemption or conversion will occur.
On November 3, 1994, the Company announced two acquisitions in the Permian
Basin of West Texas. The Company has signed a definitive agreement to
purchase the West Texas gathering and treating assets of Oasis Pipe Line
Company ("Oasis")for approximately $26.0 million. Closing is expected to
occur on November 30, 1994 with an effective date of December 1, 1994. This
closing is subject to the termination of the Hart Scott Rodino Act waiting
period. Included in this purchase are 14 gathering systems with approximately
600 miles of pipeline and two treating facilities with current throughput of
approximately 140 MMcf per day. In addition, the Company has entered into a
long term agreement for 100 MMcf per day of firm transportation service with
Oasis and will install a 220 MMcf per day pipeline interconnection between
Oasis and Katy. The Company also completed the acquisition of the 15 MMcf per
day Middle Concho Plant from Enron Gas Processing Co. for approximately $1.3
million, with an effective date of October 1, 1994. The Company plans to
consolidate this facility with its Midkiff/Benedum complex.
27
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
10.65 First Restated Loan Agreement (Revolver) (without exhibits)
as of September 2, 1994 among Western Gas Resources, Inc.
and NationsBank of Texas, N.A. as Agent and Certain Banks as
Lenders (See Page 30).
10.66 Second Amendment to Third Restated Loan Agreement (Term) as
of September 2, 1994 among Western Gas Resources, Inc. and
NationsBank of Texas, N.A. as Agent and Certain Banks as
Lenders (See Page 103).
10.67 Letter Amendment No. 2 to the Amended and Restated Master
Shelf Agreement effective as of August 31, 1994 by and
between Western Gas Resources, Inc. and Prudential Insurance
Company of America (See Page 122).
10.68 Amendment No. 2 to Note Purchase Agreement dated as of
August 31, 1994 by and among Western Gas Resources, Inc. and
the Purchasers (See Page 129).
10.69 Master Note dated September 2, 1994 between Western Gas
Resources, Inc. and Bank of America National Trust and
Savings Association (See Page 135).
(b) Reports on Form 8-K:
None
28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WESTERN GAS RESOURCES, INC.
---------------------------
Registrant
Date: November 11, 1994 By: /s/ BILL M. SANDERSON
-------------------------
Bill M. Sanderson
President and Chief
Operating Officer
Date: November 11, 1994 By: /s/ WILLIAM J. KRYSIAK
----------------------
William J. Krysiak
Vice President - Controller
(Principal Financial and
Accounting Officer)
29
<PAGE>
EXHIBIT 10.65
________________________________________________________________________________
FIRST RESTATED LOAN AGREEMENT (REVOLVER)
-------------------------------------
WESTERN GAS RESOURCES, INC.
and
NATIONSBANK OF TEXAS, N.A.
-------------------------------------
$325,000,000
September 2, 1994
________________________________________________________________________________
<PAGE>
LOAN AGREEMENT (Revolver)
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I Definitions and References........................ -1-
Section 1.1. Defined Terms..................................... -1-
Section 1.2. Exhibits and Schedules; Additional
Definitions.................................... -12-
Section 1.3. Amendment of Defined Instruments................. -12-
Section 1.4. References and Titles............................ -12-
Section 1.5. Calculations and Determinations.................. -13-
ARTICLE II The Loans............................... -13-
Section 2.1. Loans............................................ -13-
Section 2.2. Rate Elections................................... -14-
Section 2.3. Requests for Advances; Funding the
Advances....................................... -15-
Section 2.4. Use of Proceeds.................................. -16-
Section 2.5. Optional Prepayments............................. -16-
Section 2.6. Scheduled Payments............................... -17-
Section 2.7. Mandatory Prepayments............................ -17-
Section 2.8. Initial Mandatory Prepayment Ratio
Determination.................................. -19-
Section 2.9. Payments to Lenders.............................. -19-
Section 2.10. Fees............................................ -20-
Section 2.11. Increased Cost of Fixed Rate Portions........... -21-
Section 2.12. Change of Law................................... -21-
Section 2.13. Funding Losses.................................. -22-
Section 2.14. Reimbursable Taxes.............................. -22-
Section 2.15. Increased Capital............................... -23-
Section 2.16. Interest Rate Changes........................... -23-
ARTICLE III Letters of Credit........................... -24-
Section 3.1. LCs.............................................. -24-
Section 3.2. Reimbursement of LCs............................. -25-
Section 3.3. Transferees of LCs............................... -26-
Section 3.4. Extension of Maturity of LCs..................... -27-
Section 3.5. Restriction on Liability......................... -27-
Section 3.6. No Duty to Inquire............................... -28-
ARTICLE IV Conditions Precedent to Lending.................... -28-
Section 4.1. Documents to be Delivered and Fees to be
Paid........................................... -28-
Section 4.2. Additional Conditions Precedent.................. -29-
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
ARTICLE V Representations and Warranties..................... -30-
Section 5.1 Representations and Warranties by
Borrower....................................... -30-
Section 5.2. Representation by Lenders........................ -34-
ARTICLE VI Covenants of Borrower......................... -35-
Section 6.1. Affirmative Covenants............................ -35-
Section 6.2. Negative Covenants............................... -41-
ARTICLE VII Security................................ -50-
Section 7.1. The Security..................................... -50-
Section 7.2. Offset........................................... -50-
Section 7.3. Guaranties....................................... -51-
Section 7.4. Deposits......................................... -51-
ARTICLE VIII Events of Default and Remedies..................... -52-
Section 8.1. Events of Default................................ -52-
Section 8.2. Remedies......................................... -56-
Section 8.3. Indemnity........................................ -56-
ARTICLE IX Agent................................. -57-
Section 9.1. Appointment and Authority........................ -57-
Section 9.2. Agent's Reliance, Etc............................ -57-
Section 9.3. Lenders' Credit Decisions........................ -58-
Section 9.4. Indemnification.................................. -58-
Section 9.5. Rights as Lender................................. -59-
Section 9.6. Sharing of Set-Offs and Other Payments........... -59-
Section 9.7. Investments...................................... -60-
Section 9.8. Benefit of Article IX............................ -60-
Section 9.9. Resignation...................................... -60-
Section 9.10. Agency/Administrative Fee....................... -61-
ARTICLE X Miscellaneous............................. -61-
Section 10.1. Waivers and Amendments;
Acknowledgements............................... -61-
Section 10.2. Survival of Agreements; Cumulative
Nature......................................... -63-
Section 10.3. Notices......................................... -63-
Section 10.4. Parties in Interest............................. -64-
SECTION 10.5. GOVERNING LAW................................... -64-
Section 10.6. Limitation on Interest.......................... -64-
Section 10.7. Optional Termination............................ -65-
Section 10.8. Severability.................................... -66-
Section 10.9. Binding Effect.................................. -66-
Section 10.10. Counterparts................................... -68-
Section 10.11. Restatement.................................... -68-
</TABLE>
-ii-
<PAGE>
FIRST RESTATED LOAN AGREEMENT (Revolver)
----------------------------------------
THIS FIRST RESTATED LOAN AGREEMENT is made as of September 2, 1994 (to
become effective, together with the Notes of even date herewith, once the
conditions precedent set forth in Article IV have been met and that this
Agreement has been executed by all parties hereto) among WESTERN GAS RESOURCES,
INC., a Delaware corporation, which is a consolidated entity comprised of
Western Gas Resources, Inc. and its Subsidiaries (herein called "Borrower"), the
banks (each a "Lender" and, collectively, "Lenders") listed in Schedule 3
hereto, and NATIONSBANK OF TEXAS, N.A., a national banking association, as Agent
for Lenders (herein called "Agent"). In consideration of the mutual covenants
and agreements contained herein the parties hereto agree as follows:
ARTICLE I
Definitions and References
--------------------------
Section 1.1. Defined Terms. As used in this Agreement, each of the
-------------
following terms has the meaning given it in this Section 1.1 or in the sections
and subsections referred to below:
"Additional Preferred Stock" means the 1,400,000 shares of the $2.28
--------------------------
Cumulative Preferred Stock of Borrower.
"Advance" has the meaning given such term in Section 2.1.
-------
"Affiliate" means, as to any Person, each other Person that directly or
---------
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person.
"Agent" means NationsBank of Texas, N.A., as Agent hereunder, and its
-----
successors in such capacity.
"Agreement" means this First Restated Loan Agreement (Revolver).
---------
"Authorized Officer" means, with respect to any act to be performed or duty
------------------
to be discharged by or on behalf of any Person who is not an individual, any
officer, agent or representative thereof who is at the time in question
authorized to perform such act or discharge such duty on behalf of such Person.
"Base Rate" means with respect to each Base Rate Portion of the Loans, the
---------
per annum rate of interest equal to the greater of (i) the Prime Rate from time
to time in effect or (ii) the Federal Funds Rate from time to time in effect
plus one-half of one percent (.50%). If the Prime Rate or the Federal Funds
Rate, as the case may be, change after the date hereof, the Base Rate shall be
automatically increased or decreased, as the case may be, without notice to
Borrower from time to time as of the effective time of each change in the Prime
Rate or the Federal Funds Rate, as the case may be.
<PAGE>
"Base Rate Portion" means that portion of the unpaid principal balance of
-----------------
the Loans which is not made up of Fixed Rate Portions.
"Borrower" has the meaning given it in the opening paragraph of this
--------
Agreement.
"Business Day" means a day on which commercial banks are open for business
------------
with the public in Dallas, Texas and New York City, New York. Any Business Day
in any way relating to Fixed Rate Portions (such as the day on which a Interest
Period begins or ends) must also be a day on which, in the judgment of Agent,
significant transactions in dollars are carried out in the interbank
eurocurrency market.
"Change in Control" means any of the following: (i) the occurrence of a
-----------------
Founders Ownership Change; or (ii) Brion G. Wise ceases to be a director of
Borrower for reasons other than death or disability; or (iii) Bill M. Sanderson
ceases to be a director of Borrower for reasons other than death or disability.
For purposes of this definition, a "Founders Ownership Change" shall be deemed
to have occurred at any point in time at which a Person or Persons acting in
concert (such Person or Persons herein referred to as an "Acquiring Person")
obtain legal or beneficial ownership (within the meaning of Rule 13d-3,
promulgated by the Securities and Exchange Commission and now in effect under
the Securities Exchange Act of 1934, as amended) of a number of Voting Shares
greater than or equal to the Voting Shares owned by the Founders at the time of
calculation. For purposes of calculating the number of Voting Shares of any
Founder for purposes of this definition, the Voting Shares owned legally or
beneficially by such Founder shall be included in the Voting Shares of an
Acquiring Person (and excluded from the Voting Shares of the remaining Founders)
if such Founder votes his Voting Shares in concert with an Acquiring Person
against the remaining Founders in (A) an election for the Board of Directors or
(B) the modification of the Borrower's certificate of incorporation or by-laws.
"CIGNA Group" means, collectively, Connecticut General Life Insurance
-----------
Company, CIGNA Property and Casualty Insurance Company, Insurance Company of
North America, Life Insurance Company of North America, The Canada Life
Assurance Company, Canada Life Insurance Company of America, Canada Life
Insurance Company of New York, The Franklin Life Insurance Company and Royal
Maccabees Life Insurance Company.
"Closing Date" means the date on which this Agreement becomes effective.
------------
"Collateral" means all tangible or intangible real or personal property
----------
which, under the terms of any Security Document, is or is purported to be
encumbered thereby or subject thereto.
-2-
<PAGE>
"Commitment" means (i) from the Closing Date to and including December 31,
----------
1994, the amount of $325,000,000 minus the LC Balance at the time in question
and (ii) from January 1, 1995 to and including the last day of the Commitment
Period, $300,000,000 minus the LC Balance at the time in question.
"Commitment Period" means the period from and including the Closing Date
-----------------
until and including the earlier of October 1, 1996 or the day on which the Notes
become due and payable in full.
"Consolidated" refers to the consolidation of any Person, in accordance
------------
with Generally Accepted Accounting Principles, with its properly consolidated
Subsidiaries. References herein to a Person's Consolidated financial
statements, financial position, financial condition, liabilities, etc. refer to
the consolidated financial statements, financial position, financial condition,
liabilities, etc. of such Person and its properly consolidated Subsidiaries.
"Debt Securities" means, collectively, (i) the Senior Notes dated October
---------------
27, 1992 issued by Borrower pursuant to that certain Master Shelf Agreement
dated as of December 19, 1991 between Borrower and The Prudential Insurance
Company of America, as amended and restated from time to time and (ii) the 7.65%
Senior Notes due May 31, 2003 in the aggregate principal amount of $50,000,000
issued by Borrower pursuant to various Note Purchase Agreements among Borrower,
MIGC, MGTC, WGRS, WGRT and each member of the CIGNA Group, as amended and
restated from time to time.
"Debt to Capitalization Ratio" means, at the time of determination, the
----------------------------
ratio of (a) the Adjusted Funded Debt of Borrower to (b) the sum of (i) the
Adjusted Funded Debt of Borrower plus (ii) Borrower's Shareholders' Equity. As
----
used in this definition, "Shareholders' Equity" means the remainder of (1)
Borrower's Consolidated assets minus (2) the sum of (x) Borrower's Consolidated
-----
liabilities plus (y) all treasury stock of Borrower and its Subsidiaries plus
(z) all intangible assets of Borrower and its Subsidiaries (including without
limitation all patents, copyrights, licenses, franchises, goodwill, trade names
and trade secrets); provided that the term "Shareholder's Equity" shall include
the book value of long-term gas contracts with producers that Borrower assumes
in connection with acquisitions that are reflected on the books of Borrower as
assets. As used in this definition, "Adjusted Funded Debt of Borrower" means,
at the time of determination, the sum of (1) Funded Debt plus (2) Excess Working
Capital Deficit.
"Default" has the meaning given it in Section 8.1. An Event of Default is
-------
a Default as well.
"Disclosure Schedule" means (a) Schedule 1 hereto and (b) any documents
-------------------
listed on such schedule and expressly incorporated therein by reference, so long
as Borrower has heretofore delivered true and correct copies of such documents
to
-3-
<PAGE>
Agent and each Lender. Insofar as any representations and warranties made
herein are incorporated by reference or otherwise remade in Loan Documents
delivered after the date hereof, the term "Disclosure Schedule" shall in such
representations and warranties be deemed to refer to all documents, instruments
or other writings which have at the time in question been delivered to Agent and
each Lender in connection with the transactions contemplated herein.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended, together with all rules and regulations promulgated with respect
thereto.
"ERISA Plan" means any pension benefit plan subject to Title IV of ERISA
----------
maintained by any Related Person or any Affiliate thereof to which any Related
Person is required to contribute.
"Eurodollar Rate" means, with respect to each particular Fixed Rate Portion
---------------
within a Tranche and with respect to the related Interest Period, the rate of
interest per annum determined by Agent on behalf of Lenders in accordance with
its customary general practices to be representative of the rates at which
deposits of dollars are offered to NationsBank at approximately 9:00 a.m. Dallas
time two Business Days prior to the first day of such Interest Period (by prime
banks in the interbank eurocurrency market which have been selected by
NationsBank in accordance with its customary general practices) for delivery on
the first day of such Interest Period in an amount equal or comparable to the
amount of such Fixed Rate Portion of NationsBank within such Tranche and for a
period of time equal or comparable to the length of such Interest Period. The
Eurodollar Rate determined by Agent with respect to a particular Fixed Rate
Portion shall be fixed at such rate for the duration of the associated Interest
Period. If Agent is unable so to determine the Eurodollar Rate for any Fixed
Rate Portion, or if the associated Fixed Rate would exceed the maximum rate of
interest, if any, then permitted to be charged on the Note to which it relates
under applicable law Borrower shall be deemed not to have elected such Fixed
Rate Portion.
"Eurodollar Spread" with respect to each Fixed Rate Portion of the Loans,
-----------------
(a) if the Debt to Capitalization Ratio is less than or equal to .25 to 1.0,
.5625%; (b) if the Debt to Capitalization Ratio is greater than .25 to 1.0 but
less than or equal to .30 to 1.0, three-quarters of one percent (0.75%); (c) if
the Debt to Capitalization Ratio is greater than .30 to 1.0 but less than or
equal to .40 to 1.0, seven-eighths of one percent (0.875%); (d) if the Debt to
Capitalization Ratio is greater than .40 to 1.0 but less than or equal to .50 to
1.0, one percent (1.0%); and (e) if the Debt to Capitalization Ratio is greater
than .50 to 1.0, one and one-quarter of one percent (1.25%). Each of the above
listed Eurodollar Spreads will be reduced by one-eighth of one percent (.125%)
upon the issuance by Borrower of either Funded Debt which has a maturity in
excess of
-4-
<PAGE>
six years or capital stock, which issuance results in net proceeds to Borrower
of at least $100,000,000.
"Event of Default" has the meaning given it in Section 8.1.
----------------
"Excess Working Capital Deficit" means (i) if Borrower's Working Capital is
------------------------------
greater than or equal to negative $10,000,000, zero, or (ii) if Borrower's
Working Capital is less than negative $10,000,000, the product of (A) the amount
of such Working Capital plus $10,000,000 multiplied by (B) negative one (for
---- -------------
example, if Working Capital equals negative $15,000,000, the Excess Working
Capital Deficit would equal $5,000,000). For purposes of this definition,
"Working Capital" means the remainder of Borrower's Consolidated current assets
minus Borrower's Consolidated current liabilities, excluding current maturities
- - -----
of long-term Indebtedness.
"Existing Agreements" shall mean that certain Loan Agreement (Revolver)
-------------------
dated as of August 31, 1993, among Borrower, Agent and various lenders thereto
as amended by that certain First Amendment to Loan Agreement (Revolver) dated as
of December 31, 1993.
"Federal Funds Rate" means for each day, the rate (expressed as a per annum
------------------
rate and rounded upwards, if necessary, to the next 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, 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
rates are not so published for any day which is a Business Day, the average of
the quotations for such day on such transactions received by Agent from three
Federal funds brokers of recognized standing selected by Agent.
"Fiscal Quarter" means any three-month period ending on March 31, June 30,
--------------
September 30 or December 31 of any year.
"Fiscal Year" means any twelve-month period ending on December 31 of any
-----------
year.
"Fixed Rate" means, with respect to each particular Fixed Rate Portion and
----------
the associated Eurodollar Rate and Reserve Percentage, the rate per annum
calculated by Agent on behalf of Lenders (rounded upwards, if necessary, to the
next higher 0.01%) determined on a daily basis pursuant to the following
formula:
Fixed Rate =
Eurodollar Rate + Eurodollar Spread
---------------------------
100.0% - Reserve Percentage
The Fixed Rate shall change as the associated Reserve Percentage changes. The
Fixed Rate shall be fixed for the Interest Period elected for such Fixed Rate
Portion.
-5-
<PAGE>
"Fixed Rate Portion" means any portion of the unpaid principal balance of
------------------
any of the Loans which Borrower designates as such in a Rate Election.
"Founders" means, collectively, Brion G. Wise, Bill M. Sanderson, Walter L.
--------
Stonehocker, Dean Phillips, Ward Sauvage and their immediate families and the
companies through which they hold ownership in Borrower.
"Funded Debt" means the aggregate of the following Indebtedness of Borrower
-----------
and its Subsidiaries, after elimination of intercompany items and other
Consolidation in accordance with Generally Accepted Accounting Principles: (a)
Indebtedness (including the Obligations) for borrowed money, regardless of
maturity, (b) Indebtedness constituting an obligation to pay the deferred
purchase price of property, (c) Indebtedness evidenced by a bond, debenture,
note or similar instrument and (d) Indebtedness which is due and payable at the
time in question, with respect to letters of credit or applications or
reimbursement agreements therefor; provided however that any amounts outstanding
under subordinated notes into which shares of Preferred Stock have been
converted (following Majority Lenders' consent thereto) shall be included in
Funded Debt following such conversion.
"Generally Accepted Accounting Principles" means those generally accepted
----------------------------------------
accounting principles and practices which are recognized as such by the
Financial Accounting Standards Board (or any generally recognized successor) and
which, in the case of Borrower and its Consolidated Subsidiaries, (a) are
applied for all periods after the date hereof in a manner consistent with the
manner in which such principles and practices were applied to the audited
Initial Financial Statements, and (b) are consistently applied for all periods
after the date hereof so as to properly reflect the financial condition, and the
results of operations and changes in financial position, of Borrower and, on a
Consolidated basis, of Borrower and its Consolidated Subsidiaries. If any
change in any accounting principle or practice is required by the Financial
Accounting Standards Board in order for such principle or practice to continue
as a generally accepted accounting principle or practice, all reports and
financial statements required hereunder with respect to Borrower or with respect
to Borrower and its Consolidated Subsidiaries may be prepared in accordance with
such change, but all calculations and determinations to be made hereunder may be
made in accordance with such change only after written notice of such change is
given to each Lender and Majority Lenders agree to such change insofar as it
affects the accounting of Borrower or of Borrower and its Consolidated
Subsidiaries.
"Grace Period" has the meaning given it in Section 8.1.
------------
-6-
<PAGE>
"Grass-Roots Projects" means all facilities related to the
--------------------
production, storage, processing or transportation of oil, gas, other
hydrocarbons or other minerals which are constructed and owned by Borrower.
"Guarantor" means MIGC, MGR, MGTC, WGRS, WGRO and WGRT and any other Person
---------
which has guaranteed some or all of the Obligations pursuant to a guaranty
listed on Schedule 2 or any other Person which has guaranteed some or all of the
Obligations and which has been accepted by Majority Lenders as a Guarantor or
any Subsidiary of Borrower which now or hereafter executes and delivers a
guaranty to Agent conforming to Section 7.3.
"Indebtedness" means, as to any Person, all indebtedness, liabilities and
------------
obligations of such Person, whether primary or secondary, direct or indirect,
absolute or contingent.
"Initial Financial Statements" means (i) the audited annual Consolidated
----------------------------
financial statements of Borrower dated as of and for the period ended December
31, 1993 and (ii) the unaudited interim Consolidated financial statements of
Borrower dated as of and for the period ended June 30, 1994.
"Interest Period" means, with respect to each particular Fixed Rate
---------------
Portion, a period of 1, 2 or 3 months, as specified in the Rate Election
applicable thereto, beginning on and including the date specified in such Rate
Election (which must be a Business Day), and ending on but not including the
same day of the month as the day on which it began (e.g., a period beginning on
the third day of one month shall end on but not include the third day of another
month), provided that each Interest Period which would otherwise end on a day
which is not a Business Day shall end on either the immediately preceding
Business Day or the next succeeding Business Day, at the option of Borrower. No
Interest Period may be elected which would extend past the date on which the
associated Note to which it relates is due and payable in full.
"Issuing Bank" shall mean NationsBank of Texas, N.A., in its capacity as
------------
the issuer of LCs hereunder, and its successors in such capacity.
"Late Payment Rate" means four percent (4.0%) per annum plus the applicable
-----------------
Base Rate in effect at the time in question, provided that, with respect to any
Fixed Rate Portion of any Loan with an Interest Period extending beyond the date
such Fixed Rate Portion becomes due and payable, "Late Payment Rate" shall mean
the higher of (a) four percent (4.0%) per annum plus the related Fixed Rate or
(b) four percent (4.0%) per annum plus the applicable Base Rate in effect at the
time in question.
"LC" has the meaning given it in Section 3.1.
--
"LC Balance" means Lenders' maximum aggregate liability with respect to all
----------
LCs outstanding at the time in question.
-7-
<PAGE>
"Lenders" means each signatory hereto (other than Borrower), including
-------
NationsBank, and the successors of each as a holder of any Note.
"Loan" has the meaning given it in Section 2.1.
----
"Loan Documents" means this Agreement, the Notes, the LCs, the Security
--------------
Documents and all other agreements, certificates, legal opinions and other
documents, instruments and writings (other than term sheets, commitment letters,
or similar documents used in the negotiation hereof) heretofore or hereafter
delivered in connection herewith or therewith.
"Loan Share" means with respect to any Lender (a) when used in Sections
----------
2.5 and 2.6, the percentage equal to the unpaid principal balance of such
Lender's Loans at the time in question divided by the aggregate unpaid principal
balance of all Loans at such time and (b) when used in any section other than in
Sections 2.5 and 2.6, the percentage designated `Loan Share' set forth opposite
such Lender's name on the then applicable part of Schedule 3. When any Lender
sells an interest in its Loan, the `Loan Share' set forth opposite such Lender's
name will be recalculated by Agent based on the amount of the Loan sold by such
Lender.
"Majority Lenders" shall mean at the time in question two or more Lenders
----------------
collectively having at least a 66-2/3% Loan Share.
"Mandatory Prepayment Ratio" means, as of each Prepayment Calculation Date,
--------------------------
the ratio of (a) the sum of (I) the aggregate principal amount of Lenders' Loans
then outstanding plus the LC Balance plus (II) the Funded Debt of Borrower
(other than the Obligations) outstanding on such date which has a final maturity
prior to or concurrent with the final maturity of the Obligations, plus (III)
the Excess Working Capital Deficit on such date to (b) the remainder of (I) the
sum of (i) Borrower's Consolidated net income for the four complete, consecutive
Fiscal Quarters immediately preceding such date plus (ii) all non-cash expenses
incurred by Borrower during such four Fiscal Quarters (including but not limited
to depreciation, depletion and amortization), as calculated by Borrower, based
on financial statements of Borrower delivered to Lenders minus (II) the
aggregate amount of dividends which Borrower projects will be paid to the
stockholders of the Preferred Stock during the four consecutive Fiscal Quarters
immediately following such date, provided that in calculating the Mandatory
Prepayment Ratio, (i) Borrower shall add or subtract, as the case may be, any
non-recurring losses or gains included in the calculation of its Consolidated
net income (for example, Borrower shall subtract any gain from the sale of any
of its assets which is not in the ordinary course of business from the
calculation of its consolidated net income), (ii) Borrower shall add or
subtract, as the case may be, the historical cash earnings or losses during the
last four Fiscal Quarters of any properties sold or acquired by Borrower during
such four Fiscal Quarters, as reflected in
-8-
<PAGE>
financial statements of the seller of such properties delivered to Lenders;
provided, however, that any pro-forma adjustments made by Borrower to the actual
historical cash earnings of any such properties must be done in a manner
consistent with the rules of the Securities and Exchange Commission or, if not,
approved by Majority Lenders in their sole and absolute discretion, (iii)
Borrower may consider estimates of Borrower's cash earnings from any Grass-Roots
Projects of Borrower during their first year of operations upon the approval of,
and in amounts approved by, Majority Lenders, which approval or disapproval is
within the sole and absolute discretion of Majority Lenders, and (iv) Preferred
Stock shall be treated as such until actually converted to common stock (i.e.
projected dividends cannot be based on an assumption that Preferred Stock will
be converted to common stock at a future date).
"Matured LC Indebtedness" has the meaning given it in Section 3.2.
-----------------------
"MGR" means Mountain Gas Resources, Inc., a Delaware corporation.
---
"MGTC" means MGTC, Inc., a Wyoming corporation.
----
"MIGC" means MIGC, Inc., a Delaware corporation.
----
"NationsBank" means NationsBank of Texas, N.A., in its capacity as a Lender
-----------
hereunder and not as Agent, and its successors and assigns.
"Note" has the meaning given it in Section 2.1.
----
"Obligations" means the sum of (a) all Indebtedness from time to time owing
-----------
by any of the Related Persons to Agent or any Lender under or pursuant to any of
the Loan Documents, plus (b) all amounts which Borrower is required hereunder to
deposit with Agent to be held on behalf of Lenders under Section 7.4.
"Obligation" means any part of the Obligations.
----------
"Partnership" means Western Gas Processors, Ltd., a Colorado limited
-----------
partnership, which Partnership was a predecessor of Borrower.
"Person" means an individual, corporation, partnership, association, joint-
------
stock company, trust, unincorporated organization or joint venture, or a court
or governmental unit or any agency or subdivision thereof, or any other legally
recognizable entity.
"Preferred Stock" means, collectively, (i) the 7.25% Cumulative Senior
---------------
Perpetual Convertible Preferred Stock of Borrower and (ii) 2,760,000 shares of
Cumulative Convertible Preferred Stock of Borrower.
"Prepayment Amount" has the meaning given it in Section 2.7.
-----------------
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<PAGE>
"Prepayment Calculation Date" means the last day of each Fiscal Quarter
---------------------------
(beginning on September 30, 1994) and each other Mandatory Prepayment Ratio
recalculation date permitted pursuant to Section 6.2(e)(iii) and Section 6.2(f).
"Prime Rate" means the rate of interest established by NationsBank from
----------
time to time as its "prime rate". Such rate is set by NationsBank as a general
reference rate of interest, taking into account such factors as it may deem
appropriate, it being understood that many of NationsBank's commercial or other
loans are not priced in relation to such rate, that it is not necessarily the
lowest or the best rate actually charged to any customer, that it may not
correspond with further increases or decreases in interest rates charged by
other lenders or market rates in general and that NationsBank may make various
commercial or other loans at rates of interest having no relationship to such
rate.
"Rate Election" has the meaning given it in Section 2.2.
-------------
"Regulation D" means Regulation D of the Board of Governors of the Federal
------------
Reserve System as from time to time in effect.
"Related Person" means any of Borrower, each Guarantor and each other
--------------
Subsidiary of Borrower, with the exception of the Williston Gas Company and
Westana.
"Request for Advance" means a request for Advance meeting the requirements
-------------------
of Section 2.3.
"Reserve Percentage" means, on any day with respect to each particular
------------------
Fixed Rate Portion in a Tranche, the maximum reserve requirement, as determined
by Agent on behalf of Lenders (including without limitation any basic,
supplemental, marginal, emergency or similar reserves), expressed as a
percentage and rounded to the next higher 0.01%, which would then apply to Agent
under Regulation D with respect to "Eurocurrency liabilities" (as such term is
defined in Regulation D) equal in amount to Agent's Fixed Rate Portion in such
Tranche, were Agent to have any such "Eurocurrency liabilities". If such
reserve requirement shall change after the date hereof the Reserve Percentage
shall be automatically increased or decreased, as the case may be, from time to
time as of the effective time of each such change in such reserve requirement.
"Security Documents" means the instruments listed in Schedule 2 and all
------------------
other security agreements, deeds of trust, mortgages, chattel mortgages,
pledges, guaranties, financing statements, continuation statements, extension
agreements and other agreements or instruments delivered by any Related Person
or any Guarantor to Agent in connection with this Agreement or any transaction
contemplated hereby to secure or guarantee the payment of any part of the
Obligations or the performance of any Related Person's other duties and
obligations under the Loan Documents, whenever made or delivered.
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<PAGE>
"Stock Option Agreements" means, collectively, those certain Agreements to
-----------------------
Provide Loan(s) to enable certain employees to exercise stock options by and
among Borrower and certain of its key employees.
"Subsidiary" means, with respect to any Person, any corporation,
----------
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned fifty-one percent or more by such Person.
"Term Loan Agreement" means that certain Third Restated Loan Agreement
-------------------
(Term) dated as of August 31, 1993, among Borrower, Agent and the lenders party
thereto, as amended by that certain First Amendment to Third Restated Loan
Agreement (Term) dated as of December 31, 1993 and that certain Second Amendment
of Third Restated Loan Agreement (Term) dated of even date herewith.
"Termination Event" means (a) the occurrence with respect to any ERISA Plan
-----------------
of (i) a reportable event described in Sections 4043(b)(5) or (6) of ERISA or
(ii) any other reportable event described in Section 4043(b) of ERISA other than
a reportable event not subject to the provision for 30-day notice to the Pension
Benefit Guaranty Corporation pursuant to a waiver by such corporation under
Section 4043(a) of ERISA, or (b) the withdrawal of any Related Person or of any
Affiliate of any Related Person from an ERISA Plan during a plan year in which
it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or
(c) the filing of a notice of intent to terminate any ERISA Plan or the
treatment of any ERISA Plan amendment as a termination under Section 4041 of
ERISA, or (d) the institution of proceedings to terminate any ERISA Plan by the
Pension Benefit Guaranty Corporation 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
ERISA Plan.
"Test Amount" has the meaning given it in Section 2.7(b).
-----------
"Tranche" has the meaning given it in Section 2.2.
-------
"Voting Shares" means at the time in question, the sum of (a) all
-------------
outstanding shares of common stock of Borrower, (b) all other securities issued
by Borrower which entitle the holder thereof to voting rights with respect to
Borrower at such time (as used in this definition, the shares described in the
immediately preceding clauses (a) and (b) are collectively called ("Shares")),
and (c) the amount of additional Shares (not including any share or security
included in the preceding clauses (a) and (b)) which may be obtained by
converting outstanding shares of capital stock of Borrower or rights under other
outstanding instruments into Shares.
-11-
<PAGE>
"Westana" means the joint venture formed between WGRO and Panhandle
-------
Gathering Company, a wholly-owned subsidiary of Panhandle Eastern Pipe Line
Company.
"WGRO" means Western Gas Resources - Oklahoma, Inc., a Delaware
----
corporation.
"WGRS" means Western Gas Resources Storage, Inc., a Texas corporation.
----
"WGRT" means Western Gas Resources Texas, Inc., a Texas corporation.
----
"Williston Gas Company" means the joint venture formed pursuant to that
---------------------
certain Amended and Restated Joint Venture Agreement dated August 1, 1990
between the Partnership and Enron Gas Processing (the rights of the Partnership
thereunder having been assigned to Borrower), as amended to the date hereof.
Section 1.2. Exhibits and Schedules; Additional Definitions. All Exhibits
----------------------------------------------
and Schedules attached to this Agreement are a part hereof for all purposes.
Reference is hereby made to Schedule 2 for the meaning of certain terms defined
therein and used but not defined herein, which definitions are incorporated
herein by reference.
Section 1.3. Amendment of Defined Instruments. Unless the context
--------------------------------
otherwise requires or unless otherwise provided the terms defined in this
Agreement which refer to a particular agreement, instrument or document also
refer to and include all renewals, extensions and modifications of such
agreement, instrument or document, provided that nothing contained in this
section shall be construed to authorize any Person to execute or enter into any
such renewal, extension or modification.
Section 1.4. References and Titles. All references in this Agreement to
---------------------
Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the Exhibits, Schedules, articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any subdivisions are for convenience only and do
not constitute any part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions. The words "this
Agreement", "this instrument", "herein", "hereof", "hereby", "hereunder" and
words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The phrases "this section"
and "this subsection" and similar phrases refer only to the sections or
subsections hereof in which such phrases occur. The word "or" is not exclusive.
Pronouns in masculine, feminine and neuter genders shall be construed to include
any other gender, and words in the singular form shall be construed to include
the plural and vice versa, unless the context otherwise requires.
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<PAGE>
Section 1.5. Calculations and Determinations. All calculations under the
-------------------------------
Loan Documents with respect to the Federal Funds Rate, Fixed Rate Portions or
the interest chargeable with respect thereto shall be calculated on the basis of
actual days elapsed (including the first day but excluding the last) and a year
of 360 days. All calculations under the Loan Documents which are unrelated to
the Federal Funds Rate, Fixed Rate Portions and the interest chargeable with
respect thereto shall be made on the basis of actual days elapsed (including the
first day but excluding the last) and a year of 365 or 366 days, as appropriate.
Each determination by Agent or a Lender of amounts to be paid under Sections
2.11 through 2.15 or any other matters which are to be determined hereunder by
Agent or a Lender (such as any Fixed Rate, Eurodollar Rate, Business Day,
Interest Period, or Reserve Percentage) shall, in the absence of manifest error,
be conclusive and binding. Unless otherwise expressly provided herein or unless
Majority Lenders otherwise consent all financial statements and reports
furnished to Agent or any Lender hereunder shall be prepared and all financial
computations and determinations pursuant hereto shall be made utilizing data
that, had it been prepared for inclusion in a full set of financial statements,
would be in accordance with Generally Accepted Accounting Principles.
ARTICLE II
The Loans
---------
Section 2.1. Loans. Subject to the terms and conditions hereof, Lenders
-----
agree to make advances to Borrower (such advances together with such outstanding
indebtedness are herein called "Advances") from time to time during the
Commitment Period so long as (i) the aggregate amount of each Lender's Advances
outstanding at any time does not exceed such Lender's Loan Share, and (ii) the
aggregate amount of all Lenders' Advances outstanding at any time does not
exceed the Commitment. The aggregate amount of all Advances requested of all
Lenders in any Request for Advance must be greater than or equal to $250,000 and
must be an integral multiple of $250,000 for requests of $1,000,000 or less and
an integral multiple of $100,000 for requests over $1,000,000 or must equal the
unadvanced portion of the Commitment. In addition to the foregoing, upon the
making of each payment by the Issuing Bank pursuant to any LC, Borrower shall be
deemed to have requested each Lender to, and such Lender shall, make an Advance
in the amount of such Lender's Loan Share of Borrower's consequent reimbursement
obligation and apply the proceeds thereof to the payment of such reimbursement
obligation, provided that such Lender shall have no obligation to do so if (i)
any Default or Event of Default then exists, (ii) the unpaid principal balance
of such Lender's Loan then exceeds (or would thereby be caused to exceed) such
Lender's Loan Share or (iii) the aggregate unpaid principal balance of the Loans
then exceeds (or would thereby be caused to exceed) the Commitment. When any
Matured LC Indebtedness is repaid with proceeds of Advances, such Matured LC
Indebtedness so repaid shall be extinguished and such
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<PAGE>
Advances shall be governed by the terms of this Agreement applicable to all
other Advances. Borrower shall designate any such Advances as Base Rate
Portions initially or Borrower shall otherwise comply with the notice
requirements set forth in Section 2.3(a). The obligation of Borrower to repay
to each Lender the aggregate amount of all Advances made by such Lender (herein
called such Lender's "Loan"), together with interest accruing in connection
therewith, shall be evidenced by a single promissory note made by Borrower
payable to the order of such Lender (herein called such Lender's "Note") in the
form of Exhibit A with appropriate insertions. The amount of principal owing on
any Lender's Note at any given time shall be the aggregate amount of all
Advances theretofore by such Lender made minus all payments of principal
theretofore received by such Lender on its Note. Principal paid or prepaid on
the Notes may, subject to the terms and conditions hereof, be reborrowed during
the Commitment Period. Interest on each Note shall accrue and be payable as
provided herein and therein.
Section 2.2. Rate Elections. Borrower may from time to time designate all
--------------
or any portion of any of the Loans (including any yet to be made Advances which
are to be made prior to or at the beginning of the designated Interest Period
but excluding any portion of any of the Loans which are required to be repaid
prior to the end of the designated Interest Period) as a "Tranche", which term
refers to a set of Fixed Rate Portions of the Loans that are of the same type
and have identical Interest Periods with each Lender participating in such
Tranche in accordance with its Loan Share. Without the consent of Majority
Lenders, Borrower may make no such election during the continuance of a Default
or an Event of Default, and Borrower may make such an election with respect to
an already existing Fixed Rate Portion only if such election will take effect at
or after the termination of the Interest Period applicable to such already
existing Fixed Rate Portion. Each election by Borrower of a Tranche shall:
(i) Be made in writing in the form and substance of the "Rate
Election" attached hereto as Exhibit D or by telephone promptly confirmed
in writing by such a Rate Election, duly completed and signed by an
Authorized Officer of Borrower;
(ii) Specify the amount of the Loans which Borrower desires to
designate as a Tranche, the first day of the Interest Period which is to
apply thereto, and the length of such Interest Period; and
(iii) Be received by Agent not later than 10:00 a.m., Dallas, Texas
time, on the third Business Day preceding the first day of the specified
Interest Period.
Each election which meets the requirements of this Section 2.2 (herein called a
"Rate Election") shall be irrevocable. Borrower may make no Rate Election under
this Section 2.2 which does not
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<PAGE>
specify an Interest Period complying with the definition of "Interest Period" in
Section 1.1, and the aggregate amount of the Tranche elected in any Rate
Election must be at least $1,000,000. Upon the termination of each Interest
Period the portion of any of the Loans theretofore constituting the related
Tranche shall, unless the subject of a new Rate Election then taking effect,
automatically become a part of the Base Rate Portion of such Loan and become
subject to all provisions of the Loan Documents governing the Base Rate Portion
of such Loan. Borrower shall have, in the aggregate, no more than six Tranches
in effect at any time.
Section 2.3. Requests for Advances; Funding the Advances.
-------------------------------------------
(a) Requests for Advances. Borrower must give notice of any requested
---------------------
Advance as follows:
(i) to Agent for Advances if all such Advances are designated by
Borrower as Base Rate Portions, by 10:00 a.m. Dallas, Texas time on the
date such Advances are requested to be made; or
(ii) to Agent for Advances if any part of such Advances is designated
by Borrower as a Fixed Rate Portion, by 10:00 a.m. Dallas, Texas time on
the third Business Day preceding the date such Advances are requested to be
made.
Each request for Advances may be made by telephone; provided, however, that if
Agent so requests on behalf of Lenders Borrower shall make any future request
for any Advances or confirm any prior request for any Advances in writing in the
form and substance of the "Request for Advance" attached hereto as Exhibit B,
duly completed and signed by an Authorized Officer of Borrower or in such other
form as may be acceptable to Agent in its sole discretion. Each such telephonic
request for an Advance shall also be a certification by Borrower of the truth of
each of the statements contained in the Request for Advance as of the date
thereof. Agent shall give each Lender prompt notice of any Advances so
requested of Agent.
(b) Funding the Advances. All Advances requested by Borrower shall be made
--------------------
pro rata by each Lender in proportion to such Lender's Loan Share. Upon notice
to Lenders from Agent of any requested Advances, if all conditions precedent to
Advances have been met, each Lender will on the date requested promptly remit to
Agent at Agent's office in Dallas, Texas the amount of such Lender's Advance
(which shall be in the amount of such Lender's Loan Share of the aggregate
amount of Advances which are then being requested by Borrower) in immediately
available funds, and upon receipt of such funds, unless to its actual knowledge
any condition precedent to such Advances has been neither met nor waived as
provided herein, Agent shall promptly make the Advances available to Borrower on
behalf of Lenders. Each Request for Advance shall be irrevocable and binding on
Borrower. Unless Agent shall have received prompt notice from a Lender that
such
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<PAGE>
Lender will not make available to Agent such Lender's Advance, Agent may in its
discretion assume that such Lender has made such Advance available to Agent in
accordance with this section and Agent may if it chooses, in reliance upon such
assumption, make such Advance available to Borrower. If and to the extent such
Lender shall not so make its Advance available to Agent, such Lender and
Borrower severally agree to pay or repay to Agent within three days after demand
the amount of such Advance together with interest thereon, for each day from the
date such amount is made available to Borrower until the date such amount is
paid or repaid to Agent, at the interest rate applicable at the time to the
other Advances made on such date. The failure of any Lender to make any Advance
to be made by it hereunder shall not relieve any other Lender of its obligation
hereunder, if any, to make its Advance, but no Lender shall be responsible for
the failure of any other Lender to make any Advance to be made by such other
Lender.
Section 2.4. Use of Proceeds. Borrower shall use all funds from the
---------------
initial Advances under the Loans to repay in full all existing outstanding
indebtedness owing under the Existing Agreement. Borrower shall use all funds
from subsequent Advances under the Loans to make capital expenditures and
provide working capital for its operations, to meet its reimbursement
obligations under LCs, and for other general business purposes. In no event
shall any LC or any Advance be used directly or indirectly for the purpose,
whether immediate, incidental or ultimate, of purchasing, acquiring or carrying
any "margin stock" or any "margin securities" (as such terms are defined
respectively in Regulation U and Regulation G promulgated by the Board of
Governors of the Federal Reserve System) or to extend credit to others directly
or indirectly for the purpose of purchasing or carrying any such margin stock or
margin securities. Borrower represents and warrants to Lenders that it is not
engaged principally, or as one of its important activities, in the business of
extending credit to others for the purpose of purchasing or carrying such margin
stock or margin securities.
Section 2.5. Optional Prepayments.
--------------------
(a) Subject to the provisions of this Section 2.5, Borrower may from time
to time prepay the Notes, in whole or in part, so long as (A) Borrower so
notifies Agent by 10:00 a.m. Dallas, Texas time on the date such prepayment is
to be made, which date must be a Business Day, and (B) the aggregate amount of
all partial prepayments of principal concurrently paid on any category of Notes
is greater than or equal to $250,000 and is an integral multiple of $250,000 for
prepayments of $1,000,000 or less and an integral multiple of $100,000 for
prepayments over $1,000,000, provided that Borrower may not prepay any Fixed
Rate Portion unless required to do so pursuant to Section 2.8, and provided
further that if any such prepayment is so required the provisions of Section
2.13 shall apply. Agent shall give each Lender prompt notice of any notice of
prepayment it receives from Borrower.
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<PAGE>
(b) Each partial prepayment of principal made on the Notes after the end of
the Commitment Period shall be applied to the regular installments of principal
due on such Notes under Section 2.6 in the inverse order of their maturities
unless Borrower elects in writing to apply such prepayment to the next-maturing
installment of principal due on such Notes; provided, however, that in no event
may Borrower elect to apply such prepayment of principal to an installment of
principal which is due more than three months after the date such prepayment is
made.
(c) Each prepayment of principal made on the Notes after the end of the
Commitment Period under this Section 2.5, shall be accompanied by a percentage
of all interest accrued through the date of such prepayment and unpaid on such
Notes, which percentage shall be equal to the amount of principal prepaid
divided by the unpaid principal balance of such Notes immediately prior to such
prepayment. Each principal payment made under this Section 2.5 shall be
apportioned and applied to each Lender's Note in accordance with such Lender's
Loan Share of such payment. Any principal or interest prepaid pursuant to this
Section 2.5 shall be in addition to, and not in lieu of, all payments otherwise
required to be paid under the Loan Documents at the time of such prepayment.
Section 2.6. Scheduled Payments. The principal amount of the Notes shall
------------------
be due and payable in sixteen quarterly installments, each of which shall be
equal to one-sixteenth of the aggregate unpaid principal balance of the Loans at
the end of the Commitment Period. These prepayments shall be due and payable on
the first day of each January, April, July and October, beginning on and
including January 1, 1997, and continuing regularly thereafter until and
including October 1, 2000, the date on which the Notes become due and payable in
full. Each principal payment made under this section shall be apportioned and
applied to each Lender's Note in accordance with such Lender's Loan Share of
such payment. Any principal prepaid pursuant to this section shall be in
addition to and not in lieu of, all payments otherwise required to be made under
the Loan Documents at the time of such prepayment.
Section 2.7. Mandatory Prepayments.
---------------------
(a) Loans. If the unpaid principal balance of the Loans ever exceeds the
-----
Commitment, Borrower shall, within ten Business Days after Agent on behalf of
Majority Lenders gives written notice of such fact to Borrower, make a
prepayment to Agent for distribution to Lenders in the amount of such excess.
Any such payment under this Section 2.7(a) shall be applied pro rata in
accordance with each Lender's Loan Share to the unpaid principal balances of the
Loans thereof.
(b) Mandatory Prepayment Ratio. Borrower shall calculate the Mandatory
--------------------------
Prepayment Ratio in accordance with the terms of the definition of "Mandatory
Prepayment Ratio" on each Prepayment Calculation Date and shall deliver notice
of such recalculated
-17-
<PAGE>
Mandatory Prepayment Ratio (together with a certificate signed by the chief
financial officer, treasurer or controller of Borrower certifying as to the
accuracy of such calculation) to Agent and Lenders within 45 days after each
Prepayment Calculation Date which falls on the last day of a Fiscal Quarter and
on each other Prepayment Calculation Date. If on any Prepayment Calculation
Date the Mandatory Prepayment Ratio exceeds the applicable Test Amount (as
defined below), Borrower shall, within ten Business Days after Agent on behalf
of Majority Lenders gives written notice of such fact to Borrower, either (A)
make a prepayment of Indebtedness owing by it to Lenders or to other Senior
Creditors of Borrower in an amount which will bring Borrower into compliance
with the Test Amount then in effect (the "Prepayment Amount") and provide Agent
written evidence of such prepayment to other Senior Creditors or (B) give
written notice to Lenders or certain of Borrower's other Senior Creditors (and a
copy of any such notice to Agent) electing to prepay the Prepayment Amount in no
more than six (6) equal monthly installments beginning no later than ninety (90)
days from the date Borrower was sent such deficiency notice by Agent, and
Borrower shall thereafter make such prepayment in equal consecutive monthly
installment on the first day of each calendar month within such period until and
including the first date of such sixth calendar month (if applicable) and shall
provide Agent with written evidence of each such prepayment; provided that if
the Mandatory Prepayment Ratio exceeds the applicable Test Amount more than once
during any two consecutive Fiscal Quarters (as used in this section, each an
"Additional Deficiency"), Borrower must pay the Prepayment Amount of each
Additional Deficiency in full or begin making monthly installments with respect
to the Prepayment Amount of each Additional Deficiency no later than thirty (30)
days from the date Borrower was sent a deficiency notice with respect to such
Additional Deficiency by Agent. If, on any Prepayment Calculation Date,
Borrower does not recalculate the Mandatory Prepayment Ratio in accordance with
the terms hereof, Agent may recalculate the Mandatory Prepayment Ratio at such
time, and from time to time thereafter until Borrower does recalculate the
Mandatory Prepayment Ratio in accordance with the terms hereof and deliver the
same to Agent, based upon information available to it at that time, which
calculation shall be binding upon Borrower. As used in this section, the term
"Test Amount" means (i) 5.0 to 1.0 at any time after the date hereof until and
including August 31, 1995, (ii) 4.0 to 1.0 at any time from and including
September 1, 1995 until and including August 31, 1998, and (iii) 3.5 to 1.0 at
any time from and including September 1, 1998 and thereafter, and the term
"Senior Creditors" means all creditors of Borrower other than Lenders which have
obligations owing from Borrower which are not subordinated to the Obligations.
Notwithstanding anything to the contrary contained in the foregoing
provisions of this Section 2.7(b), if Borrower brings the Mandatory Prepayment
Ratio back into compliance with the applicable Test Amount as of the last day of
a Fiscal Quarter, then Borrower may cease making all payments then required to
be
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<PAGE>
made by Borrower pursuant to this Section 2.7(b) (as used in this section, each
a "Deficiency Cessation"); provided, however, that no Deficiency Cessation shall
excuse Borrower from full compliance with the terms of this Section 2.7(b) at
all times following the date of such Deficiency Cessation.
(c) Prepayments. Each prepayment of principal on a Note after the end of
-----------
the Commitment Period made under this Section 2.7 shall be accompanied by a
percentage of all interest then accrued and unpaid on such Note, which
percentage shall be equal to the amount of principal prepaid divided by the
unpaid principal balance of such Note immediately prior to such prepayment;
provided that any prepayment under a Note must be accompanied by any amounts due
under Section 2.13 as a result of such prepayments. Each partial prepayment of
principal applied under this Section 2.7 to the Notes after the end of the
Commitment Period shall be applied to the quarterly installments of principal
due under Section 2.6(a) in the inverse order of their maturities. Any
principal or interest prepaid pursuant to any of the preceding subsections (a)
and (b) and subsection (c) of this Section 2.7 shall be in addition to and not
in lieu of, all payments otherwise required to be made under the Loan Documents
at the time of such prepayment, provided that Borrower shall receive credit with
respect to prepayments required under the preceding subsections (a) and (b) and
subsection (c) of this Section 2.7 for any payments on the Notes concurrently
made under another subsection of this section or under Section 2.6.
Section 2.8. Initial Mandatory Prepayment Ratio Determination. During the
------------------------------------------------
period from the date hereof until the first recalculation of the Mandatory
Prepayment Ratio pursuant to the terms of Section 2.7(b) or another provision of
this Agreement, the Mandatory Prepayment Ratio shall be 3.97 to 1.0, as
calculated in Exhibit I hereto.
Section 2.9. Payments to Lenders. Borrower will make each payment which
-------------------
it owes under the Loan Documents (whether under any of Sections 2.5, 2.6, 2.7,
3.2, or otherwise) to Agent for the account of the Lender to whom such payment
is owed not later than noon, Dallas time, in lawful money of the United States
of America and in immediately available funds. Any payment received by Agent
after such time will be deemed to have been made on the next following Business
Day. Should any such payment become due and payable on a day other than a
Business Day, the maturity of such payment shall be extended to the next
succeeding Business Day, and, in the case of a payment of principal or past due
interest, interest shall accrue and be payable thereon for the period of such
extension as provided in the Loan Document under which such payment is due.
Each payment under a Loan Document shall be payable at the place provided
therein and, if no specific place of payment is provided, shall be payable at
the place of payment of the Notes. Agent will promptly thereafter cause to be
distributed to each Lender in like funds the amount of such payment owed to each
Lender; provided that in the event Agent receives less than the aggregate amount
due to all Lenders
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<PAGE>
on any day, Agent shall distribute ratably to each Lender in the case of payment
of principal, interest or fees, the portion of the aggregate amount received by
Agent on such day multiplied by the percentage obtained by dividing the sum of
all payments due to such Lender on such day by the aggregate amount of all
payments due to all Lenders on such day pursuant to the section of this
Agreement governing the payment in question, except as otherwise expressly
provided in any Loan Document. When a Lender collects or receives money on
account of the Obligations, such Lender may apply such money as it elects to the
various Obligations then due and payable.
Section 2.10. Fees.
----
(a) Commitment Fees. In consideration of Lenders' commitment to enter
---------------
into this Agreement and to advance funds to Borrower hereunder, Borrower will
pay to Agent, for pro rata distribution to each Lender in accordance with its
Loan Share, a commitment fee determined on a daily basis by applying a rate of
(a) if the Debt to Capitalization Ratio is less than or equal to 0.25 to 1.0,
fifteen one-hundredths of one percent (0.15%) per annum, (b) if the Debt to
Capitalization Ratio is greater than 0.25 to 1.0 but less than or equal to .30
to 1.0, one-fifth of one percent (.20%) per annum, (c) if the Debt to
Capitalization Ratio is greater than .30 to 1.0, but is less than or equal to
.40 to 1.0, one-quarter of one percent (.25%) per annum, (d) if the Debt to
Capitalization Ratio is greater than .40%, but less than or equal to .50 to 1.0,
three tenths of one percent (.30%), or (e) if the Debt to Capitalization Ratio
is greater than .50 to 1.0, three-eighths of one percent (.375%) to the sum of
the unused portion of the Commitment on each day during the Commitment Period.
The unused portion of the Commitment shall be determined for each such day by
deducting from the amount of the Commitment at the end of such day the unpaid
principal balance of the Loans at the end of such day and the rate used to
calculate such commitment fee shall be based on the Debt to Capitalization Ratio
in effect on such day. Promptly at the end of each Fiscal Quarter Agent shall
calculate the commitment fee then due and shall notify Borrower thereof.
Borrower shall pay such commitment fee to Agent within five Business Days after
receiving such notice.
(b) Restatement Fees. Borrower will pay to Agent on the Closing Date for
----------------
distribution to each Lender, a restatement fee in an amount equal to such
Lender's Commitment on the Closing Date multiplied by the applicable percentage
set forth below, such percentage to be determined on the basis of the amount
such Lender heretofore notified Agent that Lender was willing to commit
hereunder:
<TABLE>
<CAPTION>
Calculation Basis Amount Percentage
------------------------ ----------
<S> <C>
Greater than or equal .075%
to $25,000,000 but less
than $50,000,000
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Greater than or equal .10%
to $50,000,000 but less
than $75,000,000
Greater than or equal .125%
to $75,000,000
</TABLE>
Section 2.11. Increased Cost of Fixed Rate Portions. If any applicable
-------------------------------------
domestic or foreign law, treaty, rule or regulation (whether now in effect or
hereinafter enacted or promulgated, including Regulation D) or any
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof (whether or not having the
force of law):
(a) shall change the basis of taxation of payments to any Lender of any
principal, interest, or other amounts attributable to any Fixed Rate Portion or
otherwise due under this Agreement in respect of any Fixed Rate Portion or LC
(other than taxes imposed on the overall net income of such Lender or any
lending office of such Lender by any jurisdiction in which such Lender or any
such lending office is located); or
(b) shall change, impose, modify, apply or deem applicable any reserve,
special deposit or similar requirements in respect of any Fixed Rate Portion of
any Lender or any LC (excluding those for which such Lender is fully compensated
pursuant to adjustments made in the definition of Fixed Rate) or against assets
of, deposits with or for the account of, or credit extended by, such Lender; or
(c) shall impose on any Lender, or the interbank eurocurrency deposit
market any other condition affecting any Fixed Rate Portion or LC, and the
result of any of the foregoing is to increase the cost to any Lender of funding
or maintaining any Fixed Rate Portion or to Issuing Bank of issuing any LC or to
reduce the amount of any sum receivable by any Lender in respect of any Fixed
Rate Portion or any LC by an amount deemed by such Lender to be material, then
such Lender shall promptly notify Agent and Borrower in writing of the happening
of such event and (1) Borrower shall upon demand pay to Agent for the account of
such Lender such additional amount or amounts as will compensate such Lender for
such additional cost or reduction, and (2) Borrower may elect, by giving to
Agent and such Lender not less than three Business Days' notice, to convert all
(but not less than all) of any such Fixed Rate Portion into a part of the Base
Rate Portion.
Section 2.12. Change of Law. If any change in applicable laws, treaties,
-------------
rules or regulations or in the interpretation or administration thereof of or in
any jurisdiction whatsoever, domestic or foreign, shall make it unlawful or
impracticable for any Lender to fund or maintain Fixed Rate Portions, or shall
materially restrict the authority of any Lender to purchase, sell or take
offshore deposits of dollars (i.e., "eurodollars") or of
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<PAGE>
Issuing Bank to issue any LCs, then, upon notice to Borrower and Agent,
Borrower's right to elect Fixed Rate Portions of such Lender's Loans, or to
apply for LCs, shall be suspended to the extent and for the duration of such
illegality, impracticability or restriction and all Fixed Rate Portions of such
Lender's Loans (or portions thereof) which are then outstanding or are then the
subject of any Rate Election and which cannot lawfully or practicably be
maintained or funded shall immediately become or remain part of the Base Rate
Portion of such Lender's Loans. Borrower agrees to indemnify each Lender and
hold it harmless against all costs, expenses, claims, penalties, liabilities and
damages which may result from any such change in law, treaty, rule, regulation,
interpretation or administration.
Section 2.13. Funding Losses. In addition to its other obligations
--------------
hereunder, Borrower will indemnify Agent and each Lender against, and reimburse
Agent and each Lender on demand for, any loss or expense incurred or sustained
by Agent or such Lender (including without limitation any loss or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by a Lender to fund or maintain Fixed Rate Portions or Advances), as a
result of (a) any payment or prepayment (whether authorized or required
hereunder or otherwise) of all or a portion of a Fixed Rate Portion on a day
other than the day on which the applicable Interest Period ends, (b) any payment
or prepayment, whether required hereunder or otherwise, of the Loans made after
the delivery, but before the effective date, of a Rate Election, if such payment
or prepayment prevents such Rate Election from becoming fully effective, (c) the
failure of any Advance to be made or of any Rate Election to become effective
due to any condition precedent to an Advance not being satisfied or due to any
other action or inaction of any Related Person, or (d) any conversion (whether
authorized or required hereunder or otherwise) of all or any portion of any
Fixed Rate Portion into the Base Rate Portion or into a different Fixed Rate
Portion on a day other than the day on which the applicable Interest Period
ends.
Section 2.14. Reimbursable Taxes. Borrower covenants and agrees that,
------------------
whether or not any Fixed Rate Portion is ever elected:
(a) Borrower will pay, Agent and each Lender when due and on an after-tax
basis, all present and future income, stamp and other taxes, levies, costs and
charges whatsoever imposed, assessed, levied or collected on or in respect of
any Fixed Rate Portions or LCs (whether or not legally or correctly imposed,
assessed, levied or collected), excluding, however, any thereof imposed on or
measured by the overall net income of Agent or such Lender or any lending office
of Agent or such Lender by any jurisdiction in which Agent or such Lender or any
such lending office is located (all such non-excluded taxes, levies, costs and
charges being collectively called "Reimbursable Taxes" in this section).
Promptly after the date on which payment of any such Reimbursable Tax is due or
claimed to be due, Borrower will, at
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<PAGE>
the request of Agent or such Lender, furnish to Agent or such Lender evidence in
form and substance satisfactory to Agent or such Lender that Borrower has met
its obligation under this section.
(b) Borrower will indemnify Agent and each Lender against, and reimburse
Agent and each Lender on demand for, any Reimbursable Taxes paid by Agent or
such Lender and any loss, liability, claim or expense, including interest,
penalties and legal fees, that Agent or any Lender may incur at any time arising
out of or in connection with the failure of Borrower to make any payment of
Reimbursable Taxes when due or claimed to be due.
(c) All payments on account of the principal of, and interest on, each
Lender's Loans and each Lender's Notes, and all other amounts payable by
Borrower to Agent and each Lender hereunder shall be made free and clear of and
without reduction by reason of any Reimbursable Taxes, all of which will be for
the account of Borrower and paid by Borrower when due or claimed to be due.
(d) If Borrower is ever required to pay any Reimbursable Tax with respect
to any Fixed Rate Portion Borrower may elect, by giving to Agent and each Lender
not less than three Business Days' notice, to convert all (but not less than
all) of any such Fixed Rate Portion into a part of the Base Rate Portion, but
such election shall not diminish Borrower's obligation to pay all Reimbursable
Taxes.
Section 2.15. Increased Capital. If either (a) the introduction of or any
-----------------
change in or in the interpretation of any law or regulation or (b) compliance by
Issuing Bank or any Lender with any guideline or request from any central bank
or other governmental authority (whether or not having the force of law) affects
or would affect the amount of capital required or expected to be maintained by
Issuing Bank or any Lender or any corporation controlling Issuing Bank or any
Lender and Issuing Bank or such Lender determines that the amount of such
capital is increased by or based upon the existence of LCs (or similar
contingent obligations) or upon the existence of the Commitment and other
commitments of this type then, upon demand by Issuing Bank or such Lender,
Borrower shall immediately pay to Issuing Bank or such Lender, from time to time
as specified by Issuing Bank or such Lender, additional amounts sufficient to
compensate Issuing Bank or such Lender in light of such circumstances, to the
extent that Issuing Bank or such Lender reasonably determines such increase in
capital to be allocable to the issuance or maintenance of LCs or the Commitment.
A certificate as to such amounts submitted to Borrower by Issuing Bank or such
Lender, shall, in the absence of manifest error, be conclusive and binding for
all purposes.
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<PAGE>
Section 2.16. Interest Rate Changes.
---------------------
(a) Decreases In Rates. Any reduction in the Base Rate, the Fixed Rate or
------------------
the rate being used to determine commitment fees pursuant to Section 2.10 (in
this section collectively called the "Rates") as a result of a change in the
Debt to Capitalization Ratio shall be requested by Borrower in a certificate
delivered to Agent in which Borrower certifies as to the Debt to Capitalization
Ratio in effect on the date thereof. Together with any such certificate,
Borrower shall deliver to Lender true and correct financial statements of
Borrower, in form and substance satisfactory to Agent, supporting Borrower's
calculation of such Debt to Capitalization Ratio. If Agent determines
Borrower's calculation is correct, the reduction in the Rates shall become
effective on the fifth Business Day following the date on which such notice is
given to Agent or Lenders otherwise become aware of such a change in the Debt to
Capitalization Ratio; provided that with respect to Fixed Rate Portions, such
decrease shall apply only to Fixed Rate Portions elected after such effective
date.
(b) Increases In Rates. With respect to any increase in the Rates,
------------------
Borrower must notify Agent of any change in the Rates as a result of a change in
the Debt to Capitalization Ratio. Any such increase in the Rates shall become
effective on the fifth Business Day following the date on which such notice is
given to Agent or Lenders otherwise become aware of such a change in the Debt to
Capitalization Ratio; provided that with respect to Fixed Rate Portions, such
increase shall apply only to Fixed Rate Portions elected after such effective
date.
ARTICLE III
Letters of Credit
-----------------
Section 3.1. LCs. From time to time during the Commitment Period,
---
Borrower may request Issuing Bank to issue, in reliance on the agreements of
Lenders set forth in Section 3.2(b), letters of credit (each herein called an
"LC") by means of an application in the form of Exhibit C, appropriately
completed and with a proposed form of LC attached. Issuing Bank shall have no
obligation whatsoever to issue any such requested LC, but any such LC which
Issuing Bank does issue shall be subject to all terms and provisions hereof
relating to LCs, and shall be subject to the following restrictions: (a) no LC
issued hereunder shall have an expiration date later than the earlier of two
years after the date of issuance thereof or the end of the Commitment Period;
(b) no LC issued hereunder shall be issued in an amount greater than $5,000,000
without the prior written consent of Majority Lenders; (c) the LC Balance shall
at no time exceed $25,000,000; and (d) the sum of (i) the LC Balance and (ii)
the aggregate amount of all Lenders' Advances outstanding shall at no time
exceed (A) from the Closing Date to and including December 31, 1994,
$325,000,000 and (B) from January 1, 1995 to and including
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<PAGE>
the last day of the Commitment Period, $300,000,000. Neither Agent, Issuing
Bank, Lenders nor Borrower presently expect LCs to be applied for or issued
hereunder on a regular basis, and this section is included in this Agreement
solely to facilitate the application and issuance of any letter of credit which
Borrower hereafter, in its sole and absolute discretion, chooses to request and
which Issuing Bank hereafter, in its sole and absolute discretion, chooses to
issue.
Section 3.2. Reimbursement of LCs.
--------------------
(a) Reimbursement by Borrower. Each payment by Issuing Bank pursuant to
-------------------------
any LC (whether in response to a draft, a demand for payment, or otherwise),
shall constitute a loan to and an obligation of Borrower. Borrower hereby
promises to pay to Issuing Bank, or to Issuing Bank's order, at Issuing Bank's
office at 901 Main Street, Dallas, Texas, on demand, any and all amounts paid by
Issuing Bank pursuant to any and all LCs (such amounts being herein called the
"Matured LC Indebtedness"). Section 2.1 describes certain situations in which
such payments may be made with funds advanced by Lenders under the Notes, but
Borrower's obligations to pay the Matured LC Indebtedness as provided in this
section are absolute and not contingent upon the conditions for such Advances
being met. Borrower hereby promises to pay to Issuing Bank, or to Issuing
Bank's order, at Issuing Bank's office at 901 Main Street, Dallas, Texas, on
demand, interest at the Late Payment Rate on (a) any outstanding Matured LC
Indebtedness and (b) any fees or other amounts due with respect to LCs (to the
extent the same can legally bear interest). Borrower hereby promises to pay,
when due, all present and future taxes, levies, costs and charges whatsoever
imposed, assessed, levied or collected on, under or in respect of this Agreement
or any LC and any payments of principal, interest or other amounts made on or in
respect of any thereof (excluding, however, any such taxes, levies, costs and
charges imposed on or measured by the overall net income of Issuing Bank).
Borrower promises to indemnify Issuing Bank against, and to reimburse Issuing
Bank on demand for, any of the foregoing taxes, levies, costs or charges paid by
Issuing Bank and any loss, liability, claim or expense, including interest,
penalties and legal fees, that Issuing Bank may incur because of or in
connection with the failure of Borrower to make any such payment of taxes,
levies, costs or charges when due or any payment of Matured LC Indebtedness when
due. In addition, and without limiting the generality of the foregoing, if any
law, regulation or the interpretation thereof by any court or administrative or
governmental authority shall either impose, modify or deem applicable any
capital, reserve, insurance premium or similar requirement against letters of
credit issued by Issuing Bank and the result thereof shall be to increase the
cost to Issuing Bank of issuing or maintaining any letter of credit; then, on
demand by Issuing Bank, Borrower further promises to pay to Issuing Bank, from
time to time, additional amounts which shall be sufficient to compensate Issuing
Bank for the portion of such increased costs allocable to the LCs. A written
advice(s) setting forth in reasonable detail such costs incurred by Issuing
-25-
<PAGE>
Bank, submitted by Issuing Bank to Borrower from time to time, shall be
conclusive, absent manifest error, as to the amount thereof.
(b) Reimbursement by Lenders. Issuing Bank irrevocably agrees to grant and
------------------------
hereby grants to each Lender, and, to induce Issuing Bank to issue LCs
hereunder, each Lender irrevocably agrees to accept and purchase and hereby
accepts and purchases from Issuing Bank, on the terms and conditions hereinafter
stated, for such Lender's own account and risk an undivided interest equal to
such Lender's Loan Share of Issuing Bank's obligations and rights under each LC
issued hereunder and the amount of each draft paid by Issuing Bank thereunder.
In the event that Borrower should fail to pay Issuing Bank on demand the amount
of any draft or other request for payment drawn under or purporting to be drawn
under a LC as provided in subsection (a) above, each Lender shall, before 2:00
p.m. (Dallas Time) on the Business Day Issuing Bank shall have given notice to
Lenders of Borrower's failure to so pay Issuing Bank, if such notice is given by
10:00 am., Dallas Time (or on the Business Day immediately succeeding the day
such notice is given after 10:00 am. Dallas Time), pay to Issuing Bank at
Issuing Bank's offices in Dallas, Texas, in legal tender of the United States of
America, in same day funds, such Lender's Loan Share of the amount of such draft
or other request for payment from Borrower plus interest on such amount from the
date Issuing Bank shall have paid such draft or request for payment to the date
of such payment by such Lender at the Late Payment Rate. Each Lender's
obligation to reimburse Issuing Bank pursuant to the terms of this Section
3.2(b) is irrevocable and unconditional. If any such amount required to be paid
by any Lender pursuant to this Section 3.2(b) is not in fact made available by
such Lender to Issuing Bank within three Business Days after the date such
payment is due, Issuing Bank shall be entitled to recover from such Lender, on
demand, such amount with interest thereon calculated from such due date at the
Late Payment Rate. A written advice(s) setting forth in reasonable detail the
amounts owing under this Section 3.2, submitted by Issuing Bank to Borrower from
time to time, shall be conclusive, absent manifest error, as to the amounts
thereof. Whenever, at any time after Issuing Bank has made payment under any
LC, and has received from any Lender its Loan Share of such payment in
accordance with this Section 3.2(b), Issuing Bank receives any payment related
to such LC (whether directly from Borrower or otherwise, including proceeds of
collateral applied thereto by Issuing Bank), or any payment of interest on
account thereof, Issuing Bank will distribute to such Lender its Loan Share
thereof; provided, however, that in the event that any such payment received by
-------- -------
Issuing Bank shall be required to be returned by Issuing Bank, such Lender shall
return to Issuing Bank the portion thereof previously distributed by Issuing
Bank to it.
Section 3.3. Transferees of LCs. Borrower agrees that if any LC provides
------------------
that it is transferable, Issuing Bank is under no duty to determine the proper
identity of anyone appearing as transferee of such LC, nor shall Issuing Bank be
charged with
-26-
<PAGE>
responsibility of any nature or character for the validity or correctness of any
transfer or successive transfers. Payment by Issuing Bank to any purported
transferee or transferees as determined by Issuing Bank is hereby authorized and
approved, and Borrower further agrees to hold Issuing Bank and each Lender
harmless and indemnified against any liability or claim in connection with or
arising out of the foregoing.
Section 3.4. Extension of Maturity of LCs. Borrower agrees that in the
----------------------------
event of any extension of the maturity or time for presentation of drafts or
demands for payment or any other modification of the terms of any LC at the
request of Borrower or by order of any court or tribunal, with or without
notification to others, or in the event of any increase in the amount of any LC
at the request of Borrower or by order of any court or tribunal, this Agreement
shall be binding upon Borrower with respect to the LC so increased or otherwise
modified, with respect to drafts and demands for payment thereunder, and with
respect to any action taken in accordance with such extension, increase or other
modification by Issuing Bank or by any bank which is a confirming bank or an
advising bank with respect to any LC.
Section 3.5. Restriction on Liability. Neither Issuing Bank nor any bank
------------------------
which is a confirming bank or an advising bank with respect to an LC (in this
section called a "correspondent") shall be responsible for (a) the use which may
be made of any LC or for any acts or omissions of the users of any LC; (b) the
existence or nonexistence of a default under any instrument secured or supported
by any LC or any other event which gives rise to a right to call upon any LC;
(c) the validity, sufficiency or genuineness of any document delivered in
connection with any LC, even if such documents should in fact prove to be in any
or all respects invalid, fraudulent or forged; (d) except as specifically
required by an LC, failure of any instrument to bear any reference or adequate
reference to any LC, or failure of documents to accompany any draft at
negotiation or failure of any person to note the amount of any draft on the
reverse of any LC or surrender or take up any LC; or (e) errors, omissions,
interruptions or delays in transmission or delivery of any messages by mail,
cable, telegraph, wireless or otherwise. Issuing Bank shall not be responsible
for any act, error, neglect or default, omission, insolvency or failure in the
business of any of the correspondents or any refusal by Issuing Bank or any of
the correspondents to pay or honor drafts drawn under any LC because of any
applicable law, decree or edict, legal or illegal, of any governmental agency
now or hereafter enforced or for any matter beyond the control of Issuing Bank.
The happening of any one or more of the contingencies referred to in the
preceding clauses of this paragraph shall not affect, impair or prevent the
vesting of any of the rights or powers of Issuing Bank and Lenders under this
Agreement, or the obligation of Borrower to make reimbursement. In furtherance
and extension and not in limitation of the specific provisions hereinabove set
forth Borrower agrees that any action taken or omitted to be taken by Issuing
Bank or any Lender or by any correspondent under or in
-27-
<PAGE>
connection with any LC shall be binding on Borrower and shall not put Issuing
Bank or any Lender or any correspondent under any resulting liability to
Borrower unless grossly negligent or in breach of good faith.
Section 3.6. No Duty to Inquire. Borrower agrees that Issuing Bank is
------------------
authorized and instructed to accept and pay drafts and demands for payment under
the LCs without requiring, and without responsibility for, either at the time of
acceptance or payment or thereafter, the determination as to the existence of
any event giving rise thereto or the proper identity or authority of anyone
appearing on behalf of the beneficiary of any LC. Borrower further agrees to
hold Issuing Bank and each Lender harmless and indemnified against any liability
or claim in connection with or arising out of the foregoing.
Section 3.7. LC Fees. In consideration of any issuance by Agent of LCs
-------
hereunder and of Lender's incurrence of a reimbursement obligation with respect
to such LCs, Borrower agrees to pay to Agent a Letter of Credit Fee, for pro
rata distribution to each Lender in accordance with its Loan Share, promptly
upon the issuance of each LC in an amount equal to the greater of (i) $1,000 or
(ii) one percent (1%) per annum of the face amount of such LC.
ARTICLE IV
Conditions Precedent to Lending
-------------------------------
Section 4.1. Documents to be Delivered and Fees to be Paid. Agent and
---------------------------------------------
Lenders shall have no obligation under this Agreement until this Agreement has
been executed by all parties hereto and Agent has received, at Agent's office in
Dallas, Texas, duly executed and delivered and in form, substance and date
satisfactory to Agent, an executed counterpart of this Agreement and all of the
following:
(a) Each of the Notes.
(b) Each Security Document described in Schedule 2.
(c) A favorable opinion of Messr. John Walter, Esq., counsel for
Borrower, substantially in the form set forth in Exhibit G.
(d) An "Omnibus Certificate" of the Vice President -Controller and the
Secretary or an Assistant Secretary of Borrower, dated as of the Closing
Date, which shall contain the names and signatures of the officers of
Borrower authorized to execute Loan Documents on behalf of Borrower and
which shall certify to the truth, correctness and completeness of the
following exhibits attached thereto: (i) a copy of resolutions adopted by
the Board of Directors of Borrower in full force and effect on such date,
authorizing the execution of this Agreement and the other
-28-
<PAGE>
Loan Documents delivered or to be delivered in connection herewith and the
consummation of the transactions contemplated herein and therein, (ii) a
copy of Borrower's charter, certified by the appropriate official of the
State of Delaware and (iii) a copy of the bylaws of Borrower together with
resolutions unanimously adopted by the Board of Directors of Borrower on
March 18, 1991 amending such bylaws.
(e) Certificates of the due organization, valid existence and good
standing of Borrower in the State of Delaware, issued by the appropriate
authorities of such jurisdiction.
(f) A "Compliance Certificate" of the Vice President -Controller of
Borrower, dated as of the Closing Date, in which such officer certifies to
the satisfaction of the conditions set out in subsections (a), (b), and (c)
of Section 4.2.
(g) Certificates of Borrower's good standing and due qualification to
do business in any state where it owns property, issued by appropriate
officials in such states.
(h) Certificates with respect to each Guarantor equivalent to those to
be provided with respect to Borrower under subsections (d), (e), and (g) of
this section.
(i) Payment to NationsBank of all fees owed by Borrower pursuant to
that certain letter agreement of even date herewith between Borrower and
NationsBank.
Section 4.2. Additional Conditions Precedent. No Lender has any
-------------------------------
obligation to make any Advance (including its first) and Issuing Bank has no
obligation to issue any LC unless the following conditions precedent have been
satisfied; and each request for an Advance or for the issuance of an LC,
regardless of whether or not made in the form of Exhibit B or Exhibit C, shall
be deemed a representation and warranty by Borrower that the following
conditions in subparagraphs (a) through (e) of this section have been satisfied:
(a) All representations and warranties made by any Related Person in
any Loan Document shall be true on and as of the date of such Advance or
such issuance (except to the extent that the facts upon which such
representations are based have been changed by the transactions herein
contemplated) as if such representations and warranties had been made as of
the date of such Advance or issuance.
(b) No Default or Event of Default shall exist at the date of such
Advance or issuance.
(c) Each Related Person shall have performed and complied with all
agreements and conditions herein required
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<PAGE>
to be performed or complied with by it on or prior to the date of such
Advance or issuance.
(d) Such Advance, or such issuance, shall not be prohibited by any law
or any regulation or order of any court or governmental agency or authority
and shall not subject any Lender to any penalty or other onerous condition
under or pursuant to any such law, regulation or order.
(e) Agent shall have received all documents and instruments which
Agent has then reasonably requested, in addition to those described in
Section 4.1 (including without limitation opinions of legal counsel for
Borrower, Guarantors, and Agent; corporate or partnership documents and
records; documents evidencing governmental authorizations, consents,
approvals, licenses and exemptions; and certificates of public officials
and of officers and representatives of Borrower and other Persons), as to
(i) the accuracy and validity of or compliance with all representations,
warranties and covenants made by any of the Related Persons in this
Agreement and the other Loan Documents, (ii) the satisfaction of all
conditions contained herein or therein, and (iii) all other matters
pertaining hereto and thereto. All such additional documents and
instruments shall be satisfactory to Agent in form, substance and date.
(f) All legal matters relating to the Loan Documents and the
consummation of the transactions contemplated thereby shall be satisfactory
to Thompson & Knight, P.C., counsel to Agent.
ARTICLE V
Representations and Warranties
------------------------------
Section 5.1. Representations and Warranties by Borrower. To induce Agent
------------------------------------------
and each Lender to enter into this Agreement and to make the Loans, Borrower
represents and warrants to Agent and each Lender that:
(a) No Default. No event has occurred and is continuing which
----------
constitutes a Default or Event of Default.
(b) Organization and Good Standing. Each Related Person which is a
------------------------------
corporation or partnership is duly organized, validly existing and in good
standing under the laws of its state of organization, having all corporate
or partnership powers required to carry on its business and enter into and
carry out the transactions contemplated hereby. Each such Related Person
is duly qualified, in good standing, and authorized to do business in all
other jurisdictions within the United States wherein the character of the
properties owned or held by it or the nature of the business transacted by
it makes such qualification
-30-
<PAGE>
necessary, except for jurisdictions in which the failure to qualify or
maintain such qualification would not have a material adverse effect upon
Borrower's or any Guarantor's financial condition, business or operations.
Each such Related Person has taken all actions and procedures customarily
taken in order to enter, for the purpose of conducting business or owning
property, each jurisdiction outside the United States wherein the character
of the properties owned or held by it or the nature of the business
transacted by it makes such actions and procedures desirable.
(c) Authorization. Each Related Person which is a corporation or
-------------
partnership has duly taken all corporate or partnership action necessary to
authorize the execution and delivery by it of the Loan Documents to which
it is a party and to authorize the consummation of the transactions
contemplated thereby and the performance of its obligations thereunder.
Borrower is duly authorized to borrow funds hereunder, and Borrower is duly
authorized to apply for the issuance of any LC requested hereunder.
(d) No Conflicts or Consents. The execution and delivery by the
------------------------
various Related Persons of the Loan Documents to which each is a party, the
performance by each of its obligations under such Loan Documents, and the
consummation of the transactions contemplated by all the Loan Documents, do
not (i) conflict with any provision of (A) any domestic or foreign law,
statute, rule or regulation, (B) the articles or certificate of
incorporation, charter, partnership agreement or bylaws of any Related
Person, or (C) any agreement, judgment, license, order or permit applicable
to or binding upon any Related Person, or (ii) result in or require the
creation of any lien, charge or encumbrance upon any assets or properties
of any Related Person, except as expressly contemplated in the Loan
Documents. Except as indicated in the Disclosure Schedule or as expressly
contemplated in the Loan Documents no consent, approval, authorization or
order of, and no notice to or filing with, any court or governmental
authority or third party is required in connection with the execution,
delivery or performance by any Related Person of any Loan Document or to
consummate any transactions contemplated by the Loan Documents.
(e) Enforceable Obligations. This Agreement is, and the other Loan
-----------------------
Documents when duly executed and delivered will be, legal and binding
obligations of each Related Person which is a party hereto or thereto,
enforceable in accordance with their respective terms except as limited by
bankruptcy, insolvency or other laws of general application relating to the
enforcement of creditors' rights and as limited by general equitable
principles.
(f) Initial Financial Statements; Financial Condition. The Initial
-------------------------------------------------
Financial Statements of Borrower fairly present
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Borrower's Consolidated financial position at the respective dates thereof
and the Consolidated results of Borrower's operations and changes in
Borrower's Consolidated cash flow for the respective periods thereof.
Since the date of the audited annual Initial Financial Statements, no
material adverse change has occurred in Borrower's financial condition or
businesses or in Borrower's Consolidated financial condition or businesses,
except as reflected in the interim Initial Financial Statements of Borrower
or in the Disclosure Schedule. All Initial Financial Statements of
Borrower were prepared in accordance with Generally Accepted Accounting
Principles. No material adverse change in Borrower's financial condition
or businesses or in Borrower's Consolidated financial condition or
businesses is reasonably expected to occur during the next twelve months.
(g) Other Liabilities. No Related Person has any outstanding
-----------------
Indebtedness of any kind (including contingent, indirect and secondary
liabilities and obligations, tax assessments, or unusual forward or long-
term commitments) which is, in the aggregate, material with respect to
Borrower's Consolidated financial condition and not shown in the Initial
Financial Statements or disclosed in the Disclosure Schedule and not
permitted by Section 6.2(b).
(h) Full Disclosure. No certificate, statement or other information
---------------
delivered herewith or heretofore by any Related Person to Agent or any
Lender in connection with the negotiation of this Agreement or in
connection with any transaction contemplated hereby contains any untrue
statement of a material fact or omits to state any material fact known to
any Related Person (other than industry risks normally associated with the
types of businesses conducted by the Related Persons) necessary to make the
statements contained herein or therein not misleading as of the date made
or deemed made. There is no fact known to any Related Person (other than
industry risks normally associated with the types of businesses conducted
by the Related Persons) that has not been disclosed to Agent and each
Lender in writing which has a substantial likelihood of materially and
adversely affecting Borrower's properties, business, prospects or condition
(financial or otherwise) or Borrower's consolidated or Consolidated
properties, businesses, prospects or condition (financial or otherwise).
All statements, reports and other information provided by or on behalf of
Borrower to Agent and each Lender concerning Borrower's and its
Subsidiaries' processing plants and the production dedicated to such plants
and their pipelines and operations do not include misleading information or
fail to take into account material information regarding the matters
reported therein.
(i) Litigation. Except as disclosed in the Initial Financial
----------
Statements or in the Disclosure Schedule: (i) there are no actions, suits
or legal, equitable, arbitrative or administrative proceedings pending, or
to the knowledge
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of any Related Person threatened, against any Related Person before any
federal, state, municipal or other court, department, commission, body,
board, bureau, agency, or instrumentality, domestic or foreign, which do or
may reasonably be expected to materially and adversely affect Borrower or,
on a Consolidated basis, Borrower and its properly Consolidated
subsidiaries, their ownership or use of any of their assets or properties,
their businesses or financial condition or prospects, or the right or
ability of any Related Person to enter into the Loan Documents to which it
is a party or to consummate the transactions contemplated thereby or to
perform its obligations thereunder and (ii) there are no outstanding
judgments, injunctions, writs, rulings or orders by any such governmental
entity against any Related Person or, to the best of Borrower's knowledge,
against any Related Person's shareholders, partners, directors or officers
which have or may reasonably be expected to have any such effect.
(j) ERISA Liabilities. Except as disclosed in the Initial Financial
-----------------
Statements or in the Disclosure Schedule, no Termination Event has occurred
with respect to any ERISA Plan and the Related Persons are in compliance
with ERISA in all material respects. No Related Person is required to
contribute to, or has any other absolute or contingent liability in respect
of, any "multiemployer plan" as defined in Section 4001 of ERISA.
(k) Borrower's Subsidiaries. None of Borrower and its Subsidiaries
-----------------------
presently has any Subsidiary or owns any stock in any other corporation or
association except those listed in the Disclosure Schedule. None of
Borrower and its Subsidiaries is a member of any general or limited
partnership, joint venture or association of any type whatsoever except
those listed in the Disclosure Schedule. Each of Borrower and its
Subsidiaries owns, directly or indirectly, the equity interest in each of
its Subsidiaries which is indicated in the Disclosure Schedule.
(l) Title to Properties. Except as indicated in the Disclosure
-------------------
Schedule each of Borrower and its Subsidiaries has good and defensible
title to all of its properties and assets, free and clear of all liens,
encumbrances, options, charges and assessments other than those permitted
under Section 6.2(c), except that (i) such representations and warranties
are made to the best of Borrower's knowledge with respect to the easements
and rights of way associated with Borrower's gas gathering systems and (ii)
no representation or warranty is made with respect to any gas or mineral
property or interest to which no proved oil or gas reserves are properly
attributed.
(m) Names and Places of Business. Neither Borrower nor any Related
----------------------------
Person has, during the preceding five years, been known by or used any
other corporate, partnership or fictitious name, except as disclosed in the
Disclosure
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Schedule. Except as otherwise indicated in the Disclosure Schedule, the
chief executive office and principal place of business of Borrower and the
Related Persons are (and for the preceding five years have been) located at
their addresses set out in Section 10.3. Except as indicated in the
Disclosure Schedule, no Related Person has any other office or place of
business.
(n) Change in Control. No event has occurred which constitutes a
-----------------
Change in Control.
(o) Environmental and Other Laws. The Related Persons are conducting
----------------------------
their businesses in material compliance with all applicable federal, state
or local laws, including without limitation those pertaining to
environmental matters. To the best knowledge of the Related Persons, none
of the operations of any Related Person is the subject of federal, state or
local investigation evaluating whether any material remedial action is
needed to respond to a release of any hazardous or toxic waste, substance
or constituent into the environment. No Related Person (and to the best
knowledge of Borrower, no other Person) has filed any notice under any
federal, state or local law indicating that any Related Person is
responsible for the release into the environment, or the improper storage,
of any material amount of any hazardous or toxic waste, substance or
constituent, or that any such waste, substance or constituent has been
released, or is improperly stored, upon any property of any Related Person
and no Related Person otherwise has any known material contingent liability
in connection with the release into the environment, or the improper
storage, of any such waste, substance or constituent. The use which the
Related Persons make and intend to make of all of their properties will not
result in the disposal or release of a hazardous substance or hazardous
waste on their properties that, based upon the laws in effect on the date
each such representation and warranty is made by Borrower under the Loan
Documents (excluding any laws, regulations or court rulings thereafter
enacted or made that are applied retroactively), could reasonably be
expected to result in a material adverse effect on the financial condition
of Borrower. As used in this Section 5.1(o), the term "material" shall
mean an event with respect to which the liability of Borrower therefor when
added to the liability of Borrower for all other matters that are the
subject of this section could reasonably be expected to exceed $10,000,000.
Section 5.2. Representation by Lenders. Each Lender hereby represents
-------------------------
that it will acquire its Notes for its own account in connection with its
commercial banking business; however, the disposition of such Lender's property
shall at all times be and remain within its control and, in particular and
without limitation, this section does not prohibit such Lender's sale either of
the Notes or of any participation in any of the Notes to any bank, pension plan,
investment fund, financial institution or similar purchaser.
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ARTICLE VI
Covenants of Borrower
---------------------
Section 6.1. Affirmative Covenants. Borrower warrants, covenants and
---------------------
agrees that until the full and final payment of the Obligations and the
termination of this Agreement, unless Majority Lenders have previously agreed
otherwise in writing:
(a) Payment and Performance. Borrower will pay all amounts owed by it
-----------------------
under the Loan Documents to which it is a party in accordance with the
terms thereof and will observe, perform and comply with every covenant,
term and condition expressed or implied in the Loan Documents. Borrower
will use its best efforts to cause each other Related Person to observe,
perform and comply with every term, covenant and condition of the Loan
Documents applicable to it.
(b) Books, Financial Statements and Reports. Each Related Person will
---------------------------------------
at all times maintain full and accurate books of account and records.
Borrower will maintain and will cause its Subsidiaries to maintain a
standard system of accounting and will furnish the following statements and
reports to Agent and each Lender at Borrower's expense:
(i) As soon as available, and in any event within 90 days in the
case of Agent and 95 days in the case of each other Lender after the
end of each Fiscal Year, complete Consolidated and consolidating
financial statements of Borrower together with all notes thereto,
prepared in reasonable detail in accordance with Generally Accepted
Accounting Principles, together with opinions, based on audits using
generally accepted auditing standards, by Price Waterhouse, or other
independent certified public accountants selected by Borrower and
acceptable to Majority Lenders, stating that such Consolidated
financial statements have been so prepared. Such Consolidated
financial statements shall contain a balance sheet as of the end of
such Fiscal Year and statements of operations, of cash flows, and of
changes in stockholders' equity for such Fiscal Year, each setting
forth in comparative form the corresponding figures for the preceding
Fiscal Year. Additionally, at the same time Borrower will provide
Agent and each other Lender consolidating financial statements
containing a balance sheet as of the end of such Fiscal Year and a
statement of operations for such Fiscal Year. In addition, within 90
days in the case of Agent and 95 days in the case of each other Lender
after the end of each Fiscal Year Borrower will furnish to Agent and
each Lender (A) a certificate in the form of Exhibit E signed by the
chief financial officer, treasurer or controller of Borrower
confirming compliance (or failure to comply) with the requirements of
Sections 6.2(a), (b), (e), (f), (g), (j), (m), (n),
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(o) and (p) and setting out in reasonable detail calculations showing
such compliance, if applicable, and (B) a report signed by such
accountants stating that they have reviewed such certificate and this
Agreement and further stating that, in making such review and the
examination and report on the Consolidated financial statements
described above, they did not obtain any knowledge that there existed
any condition or event related to the financial covenants set forth in
such sections relating to Borrower at the end of such Fiscal Year or
at the time of their report which constituted an Event of Default or a
Default, or, if they did obtain any such knowledge, specifying the
nature and period of existence of any such condition or event.
(ii) For each Guarantor which has income in any Fiscal Quarter
which constitutes ten percent (10%) or more of Borrower's Consolidated
net income for such Fiscal Quarter or which has assets at any time
with a book value equal to or exceeding ten percent (10%) of the book
value of Borrower's Consolidated assets at such time, as soon as
available, and in any event within 105 days in the case of Agent and
110 days in the case of each other Lender after the end of each fiscal
year of such Guarantor, complete Consolidated and consolidating (if
applicable) financial statements of such Guarantor, together with all
notes thereto, prepared in reasonable detail in accordance with all
regulations applicable to such Guarantor or in accordance with
accounting methods acceptable to Agent. Such Consolidated financial
statements shall contain a balance sheet as of the end of such fiscal
year and a statement of operations for such fiscal year, each setting
forth in comparative form the corresponding figures for the preceding
fiscal year.
(iii) As soon as available, and in any event within 45 days after
the end of each Fiscal Quarter, (A) Borrower's Consolidated and
consolidating balance sheets as of the end of such Fiscal Quarter and
statements of operations for the period from the beginning of the then
current Fiscal Year to the end of such Fiscal Quarter, all in
reasonable detail in accordance with Generally Accepted Accounting
Principles, subject to changes resulting from normal year-end
adjustments, (B) for each Guarantor which has income in any Fiscal
Quarter which constitutes ten percent (10%) or more of Borrower's
Consolidated net income for such Fiscal Quarter or which has assets at
any time with a book value equal to or exceeding ten percent (10%) of
the book value of Borrower's Consolidated assets at such time, such
Guarantor's consolidated and consolidating (if applicable) balance
sheets as of the end of each fiscal quarter of such Guarantor and
statements of operations from the
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<PAGE>
beginning of its then current fiscal year to the end of such fiscal
quarter, prepared in reasonable detail in accordance with all
regulations applicable to such Guarantor or in accordance with
accounting methods acceptable to Agent, subject to changes resulting
from normal year-end adjustments, and (C) a certificate in the form of
Exhibit E signed by the chief financial officer, treasurer or
controller of Borrower setting out in reasonable detail calculation of
the Mandatory Prepayment Ratio and confirming its compliance (or
failure to comply) with the applicable Test Amount, confirming
compliance (or failure to comply) with the requirements of Sections
6.2(a), (b), (e), (f), (g), (j), (m), (n), (o) and (p) and setting out
in reasonable detail calculation showing such compliance, if
applicable, stating that such financial statements are materially
complete, stating that he has reviewed the Loan Documents and carried
out or caused to be carried out such further review as is necessary to
enable him to express an informed opinion as to compliance with the
Loan Documents, and further stating that to the best of his knowledge
there is no condition or event at the end of such Fiscal Quarter or at
the time of such certificate which constitutes an Event of Default or
a Default or specifying the nature and period of existence of any such
condition or event.
(iv) Promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent by
Borrower to its shareholders and all registration statements, periodic
reports and other statements and schedules filed by any Related Person
with any securities exchange or any governmental authority responsible
for compliance with securities laws.
(v) By April 30 of each year, a projection of Borrower's cash flows
for such year in form and scope substantially similar to Exhibit H
hereto.
(c) Other Information and Inspections. Each Related Person will
---------------------------------
furnish to Agent and each Lender any information which Agent may from time
to time request on behalf of itself or any Lender concerning any covenant,
provision or condition of the Loan Documents or any matter in connection
with the Related Persons' businesses and operations. Each Related Person
will permit representatives appointed by Agent on behalf of Lenders,
including independent accountants, agents, attorneys, appraisers and any
other persons, to visit and inspect any of such Related Person's property,
including its books of account, other books and records, and any facilities
or other business assets, and to make extra copies therefrom and
photocopies and photographs thereof, and to write down and record any
information such representatives obtain, and each Related Person shall
permit Agent or its representatives, on behalf of Lenders, to
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investigate and verify the accuracy of the information furnished to Agent
or any Lender in connection with the Loan Documents and to discuss all such
matters with its officers, employees and representatives. Each of Agent
and Lenders agrees that, until the occurrence of a Default, it will take
all reasonable steps to keep confidential any proprietary information
regarding lists of customers of Borrower and its Subsidiaries and the terms
of contracts of Borrower and its Subsidiaries with purchasers and
producers; provided, however, that this restriction shall not apply to
information which (i) has at the time in question entered the public
domain, (ii) is required to be disclosed by law or by any order, rule or
regulation (whether valid or invalid) of any court or governmental agency,
or (iii) is furnished to purchasers or prospective purchasers of
participations or interests in the Loans or the Notes so long as such
purchasers and prospective purchasers have agreed to be subject to
restrictions identical to those imposed upon Agent and each Lender under
this sentence.
(d) Notice of Material Events. Borrower will promptly notify Agent
-------------------------
and each Lender (i) of any material adverse change in Borrower's financial
condition or Borrower's Consolidated financial condition, (ii) of the
occurrence of a Default or Event of Default, (iii) of the acceleration of
the maturity of any indebtedness owed by any Related Person or of any
default by any Related Person under any indenture, mortgage, agreement,
contract or other instrument to which any of them is a party or by which
any of them or any of their properties is bound, if such acceleration or
default might have a material adverse effect upon Borrower's Consolidated
financial condition, (iv) of any material adverse claim (or any claim of
$7,500,000 or more) asserted against any Related Person or with respect to
any Related Person's properties pursuant to which an adverse decision could
result in a material adverse effect upon such Related Person's financial
position, business or operations, (v) of the occurrence of any Termination
Event or of any event or condition known to Borrower which might adversely
affect the enforceability of the Loan Documents, (vi) of the filing of any
suit or proceeding against any Related Person in which an adverse decision
could have a material adverse effect upon Borrower's Consolidated financial
condition, business or operations, and (vii) any material adverse change in
pipeline rates or regulations affecting any Guarantor or their properties
which has a material adverse effect on Borrower or on Borrower and its
Subsidiaries taken as a whole. Upon the occurrence of any of the foregoing
the Related Persons will take all necessary or appropriate steps to remedy
promptly any such material adverse change, Default, Event of Default or
default, to protect against any such adverse claim, to defend any such suit
or proceeding, to remedy any such Termination Event or event affecting
enforceability, and to resolve all controversies on account of any of the
foregoing. Borrower will also notify Agent and Agent's counsel in writing
at least twenty Business Days
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<PAGE>
prior to the date that any Related Person changes its name or the location
of its chief executive office or principal place of business or the place
where it keeps its books and records concerning the Collateral, furnishing
with such notice any necessary financing statement amendments or requesting
Agent and its counsel to prepare the same. Borrower hereby represents that
the address of the chief executive office and principal place of business
of each Related Person is the address of Borrower set out in Section 10.3
hereof or (if different) the address of each Related Person set out in the
Disclosure Schedule.
(e) Maintenance of Properties. Each Related Person will maintain,
-------------------------
preserve, protect, and keep all property used or useful in the conduct of
its business in good condition and in compliance with all applicable laws,
rules and regulations, and will from time to time make all repairs,
renewals and replacements needed to enable the business and operations
carried on in connection therewith to be promptly and advantageously
conducted at all times.
(f) Maintenance of Existence and Qualifications. Each Related Person
-------------------------------------------
which is a corporation or partnership will maintain and preserve its
corporate or partnership existence and its rights and franchises in full
force and effect and will qualify to do business as a foreign corporation
or partnership in all states or jurisdictions where required by applicable
law, except where the failure so to qualify will not have any material
adverse effect on such Related Person.
(g) Payment of Trade Debt, Taxes, etc. Each Related Person (i) will
---------------------------------
timely file all required tax returns; (ii) will timely pay all taxes,
assessments and other governmental charges or levies imposed upon it or
upon its income, profits or property; (iii) will within 90 days after the
same becomes due pay all Indebtedness owed by it on ordinary trade terms to
vendors, suppliers, and other Persons providing goods and services used by
it in the ordinary course of its business; (iv) will pay and discharge when
due all other Indebtedness now or hereafter owed by it; and (v) will
maintain appropriate accruals and allowance accounts for all such
liabilities in a timely fashion in accordance with Generally Accepted
Accounting Principles. Each Related Person may, however, delay paying or
discharging any such taxes, charges, claims or liabilities so long as the
validity thereof is contested in good faith by appropriate proceedings and
it has set aside on its books adequate allowance accounts therefor in
accordance with Generally Accepted Accounting Principles.
(h) Insurance. Borrower and the Related Persons will keep or cause to
---------
be kept adequately insured by financially sound and reputable insurers all
property of a character
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<PAGE>
usually insured by corporations or partnerships engaged in the same or
similar businesses. Unless otherwise agreed to in writing by Majority
Lenders, any insurance policies covering properties which are the subject
of any Security Document shall be endorsed to add Agent for the account of
Lenders as an additional named insured and to provide that such policies
may not be cancelled, reduced or affected in any manner for any reason
without thirty days prior notice to Agent and shall contain such other
provisions or endorsements as are reasonably required by Agent on behalf of
Lenders. Any such insurance covering property shall be against fire,
casualty and any other hazards normally insured and shall be in the amount
of the full value (less a reasonable deductible not to exceed amounts
customary in the industry for similarly situated companies and properties),
of the property insured. Borrower and its Affiliates shall maintain
business interruption insurance in an amount providing not less than
$10,000,000 coverage for the covered persons, taken as a whole. In the
event of foreclosure under any such Security Document, or other transfer of
title to any item of Collateral in extinguishment in whole or in part of
the Obligations, all right, title and interest of any Related Person in and
to the policies of insurance required hereby which are then in force
concerning such Collateral and all proceeds payable thereunder shall
thereupon vest in the purchaser at such foreclosure or Agent or other
transferee in the event of such other transfer of title. In the event any
of the Collateral covered by such insurance is destroyed or damaged by
fire, explosion, windstorm, hail or by any other casualty against which
insurance shall have been required hereunder or under any Loan Document,
(i) Agent may, but shall not be obligated to, make proof of loss if not
made promptly by Borrower and (ii) each insurance company concerned is
hereby authorized and directed to make payment for such loss to Agent and
the Related Person owning such Collateral, as joint payees; provided that
so long as no Default or Event of Default has occurred and is continuing,
each insurance company concerned may make payment for any loss in an amount
less than $1,000,000 solely to such Related Person. At all times adequate
insurance against liability on account of damages to persons or property
and workmen's compensation insurance shall be maintained covering Borrower
and its Subsidiaries, which insurance shall be by financially sound and
reputable insurers.
(i) Payment of Expenses. Whether or not the transactions contemplated
-------------------
by this Agreement are consummated, Borrower will promptly (and in any
event, within 30 days after any invoice or other statement or notice) pay
all reasonable costs and expenses incurred by or on behalf of NationsBanc
Capital Markets, Inc. (including attorneys' fees) in connection with the
syndication of the Loans and by or on behalf of Agent (including attorneys'
fees) in connection with (i) the preparation, execution and delivery of the
Loan Documents, and any and all consents, waivers or
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other documents or instruments relating thereto, (ii) the filing,
recording, refiling and re-recording of any Loan Documents and any other
documents or instruments or further assurances required to be filed or
recorded or refiled or re-recorded by the terms of any Loan Document, (iii)
the borrowings hereunder and other action reasonably required in the course
of administration hereof, and (iv) the enforcement, after the occurrence of
a Default, of the Loan Documents; provided, however, that Borrower shall
not pay any expenses incurred by Agent or any Lender in connection with the
loss of any Note and provided further that Borrower will pay the expenses
of each Lender in connection with the events described in clause (iv)
above.
(j) Performance on Borrower's Behalf. If any Related Person fails to
--------------------------------
pay any taxes, insurance premiums, costs, expenses, or other amounts it is
required to pay under any Loan Document (including without limitation any
amounts required to be paid under Sections 6.1(i) and 8.3 of this
Agreement), Agent may pay the same on behalf of Lenders. Borrower shall
immediately reimburse Agent for any such payments and each amount paid
shall constitute a part of the Obligations, shall be secured by the
Security Documents and shall bear interest at the Late Payment Rate from
the date such amount is paid by Agent until the date such amount is repaid
to Agent).
(k) Compliance with Agreements and Law. Each Related Person will
----------------------------------
perform all obligations which are material to Borrower's Consolidated
financial condition which such Related Person is required to perform under
the terms of each indenture, mortgage, deed of trust, security agreement,
lease, franchise, agreement, contract or other instrument or obligation to
which it is a party or by which it or any of its properties is bound
(subject to their rights to delay payment in the circumstances described in
Section 6.1(g)). Each Related Person will conduct its business and affairs
in material compliance with all laws, regulations, and orders applicable
thereto (including those relating to pollution and other environmental
matters).
(l) Evidence of Compliance. Each Related Person will furnish to each
----------------------
Lender at such Related Person's or Borrower's expense all evidence which
Agent from time to time reasonably requests on behalf of Lenders, including
but not limited to the forms of evidence and assurance described in Section
4.2(e), as to the accuracy and validity of or compliance with all
representations, warranties and covenants made by any Related Person in the
Loan Documents, the satisfaction of all conditions contained therein, and
all other matters pertaining thereto.
Section 6.2. Negative Covenants. Borrower warrants, covenants and agrees
------------------
that until the full and final payment of the Obligations and the termination of
this Agreement, unless Majority Lenders have previously agreed otherwise in
writing:
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(a) Limitation on Dividends and Distributions. Except for payments by
-----------------------------------------
Borrower to its stockholders which are permitted under the following
sentences of this subsection and do not otherwise violate any provisions of
this Agreement and except for dividends paid to Borrower by its
Subsidiaries or to MIGC by MGTC, none of Borrower and its Subsidiaries will
declare or pay any dividends on, or make any other distribution in respect
of, any class of its capital stock or any partnership or other interest in
it, other than the distribution of common stock pursuant to the conversion
or exchange of Preferred Stock, nor will any of Borrower and its
Subsidiaries directly or indirectly make any capital contribution to or
purchase, redeem, acquire or retire any shares of the capital stock of or
partnership interest in any of Borrower and its Subsidiaries (whether such
interests are now or hereafter issued, outstanding or created), or cause or
permit any reduction or retirement of the capital stock of or partnership
interest in any of Borrower and its Subsidiaries. Borrower may pay
dividends to its stockholders and make capital stock repurchases so long as
(i) no Default or Event of Default has occurred and is continuing at the
time such dividends are declared and paid and (ii) such repurchases and
dividends declared or paid by Borrower since March 31, 1994, together with
all investments Borrower has made in accordance with the provisions of
Section 6.2(f)(v), do not, in the aggregate, exceed the sum of (A)
$35,000,000; plus (B) fifty percent (50.0%) of Borrower's Consolidated
----
cumulative net income earned after March 31, 1994 if such figure is
positive (zero percent, if negative); plus (C) fifty percent (50.0%) of the
----
cumulative net proceeds received by Borrower and its Subsidiaries at any
time after March 31, 1994 from the sale of any equity securities issued by
Borrower or any of its Subsidiaries.
(b) Limitation on Indebtedness. No Related Person nor Williston Gas
--------------------------
Company nor Westana will create, incur, assume, guarantee, endorse, become
or be liable in any manner with respect to or suffer to exist any
Indebtedness, except:
(i) the Obligations.
(ii) unsecured Indebtedness among Borrower and any Guarantor.
(iii) Indebtedness which is 90 days or less past due (or the
validity of which is being contested in good faith by appropriate
proceedings) that was incurred on ordinary trade terms and is owed by
the Person incurring the same to vendors, suppliers, or other Persons
providing goods and services for use by such Person in the ordinary
course of its business.
(iv) Indebtedness incurred in the ordinary course of business
which neither (A) is for borrowed money,
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(B) constitutes an obligation to pay the deferred purchase price of
assets or property (except for Indebtedness of Borrower evidencing its
deferred purchase price of the assets of Citizens National Gas
Company), (C) is evidenced by bonds, debentures, notes or similar
instruments, (D) is Indebtedness of a type upon which interest or
finance charges are customarily paid, (E) arises under leases of any
kind (except as expressly permitted under subsection (v) immediately
below) or under conditional sales or other title retention agreements
(including operating leases and leases serving as a source of
financing or otherwise capitalized in accordance with Generally
Accepted Accounting Principles but excluding customary oil, gas or
mineral leases) and exceeds in the aggregate $500,000, (F) is owed
under direct or indirect guaranties of Indebtedness of any Person or
constitutes obligations to purchase or acquire or to otherwise protect
or insure a creditor against loss in respect of Indebtedness of any
Person (such as obligations under working capital maintenance
agreements, agreements to keep-well, agreements to purchase
Indebtedness, assets, goods, securities or services, or take-or-pay
agreements, but excluding endorsements in the ordinary course of
business of negotiable instruments in the course of collection), (G)
arises with respect to letters of credit or applications or
reimbursement agreements therefor, nor (H) arises with respect to
---
production payments or other payments received in consideration of
oil, gas, or other minerals yet to be acquired or produced at the time
of payment or with respect to other obligations to deliver goods or
services in consideration of advance payments therefor.
(v) Obligations under leases, whether capital leases or operating
leases, entered into in the ordinary course of business in arm's-
length transactions at competitive market rates under competitive
terms and conditions considering all aspects thereof, provided that
the obligations payable over the lives of any such leases do not in
the aggregate exceed $10,000,000, and in addition, obligations under
real estate leases for office space used by Borrower.
(vi) Indebtedness under the Term Loan Agreement and the Debt
Securities.
(vii) Indebtedness arising under any swap agreements with any
financial institution providing Borrower interest rate protection for
the Obligations, the Debt Securities, or any other Indebtedness of
Borrower.
(viii) unsecured Indebtedness of Borrower not described in
subsections (i) through (vii) above which
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meets the following requirements: (A) the documentation evidencing
such Indebtedness shall contain no terms, conditions or defaults
(other than pricing) which are more favorable to the third party
creditor than those contained in this Agreement are to Lenders and
those contained in the Debt Securities are to the issuers thereof, as
determined by Majority Lenders in their discretion (provided that
Majority Lenders shall make any such determination considering any
amendments or modifications to this Agreement or the documents
governing the Debt Securities existing at the time of the incurrence
of such Indebtedness) and shall not contain any provision which
attempts to modify, amend or restrict any of the rights or remedies of
Agent or Lenders hereunder or under any of the other Loan Documents,
(B) the average life of such Indebtedness shall not be less than the
average life of the Obligations and the Debt Securities, (C) such
Indebtedness shall have no scheduled principal payments due prior to
the final maturity of the Obligations, (D) at the time Borrower incurs
such Indebtedness, no Default or Event of Default shall have occurred
and be continuing hereunder and (E) if such Indebtedness is to be
guaranteed by any Affiliate of Borrower, then such third party
lender(s) must enter into an inter-creditor agreement with Lenders, in
form, scope and substance which is acceptable to Majority Lenders, as
evidenced by their written consent.
(ix) any asset securitization of Borrower's receivables or any
associated prefunding facility, which are not in excess of an
aggregate amount of $75,000,000 and are not secured by any assets of
Borrower other than (A) those accounts receivables of Borrower which
are sold in such securitization (the "Sold Receivables"), (B) other
rights to payment associated with the Sold Receivables and the
proceeds thereof (including deposit accounts established in connection
with the Sold Receivables) and (C) accounts receivable of Borrower,
other than the Sold Receivables, which are not in excess of ten
percent (10%) of the aggregate value of the Sold Receivables; provided
that any such asset securitization shall be terminable at the sole
discretion of Borrower.
(c) Limitation on Liens. No Related Person will create, assume or
-------------------
permit to exist any mortgage, deed of trust, pledge, encumbrance, lien or
charge of any kind (including any security interest in or vendor's lien on
property purchased under conditional sales or other title retention
agreements and including any lease intended as security or in the nature of
a title retention agreement) upon any of its properties or assets whether
now owned or hereafter acquired, except, to the extent not otherwise
forbidden by the Security Documents:
(i) liens and security interests at any time existing in favor of
Lenders.
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(ii) statutory liens for taxes and other sums which are not
delinquent or which are being contested as provided in Section 6.1(g).
(iii) mechanics' and materialmen's and similar statutory liens
with respect to obligations which are not delinquent or which are
being contested as provided in Section 6.1(g).
(iv) minor defects and irregularities in title to any property
which do not materially impair the value of such property or the use
thereof for the purposes for which it is held.
(v) any encumbrances expressly permitted under the terms of any
Security Document hereafter accepted by Agent on behalf of Lenders.
(vi) liens listed on the Disclosure Schedule.
(vii)liens securing Indebtedness specifically described in
Section 6.2(b)(ix).
(d) Limitation on Mergers, Issuances of Securities. No Related Person
----------------------------------------------
will merge or consolidate with or into any other business entity except
that (i) Borrower may merge or consolidate with or into any other business
entity if such Borrower is the surviving business entity, (ii) any
Subsidiary of Borrower which is a Guarantor may merge or consolidate with
another Subsidiary of Borrower so long as a Guarantor is the surviving
business entity, and (iii) any Subsidiary of Borrower which is not a
Guarantor may merge or consolidate with another Subsidiary of Borrower
which is not a Guarantor; provided that the surviving entity immediately
becomes a Guarantor if required to do so pursuant to the terms of Section
7.3 hereof. Except as expressly provided below in this subsection, no
Related Person will, after the Closing Date, issue partnership interests,
stock, or other securities other than shares of common or preferred stock
issued to Borrower nor will any Subsidiary of Borrower allow any diminution
of Borrower's interest (direct or indirect) therein. Notwithstanding
anything to the contrary herein, Borrower may not issue any shares of its
preferred stock without the express written consent of Lenders (including
without limitation any Preferred Stock or Additional Preferred Stock) after
the Closing Date but may issue shares of its common stock if (i) such issue
is pursuant to the conversion or exchange of previously issued Preferred
Stock or the conversion of the 7.25% Convertible Subordinated Notes into
which the Preferred Stock is exchangeable by Borrower or (ii) immediately
after the issuance thereof no Change in Control has occurred and no event
has occurred nor will any event occur as a result of such issuance of
Borrower's common stock which would require Borrower to redeem for cash the
Preferred Stock or any subordinated notes which may have been issued in
exchange for the
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Preferred Stock or which gives the holders of the Preferred Stock or any
subordinated notes which may have been issued in exchange for the Preferred
Stock the right to demand such redemption.
(e) Limitation on Sales of Property. No Related Person will sell,
-------------------------------
transfer, lease, exchange, alienate or dispose of any of its material
assets or properties or any material interest therein except, to the extent
not otherwise forbidden under the Security Documents:
(i) equipment which is worthless or obsolete or which is replaced
by equipment of equal suitability and value;
(ii) inventory which is sold in the ordinary course of business;
(iii) so long as no Default or Event of Default has occurred,
assets or property which are sold for fair consideration in arm's
length transactions to third parties that are not Affiliates of
Borrower; provided that if during any Fiscal Quarter assets and
property with an aggregate gross book value in excess of $20,000,000
are sold or if during the period beginning on the date of execution
--
hereof and continuing until all of the Obligations are paid in full
assets and property with an aggregate gross book value in excess of
$40,000,000 are sold, Lenders shall have the right to require a
recalculation of the Mandatory Prepayment Ratio in accordance with the
provisions of Section 2.7(b) which ratio shall become effective at the
time of such sale; provided further, that the sale of the Sold
Receivables permitted in Section 6.2(b)(ix) of an amount not to exceed
$75,000,000 shall not be included in the calculation of this clause
(iii); and
(iv) sales of Sold Receivables permitted in Section 6.2(b)(ix) of
an aggregate amount not to exceed $75,000,000.
Neither Borrower nor any of Borrower's Subsidiaries will sell, transfer or
otherwise dispose of capital stock of any of Borrower's Subsidiaries except
that any Subsidiary of Borrower may sell or issue its own capital stock to
the extent not otherwise prohibited hereunder. No Related Person will
discount, sell, pledge or assign any notes payable to it, accounts
receivable or future income except to the extent expressly permitted under
the Loan Documents.
(f) Limitation on Investments and New Businesses. Except as expressly
--------------------------------------------
provided below in this subsection, no Related Person will (i) make any
expenditure or commitment or incur any obligation or enter into or engage
in any transaction except in the ordinary course of business (which shall
be deemed to include expenditures, commitments, obligations and
transactions permitted by clause (iii), (iv) or (v) of this sentence); (ii)
engage directly or indirectly
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in any business or conduct any operations except in connection with or
incidental to its present businesses andoperations (which shall be deemed
to include expenditures, commitments, obligations and transactions
permitted by clause (iii), (iv) or (v) of this sentence); (iii) make any
acquisitions of or capital contributions to or other investments in any
Persons other than (A) capital contributions to and investments in
Williston Gas Company and Subsidiaries already wholly owned by such Related
Person and (B) deposits with any Lender, investments in obligations of any
Lender or any of such Lender's Affiliates, time deposits in other banking
institutions which, at the time such deposit is made, are rated "C" by
Thomson BankWatch, Inc. and investments maturing within one year from the
date of acquisition in direct obligations of or obligations supported by,
the full faith and credit of, the United States of America, (iv) make any
significant acquisitions or investments in any properties other than gas
processing, transmission, gathering and storage facilities and domestic oil
and gas properties and (v) make other investments unless (1) no Default or
Event of Default has occurred and is continuing at the time such investment
is made and (2) such investments, together with all repurchases and
dividends declared or paid by Borrower since March 31, 1994 in accordance
with the provisions of Section 6.2(a), do not, in the aggregate, exceed the
sum of (I) $35,000,000; plus (II) fifty percent (50.0%) of Borrower's
----
Consolidated cumulative net income earned after March 31, 1994 if such
figure is positive (zero percent, if negative); plus (III) fifty percent
----
(50.0%) of the cumulative net proceeds received by Borrower and its
Subsidiaries at any time after March 31, 1994 from the sale of any equity
securities issued by Borrower or any of its Subsidiaries. Notwithstanding
the foregoing, if any Related Person makes an acquisition of any Person in
accordance with the provisions of this Section 6.2(f), and if the
historical cash earnings of the Person so acquired would have to be
included in the calculation of the Mandatory Prepayment Ratio most recently
delivered to Agent and Lenders hereunder to support the Indebtedness, if
any, incurred by such Related Person in making the acquisition, Borrower
shall promptly notify Agent and Lenders of such fact and Lenders shall have
the right to require a recalculation of the Mandatory Prepayment Ratio in
accordance with the provisions of Section 2.7(b) which ratio shall become
effective at the time of such acquisition.
(g) Limitation on Credit Extensions. No Related Person will extend
-------------------------------
credit, make advances or make loans other than (i) normal and prudent
extensions of credit to customers buying goods and services in the ordinary
course of business, which extensions shall not be for longer periods than
those extended by similar businesses operated in a normal and prudent
manner, (ii) loans to Borrower or to any Guarantor made in the ordinary
course of business and (iii) loans made by Borrower to its employees
pursuant to the Stock Option Agreements; provided that the aggregate amount
of all such loans so made shall not exceed $10,000,000.
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(h) Contracts; Take-or-Pay Agreements. No Related Person will
---------------------------------
enter into, or amend or permit any amendment to, any contract which
releases, qualifies, limits, makes contingent or otherwise detrimentally
affects Agent or any Lender or the rights and benefits of Agent or any
Lender under or acquired pursuant to any Loan Documents. Borrower will not
enter into any "take-or-pay" contract or other contract which requires it
to pay for oil, gas, other hydrocarbons or other minerals prior to taking
delivery thereof, provided that Borrower may enter into such contracts so
long as the aggregate maximum direct and contingent liability of Borrower
under such contracts does not exceed $500,000 at any one time, and provided
further that Borrower may enter into contracts with gas producers requiring
Borrower to make such payments if Borrower has not connected the producer's
well to Borrower's gathering system within a specified period of time. The
Related Persons may only enter into contracts for the future sale or
purchase of liquid hydrocarbons (in this section called "liquids") to
facilitate the ultimate sale of liquids processed by Borrower. Examples of
permitted contracts include (i) futures contracts to hedge (but not
speculate) against future changes in prices and (ii) essentially back to
back contracts in which Borrower avoids transportation of liquids processed
by it by exchanging such liquids for liquids processed by others which are
closer in location to Borrower's ultimate purchaser. Examples of prohibited
contracts include essentially speculative contracts entered into primarily
in hopes of benefitting from price changes and with no substantial
connection to the sale or transportation of liquids produced or stored at
Borrower's gas plants.
(i) Fiscal Year. No Related Person will change its fiscal year.
-----------
(j) Tangible Net Worth. Borrower's Consolidated Tangible Net
------------------
Worth will never be less than the Tangible Net Worth Minimum (as defined
below in this subsection). As used in this subsection, the term
"Consolidated Tangible Net Worth" means the remainder of (A) all
Consolidated assets of such Borrower, other than intangible assets
(including without limitation as intangible assets such assets as patents,
copyrights, licenses, franchises, goodwill, trade names, trade secrets and
leases other than oil, gas or mineral leases or leases required to be
capitalized under Generally Accepted Accounting Principles, but treating as
tangible assets with respect to Borrower all gas purchase and sale
contracts acquired by Borrower), minus (B) Borrower's Consolidated Debt.
-----
As used in this subsection, the term "Consolidated Debt" means all
Consolidated liabilities and similar balance sheet items of Borrower,
together with all other contingent and indirect liabilities ("contingent
and indirect liabilities" shall include only those liabilities that are
required to be included in amounts accrued in accordance with Generally
Accepted
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<PAGE>
Accounting Principles) of Borrower or any of its Subsidiaries which are of
a character required to be included in Borrower's audited Consolidated
annual financial statements required hereunder (if any) (including the
notes thereto). As used in this subsection the term "Tangible Net Worth
Minimum" means the sum of (i) $400,000,000; plus (ii) fifty percent (50.0%)
----
of Borrower's Consolidated cumulative net income earned after March 31,
1994, if such figure is positive (zero percent, if negative); plus (iii)
----
seventy-five percent (75.0%) of the cumulative net proceeds received by
Borrower at any time after March 31, 1994 from the sale of any equity
securities issued by Borrower or any of its Subsidiaries.
(k) Organizational Documents. The Certificate of Incorporation
------------------------
and Bylaws of Borrower and the joint venture agreements under which each of
Williston Gas Company and Westana, respectively, are established shall not
be amended or modified in any way unless the effect of any such amendment
or modification will not materially and adversely effect the management,
financial condition, business or operations of any of Borrower, any
Guarantor, Williston Gas Company or Westana.
(l) Certain Contracts; Amendments; Multiemployer ERISA Plans.
--------------------------------------------------------
Except as expressly provided for in the Loan Documents, no Related Person
will, directly or indirectly, enter into, create or otherwise allow to
exist any contract or other consensual restriction on the ability of any
Related Person to (i) pay dividends or make other distributions to
Borrower, (ii) redeem equity interests held in it by Borrower, (iii) repay
loans and other indebtedness owing by it to Borrower, or (iv) transfer any
of its assets to Borrower; provided that nothing contained in this sentence
is intended to prohibit Borrower's execution and delivery of the Debt
Securities, as in existence on the date hereof, and the documents and
instruments executed in connection therewith. No Related Person will amend
or permit any amendment to any contract or lease which releases, qualifies,
limits, makes contingent or otherwise detrimentally affects the rights and
benefits of Agent or any Lender under or acquired pursuant to any Security
Document. No Related Person will incur any obligation to contribute to any
"multiemployer plan" as defined in Section 4001 of ERISA.
(m) Debt to Capitalization Ratio. Borrower's Debt to
----------------------------
Capitalization Ratio will never be greater than (i) 0.60 to 1.0 at any time
until and including October 31, 1995 and (ii) 0.55 to 1.0 at any time
thereafter.
(n) Current Ratio. The ratio of Borrower's Consolidated current
-------------
assets to Borrower's Consolidated current liabilities shall not be less
than 1.0 to 1.0 at the end of any calendar month. For purposes of this
subsection, Borrower's Consolidated current liabilities will be
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calculated without including any payments of principal of any Indebtedness
of Borrower which are required to be repaid within one year from the time
of calculation and Borrower's Consolidated current assets will include any
unused portion of the Commitment which is then available for borrowing.
(o) Limits on Uncommitted Inventory. Borrower shall at no time
-------------------------------
purchase or have purchased a volume of natural gas inventory in an amount
which exceeds the sum of (i) the aggregate amount of inventory which
Borrower has purchased to satisfy commitments for delivery to third parties
pursuant to sales agreements with such third parties plus (ii) the
aggregate amount of production from all of the gas plants owned by Borrower
during the three (3) immediately preceding consecutive calendar months.
(p) EBITDA/Interest Ratio. As of the end of each Fiscal Quarter,
---------------------
the ratio of Borrower's Consolidated EBITDA for the four immediately
preceding consecutive Fiscal Quarters to Borrower's Consolidated Interest
Charges for such period shall never be less than (i) 3.25 to 1.0 at any
time after the date hereof until and including October 31, 1995, and (ii)
3.75 to 1.0 at any time from and including November 1, 1995 and thereafter.
For purposes of this subsection, the term "Borrower's Consolidated EBITDA"
means the sum of (I) Borrower's Consolidated earnings (or loss), after
deduction of all expenses and other charges other than interest and income
taxes plus (II) amounts deducted in the computation of such Consolidated
earnings (or loss) for depreciation, amortization and other non-cash items.
For purposes of this subsection the term "Borrower's Consolidated Interest
Charges" means the aggregate amount of interest treated as an expense or
capitalized on Borrower's Consolidated financial statements.
ARTICLE VII
Security
--------
Section 7.1. The Security. The Obligations will be secured by the
------------
Security Documents listed in Schedule 2 and any additional Security Documents
hereafter delivered by any Related Person and accepted by Agent on behalf of
Lenders.
Section 7.2. Offset Borrower hereby grants to Agent and each Lender a
------
right of offset to secure the repayment of the Obligations, which right of
offset shall be upon (a) any and all moneys, securities or other property (and
the proceeds therefrom) of Borrower now or hereafter held or received by or in
transit to Agent or any Lender from or for the account of Borrower, whether for
safekeeping, custody, pledge, transmission, collection or otherwise, (b) any and
all deposits (general or special, time or demand, provisional or final) of
Borrower with Agent or any Lender, and (c) any other credits and claims of
Borrower at any time existing against Agent or any Lender. Upon the occurrence
of any Default or Event of Default, each of Agent and Lenders is
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hereby authorized to offset, appropriate, and apply, at any time and from time
to time, without notice to Borrower, any and all items hereinabove referred to
against the Obligations.
Section 7.3. Guaranties . Borrower shall require each of the following
-----------
Subsidiaries to immediately execute and deliver to Agent on behalf of Lenders an
absolute and unconditional guaranty of the timely repayment of the Obligations
under this Agreement and the due and punctual performance of the obligations of
Borrower hereunder:
(A) Each Subsidiary of Borrower which has income in any Fiscal Quarter
which constitutes ten percent (10%) or more of Borrower's Consolidated net
income for such Fiscal Quarter or which has assets at any time with a book
value equal to or exceeding ten percent (10%) of the book value of
Borrower's Consolidated assets at such time;
(B) If the aggregate amount of Borrower's unconsolidated net income
for any Fiscal Quarter plus the aggregate net income of Guarantors during
such Fiscal Quarter does not constitute eighty-five percent (85%) or more
of Borrower's Consolidated net income for such Fiscal Quarter or if the
book value of Borrower's individual assets at any time plus the aggregate
book value of the assets of Guarantors at such time does not exceed eighty-
five percent (85%) of the book value of Borrower's Consolidated assets at
such time, then Subsidiaries of Borrower with aggregate assets and/or net
incomes necessary to comply with the eighty-five percent (85%) tests
contained in this subsection; and
(C) Upon request by Agent on behalf of Majority Lenders, any other
Subsidiary of Borrower.
Borrower will cause each of its Subsidiaries to deliver to Agent, simultaneously
with its delivery of such a guaranty, written evidence satisfactory to Majority
Lenders and their counsel that such Subsidiary has taken all corporate or
partnership action necessary to duly approve and authorize its execution,
delivery and performance of such guaranty and any other documents which it is
required to execute. All guaranties delivered to Agent pursuant to this section
shall be satisfactory to Agent in form and substance.
Section 7.4. Deposits.
--------
(a) During the continuance of any Event of Default, Agent may, on
behalf of Majority Lenders, require Borrower to deposit funds with Agent
under this section in an amount up to the LC Balance. Any funds deposited
under this section shall be held by Agent for the benefit of Lenders as
Collateral, and Borrower will in connection therewith execute and deliver
such Security Documents as Majority Lenders may in their discretion
require. As drafts or demands for payment are presented under any LCs,
Agent shall
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apply such funds to satisfy Borrower's reimbursement obligations with
respect thereto. Pending such application Agent shall invest such funds as
mutually agreed upon by Majority Lenders and Borrower and, if no such
agreement is made, in overnight eurodollar deposits or time deposits with
or certificates of deposit issued by Agent, with maturities from one to
sixty days as chosen by Agent and upon such other terms and conditions as
Agent chooses. All interest on such investments shall be reinvested or
applied to LC reimbursement obligations in the same manner as funds
originally deposited by Borrower or, if Borrower requests, released to
Borrower so long as no Default or Event of Default exists. When all LCs
have expired and Borrower's reimbursement obligations in connection
therewith have been satisfied, Agent shall, provided no Default or Event of
Default then exists, release to Borrower any remaining funds and interest
deposited under this section. Borrower shall in no event be obligated to
make deposits under this Section 7.4 whenever the funds and interest
already deposited equal or exceed the LC Balance.
(b) Whenever Borrower is required to make deposits under this section
and fails to do so on the day such deposit is due, Agent and Lenders may
without notice to Borrower make such deposit (whether by application of
proceeds of Collateral, by transfers from other accounts maintained with
Lenders, or otherwise) using any funds then available to Agent or any
Lender of Borrower, any Guarantor, or any other person liable for all or
any part of Borrower's obligations hereunder or with respect to the LCs.
Any amounts which are required hereunder to be deposited pursuant to this
section and which are not deposited on the date due shall, for the purposes
of each Security Document, be considered past due debts owing hereunder,
and Agent is hereby authorized to liquidate Collateral and otherwise
exercise its rights under each Security Document to obtain funds for
deposit as contemplated in this section.
ARTICLE VIII
Events of Default and Remedies
------------------------------
Section 8.1. Events of Default. Each of the following events constitutes
-----------------
an Event of Default under this Agreement:
(a) (i) Any Related Person fails to pay any principal when due and
payable, whether at a date for the payment of a fixed installment or
contingent or other payment to Agent, Issuing Bank or any Lender or as a
result of acceleration or otherwise, or (ii) any Related Person fails to
pay any interest or other Obligation other than principal when due and
payable, whether at a date for the payment of a fixed installment or
contingent or other payment to Agent, Issuing Bank or any Lender or as a
result of acceleration or
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otherwise, and such failure continues for ten (10) Business Days after such
payment is due; or
(b) Any default occurs under any Loan Document or any document
evidencing the Debt Securities or any event of default or termination event
occurs under any interest rate swap agreement between Borrower and any
Lender, and such default, event of default or termination event is not
remedied within the applicable period of grace (if any) provided for in
such document, or any Event of Default occurs under the Term Loan
Agreement; or
(c) Any Related Person fails to duly observe, perform or comply with
any provision of Section 6.2 or Section 2.7(b), provided that no grace
period shall be applicable to such failure, or any Related Person fails to
duly observe, perform or comply with any other covenant, agreement,
condition or provision (except those referred to above in this subsection
and in subsections (a) and (b) above) of any Loan Document in any material
respect, and such failure is not remedied within the greater of thirty (30)
days or any applicable Grace Period; or
(d) Any representation or warranty previously, presently or hereafter
made in writing by or on behalf of any Related Person in connection with
any Loan Document shall prove to have been false or incorrect in any
material respect on any date on or as of which made, and such
representation or warranty does not become true and correct within the
applicable Grace Period (if any); or
(e) Any Related Person fails to duly observe, perform or comply with
any agreement with any Person or any term or condition of any instrument,
if such agreement or instrument is materially significant to Borrower or
Borrower and its Subsidiaries on a Consolidated basis or materially
significant to any Guarantor, and such failure is not remedied within the
applicable period of grace (if any) provided in such agreement or
instrument; or
(f) Any Related Person (i) fails to duly pay any Indebtedness
constituting principal or interest owed by it to any Person other than
Agent, Issuing Bank or any Lender with respect to borrowed money or money
otherwise owed under any note, bond, or similar instrument (including, but
not limited to, the Indebtedness under the Debt Securities or under any
subordinated note issued in exchange for Preferred Stock) unless such
Related Person is contesting the validity of such Indebtedness by
appropriate proceedings and has set aside on its books adequate allowance
accounts therefor in accordance with Generally Accepted Accounting
Principles or (ii) breaches or defaults in the performance of any agreement
or instrument by which any Indebtedness described in the preceding clause
(i) is issued, evidenced, governed, or secured, and any such failure,
breach or default
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continues beyond any applicable period of grace provided therefor; or
(g) Either (i) any "accumulated funding deficiency" (as defined in
Section 412(a) of the Internal Revenue Code of 1986, as amended) in excess
of $5,000,000 exists with respect to any ERISA Plan, whether or not waived
by the Secretary of the Treasury or his delegate, or (ii) any Termination
Event occurs with respect to any ERISA Plan and the then current value of
such ERISA Plan's benefits guaranteed under Title IV of ERISA exceeds the
then current value of such ERISA Plan's assets available for the payment of
such benefits by more than $500,000 (or in the case of a Termination Event
involving the withdrawal of a substantial employer, the withdrawing
employer's proportionate share of such excess exceeds such amount); or
(h) Any Related Person:
(i) suffers the entry against it of a judgment, decree or order
for relief by a court of competent jurisdiction in an involuntary case
commenced under any applicable bankruptcy, insolvency or other similar
law of any jurisdiction now or hereafter in effect, including the
Bankruptcy Reform Act of 1978, as amended; or
(ii) suffers the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for a substantial
part of its assets or for any part of the Collateral in a proceeding
brought against or initiated by it, and such appointment is neither
made ineffective nor discharged within thirty days after the making
thereof, or such appointment is consented to, requested by, or
acquiesced to by it; or
(iii) commences a voluntary case under any applicable bankruptcy,
insolvency or similar law now or hereafter in effect, including the
Bankruptcy Reform Act of 1978, as amended; or consents to the entry of
an order for relief in an involuntary case under any such law or to
the appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or other similar official
of any substantial part of its assets or any part of the Collateral;
or makes a general assignment for the benefit of creditors; or fails
generally to pay its debts as such debts become due; or takes
corporate or other action in furtherance of any of the foregoing; or
(iv) suffers the entry against it of a final judgment for the
payment of money in excess of $5,000,000 (not covered by effective
insurance), unless the same is discharged within thirty days after the
date of entry thereof or an appeal or appropriate
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proceeding for review thereof is taken within said period and a stay
of execution pending such appeal is obtained; or
(v) suffers a writ or warrant of attachment or any similar
process to be issued by any court against all or any substantial part
of its property or any part of the Collateral, and such writ or
warrant of attachment or any similar process is not stayed or released
within thirty days after the entry or levy thereof or after any stay
is vacated or set aside; or
(i) Without the express prior written consent of Majority Lenders,
Borrower amends or modifies the terms of the Preferred Stock or the
Additional Preferred Stock or the subordinated notes which have been or may
be issued in exchange for the Preferred Stock in any manner which would
have the effect of (i) increasing the amount of Preferred Stock or the
Additional Preferred Stock that may be issued by Borrower, (ii) increasing
the amount of any such subordinated note or changing the terms for the
conversion of the Preferred Stock into such subordinated notes, (iii)
increasing the amount or frequency of payment of dividends on the Preferred
Stock or the Additional Preferred Stock or the amount or frequency of
payment of principal of or interest on such subordinated notes, or (iv)
otherwise materially changing the terms of the Preferred Stock or the
Additional Preferred Stock or such subordinated notes; or
(j) A Change in Control occurs; or
(k) Any event occurs which would require Borrower to redeem for cash
the Preferred Stock, the Additional Preferred Stock or any subordinated
notes which may have been issued in exchange for the Preferred Stock or
which gives the holders of the Preferred Stock, the Additional Preferred
Stock or any subordinated notes which may have been issued in exchange for
the Preferred Stock the right to demand such redemption; or
(l) Without the express prior written consent of all Lenders, Borrower
amends or modifies the terms of any of the documents or instruments
governing, or otherwise executed in connection with, any of the Debt
Securities; or
(m) Any Related Person breaches or defaults in the performance of any
agreement or instrument creating or evidencing any asset securitization or
any associated prefunding facility referred to in Section 6.2(b)(ix), and
any such breach or default continues beyond any applicable period of grace
provided therefor, or any early or accelerated amortization of Indebtedness
or other obligations or rights commences to occur under such facility
without a replacement facility permitted by such Section being effective to
provide for replacement funding therefor.
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Upon the occurrence of an Event of Default described in subsection (h)(i),
(h)(ii) or (h)(iii) of this section with respect to Borrower, all of the
Obligations shall thereupon be immediately due and payable, without presentment,
demand, protest, notice of protest, declaration or notice of acceleration or
intention to accelerate, or any other notice or declaration of any kind, all of
which are hereby expressly waived by Borrower and each Related Person who at any
time ratifies or approves this Agreement. During the continuance of any other
Event of Default, Agent shall, upon written instructions from Majority Lenders,
at any time and from time to time without notice to Borrower or any other
Related Person declare any or all of the Obligations immediately due and
payable, and all such Obligations shall thereupon be immediately due and
payable, without presentment, demand, protest, notice of protest, notice of
acceleration or of intention to accelerate, or any other notice or declaration
of any kind, all of which are hereby expressly waived by Borrower and each
Related Person who at any time ratifies or approves this Agreement. After any
such acceleration Lenders shall have no obligation to make any further Advances
or loans of any kind under any agreement with any Related Person. The term
"Grace Period", as used herein with respect to an Event of Default for which a
Grace Period is expressly provided, means the period beginning on the date of
the related Default and ending thirty days after written notice of such Default
is given by Agent to Borrower, provided that no Grace Period shall apply to any
Default if Borrower does not give notice of such Default to Agent as required in
Section 6.1(d) prior to Agent's giving notice thereof to Borrower or exercising
any of its rights or remedies in connection therewith.
Section 8.2. Remedies. If any Default shall occur and be continuing each
--------
Lender may protect and enforce its rights under the Loan Documents by any
appropriate proceedings, including proceedings for specific performance of any
covenant or agreement contained in any Loan Document, and each Lender may
enforce the payment of any Obligations due or enforce any other legal or
equitable right. All rights, remedies and powers conferred upon Agent and
Lenders under the Loan Documents shall be deemed cumulative and not exclusive of
any other rights, remedies or powers available under the Loan Documents or at
law or in equity.
Section 8.3. Indemnity. Borrower promises to indemnify Agent and each
---------
Lender, upon request, from and against any and all claims, losses, and
liabilities growing out of or resulting from the Loan Documents or the
transactions contemplated therein (including without limitation the enforcement
thereof); provided, however, that this indemnity shall not extend to any claim
which Borrower may have against Agent or any Lender that arises under or with
respect to this Agreement. THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR
NOT SUCH LIABILITIES AND COSTS ARE IN ANY
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WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR
OMISSION OF ANY KIND BY AGENT OR ANY LENDER, PROVIDED ONLY THAT BORROWER SHALL
NOT BE OBLIGATED UNDER THIS SECTION TO INDEMNIFY AGENT OR ANY LENDER FOR THAT
PORTION, IF ANY, OF ANY LIABILITIES AND COSTS WHICH IS PROXIMATELY CAUSED BY
SUCH LENDER'S OR AGENT'S OWN INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
If any Person (including without limitation Borrower or any of its Affiliates)
ever alleges such gross negligence or willful misconduct by Agent or any Lender,
the indemnification provided for in this section shall nonetheless be paid upon
demand, subject to later adjustment or reimbursement, until such time as a court
of competent jurisdiction enters a final judgment as to the extent and effect of
the alleged gross negligence or willful misconduct. As used in this section the
terms "Agent" and "Lender" shall refer not only to the Persons designated as
such in Section 1.1 but also to each director, officer, agent, attorney,
employee, representative and Affiliate of such Person.
ARTICLE IX
Agent
-----
Section 9.1. Appointment and Authority. Each Lender hereby irrevocably
-------------------------
authorizes Agent, and Agent hereby undertakes, to receive payments of principal,
interest and other amounts due hereunder as specified herein and to take all
other actions and to exercise such powers under the Loan Documents as are
specifically delegated to Agent by the terms hereof or thereof, together with
all other powers reasonably incidental thereto. The relationship of Agent to
Lenders is only that of a commercial bank acting as administrative agent for
others, and nothing in the Loan Documents shall be construed to constitute Agent
as a trustee or other fiduciary for any holder of any of the Notes or of any
participation therein nor to impose on Agent duties and obligations other than
those expressly provided for in the Loan Documents. With respect to any matters
not expressly provided for in the Loan Documents and any matters which the Loan
Documents place within the discretion of Agent, Agent shall not be required to
exercise any discretion or take any action, and it may request instructions from
Lenders with respect to any such matter, in which case it shall be required to
act or to refrain from acting (and shall be fully protected and free from
liability to all Lenders in so acting or refraining from acting) upon the
instructions of Majority Lenders (including itself), provided, however, that
Agent shall not be required to take any action which exposes it to a risk of
personal liability that it considers unreasonable or which is contrary to the
Loan Documents or to applicable law. Upon receipt by Agent from Borrower of any
communication calling for action on the part of Lenders or upon notice from any
Lender to Agent of any Default or Event of Default, Agent shall promptly notify
each Lender thereof.
Section 9.2. Agent's Reliance, Etc. Neither Agent nor any of its
---------------------
directors, officers, agents, attorneys, or employees shall
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be liable for any action taken or omitted to be taken by any of them under or in
connection with the Loan Documents, including their negligence of any kind,
except that each shall be liable for its own gross negligence or willful
misconduct. Without limiting the generality of the foregoing, Agent (a) may
treat the payee of any Note as the holder thereof until Agent receives written
notice of the assignment or transfer thereof in accordance with this Agreement,
signed by such payee and in form satisfactory to Agent; (b) may consult with
legal counsel (including counsel for 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
Lender and shall not be responsible to any Lender for any statements, warranties
or representations made in or in connection with the Loan Documents; (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 the Loan Documents on the part
of any Related Person or to inspect the property (including the books and
records) of any Related Person; (e) shall not be responsible to any Lender for
the due execution, legality, validity, enforceability, genuineness, sufficiency
or value of any Loan Document or any instrument or document furnished in
connection therewith; (f) may rely upon the representations and warranties of
the Related Persons and the Lenders in exercising its powers hereunder; and (g)
shall incur no liability under or in respect of the Loan Documents by acting
upon any notice, consent, certificate or other instrument or writing (including
any telecopy, telegram, cable or telex) believed by it to be genuine and signed
or sent by the proper Person or Persons.
Section 9.3. Lenders' Credit Decisions. Each Lender acknowledges that it
-------------------------
has, independently and without reliance upon Agent or any other Lender, made its
own analysis of Borrower and the transactions contemplated hereby and its own
independent decision to enter into this Agreement and the other Loan Documents.
Each Lender also acknowledges that it will, independently and without reliance
upon Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Loan Documents.
Section 9.4. Indemnification. Each Lender agrees to indemnify Agent (to
---------------
the extent not reimbursed by Borrower within ten (10) days after demand) from
and against such Lender's Loan Share of any and all liabilities, obligations,
claims, losses, damages, penalties, actions, judgments, suits, costs, expenses
or disbursements (including reasonable fees of attorneys, accountants, experts
and advisors) of any kind or nature whatsoever (in this section collectively
called "liabilities and costs") which to any extent (in whole or in part) may be
imposed on, incurred by, or asserted against Agent growing out of, resulting
from or in any other way associated with any of the Collateral, the Loan
Documents and the transactions and events
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(including without limitation the enforcement thereof) at any time associated
therewith or contemplated therein. THE FOREGOING INDEMNIFICATION SHALL APPLY
WHETHER OR NOT SUCH LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY EXTENT
CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY
AGENT, PROVIDED ONLY THAT NO LENDER SHALL BE OBLIGATED UNDER THIS SECTION TO
INDEMNIFY AGENT FOR THAT PORTION, IF ANY, OF ANY LIABILITIES AND COSTS WHICH IS
PROXIMATELY CAUSED BY AGENT'S OWN INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. Cumulative of the foregoing, each Lender agrees to reimburse Agent
promptly upon demand for such Lender's Loan Share of any costs and expenses to
be paid to Agent by Borrower under Section 6.1(i) to the extent that Agent is
not timely reimbursed for such expenses by Borrower as provided in such section.
As used in this section the term "Agent" shall refer not only to the Person
designated as such in Section 1.1 but also to each director, officer, agent,
attorney, employee, representative and Affiliate of such Person.
Section 9.5. Rights as Lender. In its capacity as a Lender, Agent shall
----------------
have the same rights and obligations as any Lender and may exercise such rights
as though it were not Agent. Agent may accept deposits from, lend money to, act
as trustee under indentures of, and generally engage in any kind of business
with any of the Related Persons or their Affiliates, all as if it were not Agent
hereunder and without any duty to account therefor to any other Lender.
Section 9.6. Sharing of Set-Offs and Other Payments. Each of Agent and
--------------------------------------
Lenders agrees that if it shall, whether through the exercise of rights under
Security Documents or rights of banker's lien, set off, or counterclaim against
Borrower or otherwise, obtain payment of a portion of the aggregate Obligations
owed to it which, taking into account all distributions made by Agent under
Section 2.9, causes Agent or Lender to have received more than it would have
received had such payment been received by Agent and distributed pursuant to
Section 2.9, then (a) it shall be deemed to have simultaneously purchased and
shall be obligated to purchase interests in the Obligations as necessary to
cause Agent and all Lenders to share all payments as provided for in Section
2.9, and (b) such other adjustments shall be made from time to time as shall be
equitable to ensure that Agent and all Lenders share all payments of Obligations
as provided in Section 2.9; provided, however, that nothing herein contained
shall in any way affect the right of Agent or any Lender to obtain payment
(whether by exercise of rights of banker's lien, set-off or counterclaim or
otherwise) of indebtedness other than the Obligations. Borrower expressly
consents to the foregoing arrangements and agrees that any holder of any such
interest or other participation in the Obligations, whether or not acquired
pursuant to the foregoing arrangements, may to the fullest extent permitted by
law exercise any and all rights or banker's lien, set-off, or counterclaim as
fully as if such holder were a holder of the Obligations in the amount of such
interest or other participation. If all or any part of any funds transferred
pursuant to this section is thereafter recovered from the seller under this
section which received the same, the purchase provided
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for in this section shall be deemed to have been rescinded to the extent of such
recovery, together with interest, if any, if interest is required pursuant to
court order to be paid on account of the possession of such funds prior to such
recovery.
Section 9.7. Investments . Whenever Agent in good faith determines that
-----------
it is uncertain about how to distribute to Lenders any funds which it has
received, or whenever Agent in good faith determines that there is any dispute
among Lenders about how such funds should be distributed, Agent may choose to
defer distribution of the funds which are the subject of such uncertainty or
dispute. If Agent in good faith believes that the uncertainty or dispute will
not be promptly resolved, or if Agent is otherwise required to invest funds
pending distribution to Lenders, Agent shall invest such funds pending
distribution; all interest on any such investment shall be distributed upon the
distribution of such investment and in the same proportion and to the same
Persons as such investment. All moneys received by Agent for distribution to
Lenders (other than to the Person who is Agent in its separate capacity as a
Lender) shall be held by Agent pending such distribution solely as Agent for
such Lenders, and Agent shall have no equitable title to any portion thereof.
Section 9.8. Benefit of Article IX. The provisions of this Article
---------------------
(other than the following Section 9.9) are intended solely for the benefit of
Agent and Lenders, and no Related Person shall be entitled to rely on any such
provision or assert any such provision in a claim or defense against Agent or
any Lender. Agent and Lenders may waive or amend such provisions as they desire
without any notice to or consent of Borrower or any Related Person.
Section 9.9. Resignation. Agent may resign at any time by giving written
-----------
notice thereof to Lenders and Borrower. Each such notice shall set forth the
date of such resignation. Upon any such resignation Borrower may, with the
written concurrence of Lenders whose aggregate Loan Shares constitute at least
fifty percent (50%), designate a successor Agent. If within fifteen days after
the date of such resignation Borrower makes no such designation or such written
concurrence is not given, Majority Lenders shall have the right to appoint a
successor Agent. A successor must be appointed for any retiring Agent, and such
Agent's resignation shall become effective when such successor accepts such
appointment. If, within thirty days after the date of the retiring Agent's
resignation, no successor Agent has been appointed and has accepted such
appointment, then the retiring Agent may appoint a successor Agent, which shall
be a commercial bank organized or licensed to conduct a banking or trust
business under the laws of the United States of America or of any state thereof.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
the retiring Agent shall be discharged from its duties and obligations under
this Agreement and the other Loan Documents. After any retiring Agent's
resignation hereunder the provisions of this Article VIII shall continue to
inure to its benefit as to any actions taken or
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omitted to be taken by it while it was Agent under the Loan Documents.
Section 9.10. Agency/Administrative Fee. To compensate Agent for
-------------------------
performing its duties under the Loan Documents and for expenses incurred by
Agent in connection with such performance, Borrower shall pay to Agent an agency
and administrative fee in amount mutually agreed upon by Borrower and Agent.
ARTICLE X
Miscellaneous
-------------
Section 10.1. Waivers and Amendments; Acknowledgements.
----------------------------------------
(a) Waivers and Amendments. No failure or delay by Agent or any
----------------------
Lender in exercising any right, power or remedy which Agent or such Lender
may have under any of the Loan Documents shall operate as a waiver thereof
or of any other right, power or remedy, nor shall any single or partial
exercise by Agent or such Lender of any such right, power or remedy
preclude any other or further exercise thereof or of any other right, power
or remedy. No waiver of any provision of any Loan Document and no consent
to any departure therefrom shall ever be effective unless it is in writing
and signed as provided below in this section, and then such waiver or
consent shall be effective only in the specific instances and for the
purposes for which given and to the extent specified in such writing. No
notice to or demand on any Related Person shall in any case of itself
entitle any Related Person to any other or further notice or demand in
similar or other circumstances. This Agreement and the other Loan Documents
set forth the entire understanding and agreement of the parties hereto and
thereto with respect to the transactions contemplated herein and therein,
and no modification or amendment of or supplement to this Agreement or the
other Loan Documents shall be valid or effective unless the same is in
writing and signed by (i) if such party is Borrower, by Borrower, (ii) if
such party is Agent, by Agent and (iii) if such party is a Lender, by such
Lender or by Agent on behalf of Lenders with the written consent of
Majority Lenders (or without further consent than that already provided
herein in the circumstances provided in Sections 7.4 or 10.7).
Notwithstanding the foregoing or anything to the contrary herein, Agent
shall not, without the prior consent of each individual Lender, execute and
deliver on behalf of such Lender any waiver or amendment which would: (1)
waive any of the conditions specified in Article IV (provided that Agent
may in its discretion withdraw any request it has made under Section
4.2(e)), (2) increase the Commitment of such Lender or subject such Lender
to any additional obligations, (3) reduce any fees hereunder, or the
principal of, or interest on, such Lender's Note, (4) postpone any date
fixed for any payment of any fees hereunder, or principal of, or
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interest on, such Lender's Note, (5) amend the definition herein of
"Majority Lenders" or otherwise change the aggregate amount of Loan Shares
which is required for Agent, Lenders or any of them to take any particular
action under the Loan Documents or amend Section 7.1 hereof or (6) release
Borrower from its obligation to pay such Lender's Note or any Guarantor
from its guaranty of such payment.
(b) Acknowledgements and Admissions. Borrower hereby represents,
-------------------------------
warrants, acknowledges and admits that (i) it has been advised by counsel
in the negotiation, execution and delivery of the Loan Documents to which
it is a party, (ii) it has made an independent decision to enter into this
Agreement and the other Loan Documents to which it is a party, without
reliance on any representation, warranty, covenant or undertaking by Agent
or any Lender, whether written, oral or implicit, other than as expressly
set out in this Agreement or in another Loan Document delivered on or after
the date hereof, (iii) there are no representations, warranties, covenants,
undertakings or agreements by Agent or any Lender as to the Loan Documents
except as expressly set out in this Agreement or in another Loan Document
delivered on or after the date hereof, (iv) neither Agent nor any Lender
has any fiduciary obligation toward Borrower with respect to any Loan
Document or the transactions contemplated thereby, (v) the relationship
pursuant to the Loan Documents between Borrower, on one hand, and Agent and
each Lender, on the other hand, is and shall be solely that of debtor and
creditor, respectively, (vi) no partnership or joint venture exists with
respect to the Loan Documents between any of Borrower, Agent and Lenders,
(vii) Agent is not Borrower's agent, but agent for Lenders, (viii) should
an Event of Default or Default occur or exist Agent and each Lender will
determine in its sole discretion and for its own reasons what remedies and
actions it will or will not exercise or take at that time, (ix) without
limiting any of the foregoing, Borrower is not relying upon any
representation or covenant by Agent or any Lender, or any representative
thereof, and no such representation or covenant has been made, that Agent
or any Lender will, at the time of an Event of Default or Default, or at
any other time, waive, negotiate, discuss, or take or refrain from taking
any action permitted under the Loan Documents with respect to any such
Event of Default or Default or any other provision of the Loan Documents,
and (x) Agent and all Lenders have relied upon the truthfulness of the
acknowledgements in this section in deciding to execute and deliver this
Agreement and to make their Loans.
THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES.
THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.
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Section 10.2. Survival of Agreements; Cumulative Nature. All of the
-----------------------------------------
Related Persons' various representations, warranties, covenants and agreements
in the Loan Documents shall survive the execution and delivery of this Agreement
and the other Loan Documents and the performance hereof and thereof, including
without limitation the making or granting of the Loans and the delivery of the
Notes and the other Loan Documents, and shall further survive until all of the
Obligations are paid in full to Agent and Lenders and all of Agent's and
Lenders' obligations to Borrower are terminated; provided, however, that any
Obligations under Sections 2.11 through 2.15 and any obligations which any
Person may have to indemnify or compensate Agent or any Lender with respect to
events occurring prior to such termination shall survive such termination. All
statements and agreements contained in any certificate or other instrument
delivered by any Related Person to Agent or any Lender under any Loan Document
shall be deemed representations and warranties by Borrower or agreements and
covenants of Borrower under this Agreement. The representations, warranties,
and covenants made by the Related Persons in the Loan Documents, and the rights,
powers, and privileges granted to Agent and Lenders in the Loan Documents, are
cumulative, and no Loan Document shall be construed in the context of another to
implicitly diminish, nullify, or otherwise reduce the benefit to Agent or any
Lender of any such representation, warranty, indemnity, covenant, right, power
or privilege. In particular and without limitation, no exception set out in
this Agreement to any representation, warranty or covenant herein contained
shall be deemed to apply implicitly to any similar representation, warranty,
indemnity or covenant contained in any other Loan Document, and each such
similar representation, warranty, indemnity or covenant shall be subject only to
those exceptions which are expressly made applicable to it by the terms of the
various Loan Documents.
Section 10.3. Notices. All notices, requests, consents, demands and
-------
other communications required or permitted under any Loan Document shall be in
writing and, unless otherwise specifically provided in such Loan Document
(provided that Agent may give telephonic notice to Lenders), shall be deemed
sufficiently given or furnished if delivered by personal delivery, by telegram
or telex, by expedited delivery service with proof of delivery, or by registered
or certified United States mail, postage prepaid, at the addresses specified
below for Agent and Borrower and the addresses specified in Schedule 3 hereto
for Lenders (unless changed by similar notice in writing given by the particular
Person whose address is to be changed). Any such notice or communication shall
be deemed to have been given either at the time of personal delivery or, in the
case of delivery service or mail, as of the date of first attempted delivery at
the address and in the manner provided herein, or, in the case of telegram or
telex, upon receipt; provided, however, that no Request for Advance or Rate
Election shall become effective until actually received by Agent. All such
notices to any Related Person may, at the option of Agent in each particular
instance, be either addressed and delivered to such Related Person or addressed
and delivered to Borrower.
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Address of Borrower, 12200 N. Pecos Street, Suite 230
and the Guarantors: Denver, Colorado 80234
Attention: Chief Financial Officer
General Counsel
Address of Agent: P.O. Box 655961
Dallas, Texas 75265
Attention: Energy Banking Group
with a copy to: NationsBanc Energy Group Denver, Inc.
370 Seventeenth Street, Suite 3250
Denver, Colorado 80202
Section 10.4. Parties in Interest. All grants, covenants and agreements
-------------------
contained in the Loan Documents shall bind and inure to the benefit of the
parties thereto and their respective successors and assigns; provided, however,
that no Related Person may assign or transfer any of its rights or delegate any
of its duties or obligations under any Loan Document without the prior written
consent of Majority Lenders.
SECTION 10.5. GOVERNING LAW . THE LOAN DOCUMENTS AND THE RIGHTS, DUTIES
-------------------------------------------------------------------------
AND LIABILITIES OF THE PARTIES UNDER THE LOAN DOCUMENTS AND/OR ARISING FROM OR
- - ------------------------------------------------------------------------------
RELATING IN ANY WAY THERETO SHALL BE DEEMED CONTRACTS AND INSTRUMENTS MADE UNDER
- - --------------------------------------------------------------------------------
THE LAWS OF THE STATE OF TEXAS AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
- - --------------------------------------------------------------------------------
WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND THE LAWS OF THE UNITED
- - ------------------------------------------------------------------------------
STATES OF AMERICA, EXCEPT (A) TO THE EXTENT THAT THE LAW OF ANOTHER JURISDICTION
- - --------------------------------------------------------------------------------
IS EXPRESSLY ELECTED IN A LOAN DOCUMENT, AND (B) WITH RESPECT TO SPECIFIC LIENS,
- - --------------------------------------------------------------------------------
OR THE PERFECTION THEREOF, EVIDENCED BY SECURITY DOCUMENTS COVERING REAL OR
- - ---------------------------------------------------------------------------
PERSONAL PROPERTY WHICH BY THE LAWS APPLICABLE THERETO ARE REQUIRED TO BE
- - -------------------------------------------------------------------------
CONSTRUED UNDER THE LAWS OF ANOTHER JURISDICTION. CHAPTER 15 OF TEXAS REVISED
- - ------------------------------------------------------------------------------
CIVIL STATUTES ARTICLE 5069 (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN
- - --------------------------------------------------------------------------
ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT OR
- - -------------------------------------------------------------------------------
THE NOTES. BORROWER HEREBY IRREVOCABLY SUBMITS ITSELF AND EACH OTHER RELATED
- - -----------------------------------------------------------------------------
PERSON TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE
- - -------------------------------------------------------------------------------
STATE OF TEXAS AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON
- - -------------------------------------------------------------------------------
IT AND THE RELATED PERSONS IN ANY LEGAL PROCEEDING RELATING TO THE LOAN
- - -----------------------------------------------------------------------
DOCUMENTS OR THE OBLIGATIONS BY ANY MEANS ALLOWED UNDER TEXAS OR FEDERAL LAW.
- - -----------------------------------------------------------------------------
Section 10.6. Limitation on Interest. Agent, Lenders, the Related
----------------------
Persons and the other parties to the Loan Documents intend to contract in strict
compliance with applicable usury law from time to time in effect. In
furtherance thereof such persons stipulate and agree that none of the terms and
provisions contained in the Loan Documents shall ever be construed to create a
contract to pay, for the use, forbearance or detention of money, interest in
excess of the maximum amount of interest permitted to be charged by applicable
law from time to time in effect. Neither any Related Person nor any present or
future guarantors, endorsers, or other Persons hereafter becoming liable
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for payment of any Obligation shall ever be liable for unearned interest thereon
or shall ever be required to pay interest thereon in excess of the maximum
amount that may be lawfully charged under applicable law from time to time in
effect, and the provisions of this section shall control over all other
provisions of the Loan Documents which may be in conflict or apparent conflict
herewith. Agent and Lenders expressly disavow any intention to charge or collect
excessive unearned interest or finance charges in the event the maturity of any
Obligation is accelerated. If (a) the maturity of any Obligation is accelerated
for any reason, (b) any Obligation is prepaid and as a result any amounts held
to constitute interest are determined to be in excess of the legal maximum, or
(c) Agent or any Lender or any other holder of any or all of the Obligations
shall otherwise collect moneys which are determined to constitute interest which
would otherwise increase the interest on any or all of the Obligations to an
amount in excess of that permitted to be charged by applicable law then in
effect, then all such sums determined to constitute interest in excess of such
legal limit shall, without penalty, be promptly applied to reduce the then
outstanding principal of the related Obligations or, at Agent's or such Lender's
or such holder's option, promptly returned to Borrower or the other payor
thereof upon such determination. In determining whether or not the interest paid
or payable, under any specific circumstance, exceeds the maximum amount
permitted under applicable law, Agent, Lenders and the Related Persons (and any
other payors thereof) shall to the greatest extent permitted under applicable
law, (i) characterize any non-principal payment as an expense, fee or premium
rather than as interest, (ii) exclude voluntary prepayments and the effects
thereof, and (iii) amortize, prorate, allocate, and spread the total amount of
interest throughout the entire contemplated term of the instruments evidencing
the Obligations in accordance with the amounts outstanding from time to time
thereunder and the maximum legal rate of interest from time to time in effect
under applicable law in order to lawfully charge the maximum amount of interest
permitted under applicable law. In the event applicable law provides for an
interest ceiling under Texas Revised Civil Statutes Annotated article 5069-1.04,
that ceiling shall be the indicated rate ceiling. As used in this section the
term "applicable law" means the laws of the State of Texas or the laws of the
United States of America, whichever laws allow the greater interest, as such
laws now exist or may be changed or amended or come into effect in the future.
Section 10.7. Optional Termination. In its sole and absolute discretion
--------------------
Borrower may at any time that no Obligations are owing elect in a notice
delivered to Agent to terminate this Agreement. Upon receipt by Agent of such a
notice, if no Obligations are then owing, this Agreement and all other Loan
Documents shall thereupon be terminated and the parties thereto released from
all prospective obligations thereunder, provided that any Obligations under
Sections 2.11 through 2.15 and any obligations which any Person may have to
indemnify or compensate Agent or any Lender with respect to events occurring
prior to such termination shall survive such termination. At the request
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and expense of Borrower, Agent shall prepare and execute on behalf of Lenders,
all necessary instruments to reflect and effect such termination of the Loan
Documents and return the Notes to Borrower marked "cancelled". Agent is hereby
authorized to execute all such instruments on behalf of all Lenders, without the
joinder or further action by any Lender.
Section 10.8. Severability. If any term or provision of any Loan
------------
Document shall be determined to be illegal or unenforceable all other terms and
provisions of the Loan Documents shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable law.
Section 10.9. Binding Effect.
--------------
(a) This Agreement shall become effective once the conditions
precedent set forth in Article IV have been met and this Agreement has been
executed by Borrower, Agent and each Lender listed on Schedule 3 hereto by
such date (each such Lender being hereinafter referred to in this Section
10.9 as an "Original Lender"), and thereafter shall be binding upon and
inure to the benefit of Borrower, Lenders and Agent, and to their
respective successors and assigns, except that Borrower shall not have the
right to assign its rights hereunder or any interest herein without the
prior written consent of Lenders.
(b) Assignments. Each Lender shall have the right to sell, assign or
-----------
transfer all or any part of such Lender's Notes, Advances, Loans or
Commitments hereunder to one or more financial institutions, pension plans,
investment funds, or similar purchasers; provided that in connection with
--------
each sale, assignment or transfer, the applicable Lender will consider the
opinion and recommendation of Borrower, which opinion and recommendation
shall in no way be binding upon such Lender, and each such sale,
assignment, or transfer shall be with the consent of Borrower, which
consent will not be unreasonably withheld (provided, however, that
Borrower's consent to assignment shall not be required during the
continuance of a Default or Event of Default), and with notice to Agent,
and the assignee, transferee or recipient shall have, to the extent of such
sale, assignment, or transfer, the same rights, benefits and obligations as
it would if it were an Original Lender and a holder of such Notes,
including, without limitation, the right to vote on decisions requiring
consent or approval of all Lenders or Majority Lenders and the obligation
to fund its Loan Share of any Advances or Loans and payments made under LCs
directly to Agent; provided further that (i) each such sale, assignment, or
-------- -------
transfer shall be in a principal amount not less than $10,000,000, except
for sales in an amount of not less than $5,000,000 between Original
Lenders, (ii) each Lender shall at all times maintain Commitments and Loans
then outstanding in an aggregate amount at least equal to the lesser of
$10,000,000 or 3.5% of the aggregate amount of such Commitments and Loans
then outstanding; provided,
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<PAGE>
however, that each Original Lender shall at all times maintain Commitments
and Loans then outstanding in an aggregate amount equal to the lesser of
$15,000,000 or 5.0% of the aggregate amount of such Commitments and Loans
then outstanding, (iii) each Lender may not offer to sell its Notes and
Loans or interests therein in violation of any securities laws, and (iv) no
such assignments shall become effective until (I) the assigning Lender
delivers to Agent copies of all written assignments and other documents
evidencing any such assignment or related thereto and an Agreement to be
Bound in the form of Exhibit F, providing for the assignee's ratification
and agreement to be bound by the terms of this Agreement and the other Loan
Documents and (II) the assignee agrees in writing to be bound to the terms
and conditions of that certain Third Amended and Restated Intercreditor
Agreement of even date herewith by and among Agent, Lenders, CIGNA Group
and The Prudential Insurance Company of America, as the same may be amended
from time to time. Notwithstanding the provisions of clauses (i) and (ii)
above, a Lender may make a sale, assignment or transfer, or maintain
Commitments and Loans then outstanding, in an amount which is less than
that required above provided that Borrower and such Lender have agreed to
modify such requirements and have delivered to Agent prior written evidence
of their agreement to make such modification. An assignment fee in the
amount of $2,500 for each such assignment will be payable to Agent by
assignor or assignee. Within five (5) Business Days after its receipt of
notice that the Agent has received copies of any assignment and the other
documents relating thereto, Borrower shall execute and deliver to Agent
(for delivery to the relevant assignee) new Notes evidencing such
assignee's assigned Loans and, if the assignor Lender has retained a
portion of its Loan, a replacement Note in the principal amount of the Loan
retained by the assignor Lender (such Notes to be in exchange for, but not
in payment of, the Note held by such Lender).
(c) Participations. Each Lender shall have the right to grant
--------------
participations in all or any part of such Lender's Notes, Advances, Loans
and Commitments hereunder to one or more pension plans, investment funds,
financial institutions or similar purchasers; provided that (i) each Lender
--------
granting a participation shall use its best efforts to give prior notice of
any such participation, but in any event shall promptly notify Agent and
Borrower thereof, (ii) each Lender granting a participation shall retain
the right to vote hereunder, and no participant shall be entitled to vote
hereunder on decisions requiring consent or approval of Majority Lenders
(except as set forth in (iv) below), (iii) each Lender and Borrower shall
be entitled to deal with the Lender granting a participation in the same
manner as if no participation had been granted, and (iv) no participant
shall ever have any right by reason of its participation to exercise any of
the rights of Lenders hereunder, except that any Lender may agree with any
participant that such Lender
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<PAGE>
will not, without the consent of such participant, consent to any amendment
or waiver described in Section 10.1(a) requiring approval of 100% of the
Lenders.
(d) It is understood and agreed that any Lender may provide to
assignees and participants and prospective assignees and participants
financial information and reports and data concerning Borrower's properties
and operations which was provided to such Lender pursuant to this
Agreement.
Section 10.10. Counterparts. This Agreement may be separately executed
------------
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Agreement.
Section 10.11. Restatement. This Agreement amends and restates the
-----------
Existing Agreement in its entirety, effective as of the Closing Date, and all of
the terms and provisions hereof shall supersede the terms and provisions
thereof.
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<PAGE>
IN WITNESS WHEREOF, this Agreement is executed as of the date first written
above.
WESTERN GAS RESOURCES, INC.
By:____________________________________
Name:
Title:
NATIONSBANK OF TEXAS, N.A., as
Agent, Issuing Bank and Lender
By:____________________________________
Name:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:____________________________________
Name:
Title:
BANK OF MONTREAL
By:____________________________________
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON
By:____________________________________
Name:
Title:
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<PAGE>
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By:____________________________________
Name:
Title:
CIBC INC.
By:____________________________________
Name:
Title:
COLORADO NATIONAL BANK
By:____________________________________
Name:
Title:
SOCIETE GENERALE, SOUTHWEST AGENCY
By:____________________________________
Name:
Title:
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<PAGE>
EXHIBIT 10.66
SECOND AMENDMENT TO THIRD RESTATED LOAN AGREEMENT (TERM)
THIS SECOND AMENDMENT TO THIRD RESTATED LOAN AGREEMENT (TERM) (herein
called the "Amendment") made as of the 2nd day of September 1994, by and among
Western Gas Resources, Inc., a Delaware corporation ("Borrower"), NationsBank of
Texas, N.A., a national banking association, as Agent ("Agent"), and NationsBank
of Texas, N.A., Bankers Trust Company, Bank of Montreal and CIBC Inc. (herein,
collectively referred to as "Lenders"),
W I T N E S S E T H:
WHEREAS, Borrower, Agent and Lenders have entered into that certain Third
Restated Loan Agreement (Term) dated as of August 31, 1993, as amended by that
certain First Amendment to Third Restated Loan Agreement (Term) dated as of
December 31, 1993, among Borrower, Agent and Lenders (as amended to the date
hereof, the "Original Agreement") for the purpose and consideration therein
expressed, whereby Lenders made loans to Borrower as therein provided; and
WHEREAS, Borrower, Agent and Lenders desire to amend the Original Agreement
as expressly set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and in the Original Agreement and in
consideration of the loans which may hereafter be made by Lenders to Borrower,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I.
Definitions and References
--------------------------
Section 1.1. Terms Defined in the Original Agreement. Unless the context
---------------------------------------
otherwise requires or unless otherwise expressly defined herein, the terms
defined in the Original Agreement shall have the same meanings whenever used in
this Amendment.
Section 1.2. Other Defined Terms. Unless the context otherwise requires,
-------------------
the following terms when used in this Amendment shall have the meanings assigned
to them in this Section 1.2.
"Loan Agreement" shall mean the Original Agreement as amended hereby.
- 1 -
<PAGE>
ARTICLE II.
Amendments
----------
Section 2.1. Deletion of Definition.
----------------------
The definitions of "Earnings Ratio" and "Sanderson Option Loan" found in
Section 1.1 of the Original Agreement are hereby deleted in their entirety.
Section 2.2. Amendments to Definitions.
-------------------------
(a) The definition of Change in Control found in Section 1.1 of the
Original Agreement is hereby amended in its entirety to read as follows:
"`Change in Control' means any of the following: (i) the occurrence of
-----------------
a Founders Ownership Change; or (ii) Brion G. Wise ceases to be a director
of Borrower for reasons other than death or disability; or (iii) Bill M.
Sanderson ceases to be a director of Borrower for reasons other than death
or disability. For purposes of this definition, a "Founders Ownership
Change" shall be deemed to have occurred at any point in time at which a
Person or Persons acting in concert (such Person or Persons herein referred
to as an "Acquiring Person") obtain legal or beneficial ownership (within
the meaning of Rule 13d-3, promulgated by the Securities and Exchange
Commission and now in effect under the Securities Exchange Act of 1934, as
amended) of a number of Voting Shares greater than or equal to the Voting
Shares owned by the Founders at the time of calculation. For purposes of
calculating the number of Voting Shares of any Founder for purposes of this
definition, the Voting Shares owned legally or beneficially by such Founder
shall be included in the Voting Shares of an Acquiring Person (and excluded
from the Voting Shares of the remaining Founders) if such Founder votes his
Voting Shares in concert with an Acquiring Person against the remaining
Founders in (A) an election for the Board of Directors or (B) the
modification of the Borrower's certificate of incorporation or by-laws."
(b) The definition of Debt to Capitalization Ratio found in Section 1.1 of
the Original Agreement is hereby amended in its entirety to read as follows:
"`Debt to Capitalization Ratio' means, at the time of determination,
----------------------------
the ratio of (a) the Adjusted Funded Debt of Borrower to (b) the sum of (i)
the Adjusted Funded Debt of Borrower plus (ii) Borrower's Shareholders'
----
Equity. As used in this definition, "Shareholders' Equity" means the
remainder of (1) Borrower's Consolidated assets minus (2) the sum of (x)
-----
Borrower's Consolidated liabilities plus (y) all treasury stock of Borrower
and its Subsidiaries plus (z)all intangible assets of Borrower and its
Subsidiaries
- 2 -
<PAGE>
(including without limitation all patents, copyrights, licenses,
franchises, goodwill, trade names and trade secrets); provided that the
term "Shareholder's Equity" shall include the book value of long-term gas
contracts with producers that Borrower assumes in connection with
acquisitions that are reflected on the books of Borrower as assets. As
used in this definition, "Adjusted Funded Debt of Borrower" means, at the
time of determination, the sum of (1) Funded Debt plus (2) Excess Working
Capital Deficit."
(c) The definition of Earnings Ratio found in Section 1.1 of the Original
Agreement is hereby deleted in its entirety.
(d) The definition of Excess Working Capital Deficit is hereby added in
its entirety to Section 1.1 of the Original Agreement immediately after the
definition of Event of Default, as follows:
"`Excess Working Capital Deficit' means (i) if Borrower's Working
------------------------------
Capital is greater than or equal to negative $10,000,000, zero, or (ii) if
Borrower's Working Capital is less than negative $10,000,000, the product
of (A) the amount of such Working Capital plus $10,000,000 multiplied by
---- -------------
(B) negative one (for example, if Working Capital equals negative
$15,000,000, the Excess Working Capital Deficit would equal $5,000,000).
For purposes of this definition, "Working Capital" means the remainder of
Borrower's Consolidated current assets minus Borrower's Consolidated
-----
current liabilities, excluding current maturities of long-term
Indebtedness."
(e) The definition of Mandatory Prepayment Ratio found in Section 1.1 of
the Original Agreement is hereby amended in its entirety to read as follows:
"`Mandatory Prepayment Ratio' means, as of each Prepayment Calculation
--------------------------
Date, the ratio of (a) the sum of (I) the aggregate principal amount of
Lenders' Loans then outstanding plus the LC Balance plus (II) the Funded
Debt of Borrower (other than the Obligations) outstanding on such date
which has a final maturity prior to or concurrent with the final maturity
of the Obligations, plus (III) the Excess Working Capital Deficit on such
date to (b) the remainder of (I) the sum of (i) Borrower's Consolidated net
income for the four complete, consecutive Fiscal Quarters immediately
preceding such date plus (ii) all non-cash expenses incurred by Borrower
during such four Fiscal Quarters (including but not limited to
depreciation, depletion and amortization), as calculated by Borrower, based
on financial statements of Borrower delivered to Lenders minus (II) the
aggregate amount of dividends which Borrower projects will be paid to the
stockholders of the Preferred Stock during the four consecutive Fiscal
Quarters immediately following such date, provided that in calculating the
Mandatory Prepayment Ratio, (i) Borrower shall add or subtract, as the case
may be, any
- 3 -
<PAGE>
non-recurring losses or gains included in the calculation of its
Consolidated net income (for example, Borrower shall subtract any gain from
the sale of any of its assets which is not in the ordinary course of
business from the calculation of its consolidated net income), (ii)
Borrower shall add or subtract, as the case may be, the historical cash
earnings or losses during the last four Fiscal Quarters of any properties
sold or acquired by Borrower during such four Fiscal Quarters, as reflected
in financial statements of the seller of such properties delivered to
Lenders; provided, however, that any pro-forma adjustments made by Borrower
to the actual historical cash earnings of any such properties must be done
in a manner consistent with the rules of the Securities and Exchange
Commission or, if not, approved by Majority Lenders in their sole and
absolute discretion, (iii) Borrower may consider estimates of Borrower's
cash earnings from any Grass-Roots Projects of Borrower during their first
year of operations upon the approval of, and in amounts approved by,
Majority Lenders, which approval or disapproval is within the sole and
absolute discretion of Majority Lenders, and (iv) Preferred Stock shall be
treated as such until actually converted to common stock (i.e. projected
dividends cannot be based on an assumption that Preferred Stock will be
converted to common stock at a future date)."
(f) The definition of Preferred Stock found in Section 1.1 of the Original
Agreement is hereby amended in its entirety to read as follows:
"`Preferred Stock' means, collectively, (i) the 7.25% Cumulative
---------------
Senior Perpetual Convertible Preferred Stock of Borrower and (ii) 2,760,000
shares of Cumulative Convertible Preferred Stock of Borrower."
(g) The definition of Revolver Loan Agreement found in Section 1.1 of the
Original Agreement is hereby amended in its entirety to read as follows:
"`Revolver Loan Agreement' means that certain First Restated Loan
-----------------------
Agreement (Revolver) dated as of September 2, 1994, among Borrower, Agent
and the lenders party thereto."
Section 2.3. Amendment to Mandatory Prepayments Section.
------------------------------------------
Section 2.5(a) of the Original Agreement is hereby amended in its entirety
to read as follows:
"(a) Mandatory Prepayment Ratio. Borrower shall calculate the
--------------------------
Mandatory Prepayment Ratio in accordance with the terms of the definition
of "Mandatory Prepayment Ratio" on each Prepayment Calculation Date and
shall deliver notice of such recalculated Mandatory Prepayment Ratio
(together with a certificate signed by the chief financial officer,
- 4 -
<PAGE>
treasurer or controller of Borrower certifying as to the accuracy of such
calculation) to Agent and Lenders within 45 days after each Prepayment
Calculation Date which falls on the last day of a Fiscal Quarter and on
each other Prepayment Calculation Date. If on any Prepayment Calculation
Date the Mandatory Prepayment Ratio exceeds the applicable Test Amount (as
defined below), Borrower shall, within ten Business Days after Agent on
behalf of Majority Lenders gives written notice of such fact to Borrower,
either (A) make a prepayment of Indebtedness owing by it to Lenders or to
other Senior Creditors of Borrower in an amount which will bring Borrower
into compliance with the Test Amount then in effect (the "Prepayment
Amount") and provide Agent written evidence of such prepayment to other
Senior Creditors or (B) give written notice to Lenders or certain of
Borrower's other Senior Creditors (and a copy of any such notice to Agent)
electing to prepay the Prepayment Amount in no more than six (6) equal
monthly installments beginning no later than ninety (90) days from the date
Borrower was sent such deficiency notice by Agent, and Borrower shall
thereafter make such prepayment in equal consecutive monthly installment on
the first day of each calendar month within such period until and including
the first date of such sixth calendar month (if applicable) and shall
provide Agent with written evidence of each such prepayment; provided that
if the Mandatory Prepayment Ratio exceeds the applicable Test Amount more
than once during any two consecutive Fiscal Quarters (as used in this
section, each an "Additional Deficiency"), Borrower must pay the Prepayment
Amount of each Additional Deficiency in full or begin making monthly
installments with respect to the Prepayment Amount of each Additional
Deficiency no later than thirty (30) days from the date Borrower was sent a
deficiency notice with respect to such Additional Deficiency by Agent. If,
on any Prepayment Calculation Date, Borrower does not recalculate the
Mandatory Prepayment Ratio in accordance with the terms hereof, Agent may
recalculate the Mandatory Prepayment Ratio at such time, and from time to
time thereafter until Borrower does recalculate the Mandatory Prepayment
Ratio in accordance with the terms hereof and deliver the same to Agent,
based upon information available to it at that time, which calculation
shall be binding upon Borrower. As used in this section, the term "Test
Amount" means (i) 5.0 to 1.0 at any time after the date hereof until and
including August 31, 1995, (ii) 4.0 to 1.0 at any time from and including
September 1, 1995 until and including August 31, 1998, and (iii) 3.5 to 1.0
at any time from and including September 1, 1998 and thereafter, and the
term "Senior Creditors" means all creditors of Borrower other than Lenders
which have obligations owing from Borrower which are not subordinated to
the Obligations.
Notwithstanding anything to the contrary contained in the foregoing
provisions of this Section 2.5(a), if Borrower brings the Mandatory
Prepayment Ratio back into compliance
- 5 -
<PAGE>
with the applicable Test Amount as of the last day of a Fiscal Quarter,
then Borrower may cease making all payments then required to be made by
Borrower pursuant to this Section 2.5(a) (as used in this section, each a
"Deficiency Cessation"); provided, however, that no Deficiency Cessation
shall excuse Borrower from full compliance with the terms of this Section
2.7(a) at all times following the date of such Deficiency Cessation."
Section 2.4. Amendment to Representations and Warranties.
-------------------------------------------
(a) Section 4.1(g) of the Original Agreement is hereby amended in its
entirety to read as follows:
"(g) Other Liabilities. No Related Person has any outstanding
-----------------
Indebtedness of any kind (including contingent, indirect and secondary
liabilities and obligations, tax assessments, or unusual forward or long-
term commitments) which is, in the aggregate, material with respect to
Borrower's Consolidated financial condition and not shown in the Initial
Financial Statements or disclosed in the Disclosure Schedule and not
permitted by Section 5.2(b)."
(b) Section 4.1(0) of the Original Agreement is hereby amended in its
entirety to read as follows:
"(o) Environmental and Other Laws. The Related Persons are conducting
----------------------------
their businesses in material compliance with all applicable federal, state
or local laws, including without limitation those pertaining to
environmental matters. To the best knowledge of the Related Persons, none
of the operations of any Related Person is the subject of federal, state or
local investigation evaluating whether any material remedial action is
needed to respond to a release of any hazardous or toxic waste, substance
or constituent into the environment. No Related Person (and to the best
knowledge of Borrower, no other Person) has filed any notice under any
federal, state or local law indicating that any Related Person is
responsible for the release into the environment, or the improper storage,
of any material amount of any hazardous or toxic waste, substance or
constituent, or that any such waste, substance or constituent has been
released, or is improperly stored, upon any property of any Related Person
and no Related Person otherwise has any known material contingent liability
in connection with the release into the environment, or the improper
storage, of any such waste, substance or constituent. The use which the
Related Persons make and intend to make of all of their properties will not
result in the disposal or release of a hazardous substance or hazardous
waste on their properties that, based upon the laws in effect on the date
each such representation and warranty is made by Borrower under the Loan
Documents (excluding any laws, regulations or court rulings thereafter
enacted or made that are applied retroactively), could
- 6 -
<PAGE>
reasonably be expected to result in a material adverse effect on the
financial condition of Borrower. As used in this Section 4.1(o), the term
"material" shall mean an event with respect to which the liability of
Borrower therefor when added to the liability of Borrower for all other
matters that are the subject of this section could reasonably be expected
to exceed $10,000,000."
Section 2.5. Amendment to Covenant Regarding Books, Financial Statements
-----------------------------------------------------------
and Reports.
- - -----------
Section 5.1(b)(iv) of the Original Agreement is hereby amended in its
entirety to read as follows:
"(iv) Promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent by
Borrower to its shareholders and all registration statements, periodic
reports and other statements and schedules filed by any Related Person
with any securities exchange or any governmental authority responsible
for compliance with securities laws."
Section 2.6. Amendment to Covenant Regarding Notice of Material Events.
---------------------------------------------------------
Section 5.1(d) of the Original Agreement is hereby amended in its entirety
to read as follows:
"(d) Notice of Material Events. Borrower will promptly notify Agent
-------------------------
and each Lender (i) of any material adverse change in Borrower's financial
condition or Borrower's Consolidated financial condition, (ii) of the
occurrence of a Default or Event of Default, (iii) of the acceleration of
the maturity of any indebtedness owed by any Related Person or of any
default by any Related Person under any indenture, mortgage, agreement,
contract or other instrument to which any of them is a party or by which
any of them or any of their properties is bound, if such acceleration or
default might have a material adverse effect upon Borrower's Consolidated
financial condition, (iv) of any material adverse claim (or any claim of
$7,500,000 or more) asserted against any Related Person or with respect to
any Related Person's properties pursuant to which an adverse decision could
result in a material adverse effect upon such Related Person's financial
position, business or operations, (v) of the occurrence of any Termination
Event or of any event or condition known to Borrower which might adversely
affect the enforceability of the Loan Documents, (vi) of the filing of any
suit or proceeding against any Related Person in which an adverse decision
could have a material adverse effect upon Borrower's Consolidated financial
condition, business or operations, and (vii) any material adverse change in
- 7 -
<PAGE>
pipeline rates or regulations affecting any Guarantor or their properties
which has a material adverse effect on Borrower or on Borrower and its
Subsidiaries taken as a whole. Upon the occurrence of any of the foregoing
the Related Persons will take all necessary or appropriate steps to remedy
promptly any such material adverse change, Default, Event of Default or
default, to protect against any such adverse claim, to defend any such suit
or proceeding, to remedy any such Termination Event or event affecting
enforceability, and to resolve all controversies on account of any of the
foregoing. Borrower will also notify Agent and Agent's counsel in writing
at least twenty Business Days prior to the date that any Related Person
changes its name or the location of its chief executive office or principal
place of business or the place where it keeps its books and records
concerning the Collateral, furnishing with such notice any necessary
financing statement amendments or requesting Agent and its counsel to
prepare the same. Borrower hereby represents that the address of the chief
executive office and principal place of business of each Related Person is
the address of Borrower set out in Section 10.3 hereof or (if different)
the address of each Related Person set out in the Disclosure Schedule."
Section 2.7. Amendment to Covenant Regarding Compliance with Agreements
----------------------------------------------------------
and Laws.
- - --------
Section 5.1(k) of the Original Agreement is hereby amended in its entirety
to read as follows:
"(k) Compliance with Agreements and Law. Each Related Person will
----------------------------------
perform all obligations which are material to Borrower's Consolidated
financial condition which such Related Person is required to perform under
the terms of each indenture, mortgage, deed of trust, security agreement,
lease, franchise, agreement, contract or other instrument or obligation to
which it is a party or by which it or any of its properties is bound
(subject to their rights to delay payment in the circumstances described in
Section 5.1(g)). Each Related Person will conduct its business and affairs
in material compliance with all laws, regulations, and orders applicable
thereto (including those relating to pollution and other environmental
matters)."
Section 2.8. Amendment to Covenant Regarding Limitation on Dividends and
-----------------------------------------------------------
Distributions.
- - -------------
Section 5.2(a) of the Original Agreement is hereby amended in its entirety
to read as follows:
"(a) Limitation on Dividends and Distributions. Except for payments
-----------------------------------------
by Borrower to its stockholders which are permitted under the following
sentences of this subsection and do not otherwise violate any provisions of
this
- 8 -
<PAGE>
Agreement and except for dividends paid to Borrower by its Subsidiaries or
to MIGC by MGTC, none of Borrower and its Subsidiaries will declare or pay
any dividends on, or make any other distribution in respect of, any class
of its capital stock or any partnership or other interest in it, other than
the distribution of common stock pursuant to the conversion or exchange of
Preferred Stock, nor will any of Borrower and its Subsidiaries directly or
indirectly make any capital contribution to or purchase, redeem, acquire or
retire any shares of the capital stock of or partnership interest in any of
Borrower and its Subsidiaries (whether such interests are now or hereafter
issued, outstanding or created), or cause or permit any reduction or
retirement of the capital stock of or partnership interest in any of
Borrower and its Subsidiaries. Borrower may pay dividends to its
stockholders and make capital stock repurchases so long as (i) no Default
or Event of Default has occurred and is continuing at the time such
dividends are declared and paid and (ii) such repurchases and dividends
declared or paid by Borrower since March 31, 1994, together with all
investments Borrower has made in accordance with the provisions of Section
5.2(f)(v), do not, in the aggregate, exceed the sum of (A) $35,000,000;
plus (B) fifty percent (50.0%) of Borrower's Consolidated cumulative net
----
income earned after March 31, 1994 if such figure is positive (zero
percent, if negative); plus (C) fifty percent (50.0%) of the cumulative net
----
proceeds received by Borrower and its Subsidiaries at any time after March
31, 1994 from the sale of any equity securities issued by Borrower or any
of its Subsidiaries."
Section 2.9. Amendment to Covenant Regarding Limitation on Indebtedness.
----------------------------------------------------------
Section 5.2(b) of the Original Agreement is hereby amended by replacing
clause (ii) as set forth immediately below and by adding the following clause
(ix) in its entirety as follows:
"(ii) unsecured Indebtedness among Borrower and any Guarantor."
"(ix) any asset securitization of Borrower's receivables or any
associated prefunding facility, which is not in excess of $75,000,000
and is not secured by any assets of Borrower other than (A) those
accounts receivables of Borrower which are sold in such securitization
(the "Sold Receivables"), (B) other rights to payment associated with
the Sold Receivables and the proceeds thereof (including deposit
accounts established in connection with the Sold Receivables) and (C)
accounts receivable of Borrower, other than the Sold Receivables,
which are not in excess of ten percent (10%) of the aggregate value of
the Sold Receivables; provided that any such asset
- 9 -
<PAGE>
securitization shall be terminable at the sole discretion of
Borrower."
Section 2.10. Amendment to Covenant Regarding Limitation on Liens.
---------------------------------------------------
Section 5.2(c) of the Original Agreement is hereby amended by adding the
following subsection (vii) in its entirety as follows:
"(vii) liens securing Indebtedness specifically described in
Section 5.2(b)(ix)."
Section 2.11. Amendment to Covenant Regarding Limitation on Mergers,
------------------------------------------------------
Issuances of Securities.
- - -----------------------
The covenant set forth in Section 5.2(d) of the Original Agreement is
hereby amended in its entirety to read as follows:
"(d) Limitation on Mergers, Issuances of Securities. No Related
----------------------------------------------
Person will merge or consolidate with or into any other business entity
except that (i) Borrower may merge or consolidate with or into any other
business entity if such Borrower is the surviving business entity, (ii) any
Subsidiary of Borrower which is a Guarantor may merge or consolidate with
another Subsidiary of Borrower so long as a Guarantor is the surviving
business entity, and (iii) any Subsidiary of Borrower which is not a
Guarantor may merge or consolidate with another Subsidiary of Borrower
which is not a Guarantor; provided that the surviving entity immediately
becomes a Guarantor if required to do so pursuant to the terms of Section
6.3 hereof. Except as expressly provided below in this subsection, no
Related Person will, after the Closing Date, issue partnership interests,
stock, or other securities other than shares of common or preferred stock
issued to Borrower nor will any Subsidiary of Borrower allow any diminution
of Borrower's interest (direct or indirect) therein. Notwithstanding
anything to the contrary herein, Borrower may not issue any shares of its
preferred stock without the express written consent of Lenders (including
without limitation any Preferred Stock or Additional Preferred Stock) after
the Closing Date but may issue shares of its common stock if (i) such issue
is pursuant to the conversion or exchange of previously issued Preferred
Stock or the conversion of the 7.25% Convertible Subordinated Notes into
which the Preferred Stock is exchangeable by Borrower or (ii) immediately
after the issuance thereof no Change in Control has occurred and no event
has occurred nor will any event occur as a result of such issuance of
Borrower's common stock which would require Borrower to redeem for cash the
Preferred Stock or any subordinated notes which may have been issued in
exchange for the Preferred Stock or which gives the holders of the
Preferred
- 10 -
<PAGE>
Stock or any subordinated notes which may have been issued in exchange for
the Preferred Stock the right to demand such redemption."
Section 2.12. Amendment to Covenant Regarding Limitation on Sales of
------------------------------------------------------
Property.
- - --------
Section 5.2(e) of the Original Agreement is hereby amended by replacing
clause (iii) as set forth immediately below and by adding the following clause
(iv) in it entirety as follows:
"(iii) so long as no Default or Event of Default has occurred, assets
or property which are sold for fair consideration in arm's length
transactions to third parties that are not Affiliates of Borrower; provided
that if during any Fiscal Quarter assets and property with an aggregate
gross book value in excess of $20,000,000 are sold or if during the period
--
beginning on the date of execution hereof and continuing until all of the
Obligations are paid in full assets and property with an aggregate gross
book value in excess of $40,000,000 are sold, Lenders shall have the right
to require a recalculation of the Mandatory Prepayment Ratio in accordance
with the provisions of Section 2.7(b) which ration shall become effective
at the time of such sale; provided further, that the sale of the Sold
Receivables permitted in Section 5.2(b)(ix) of an amount not to exceed
$75,000,000 shall not be included in the calculation of this clause (iii);
and
(iv) sales of Sold Receivables permitted in Section 5.2(b)(ix) of an
aggregate amount not in excess of $75,000,000."
Section 2.13. Amendment to Covenant Regarding Limitation on Investments
---------------------------------------------------------
and New Businesses.
- - ------------------
Section 5.2(f) of the Original Agreement is hereby amended in its entirety
to read as follows:
"(f) Limitation on Investments and New Businesses. Except as
--------------------------------------------
expressly provided below in this subsection, no Related Person will (i)
make any expenditure or commitment or incur any obligation or enter into or
engage in any transaction except in the ordinary course of business (which
shall be deemed to include expenditures, commitments, obligations and
transactions permitted by clause (iii), (iv) or (v) of this sentence); (ii)
engage directly or indirectly in any business or conduct any operations
except in connection with or incidental to its present businesses and
operations (which shall be deemed to include expenditures, commitments,
obligations and transactions permitted by clause (iii), (iv) or (v) of this
sentence); (iii) make any acquisitions of or capital contributions to or
other investments in any Persons other than (A) capital
- 11 -
<PAGE>
contributions to and investments in Williston Gas Company and Subsidiaries
already wholly owned by such Related Person and (B) deposits with any
Lender, investments in obligations of any Lender or any of such Lender's
Affiliates, time deposits in other banking institutions which, at the time
such deposit is made, are rated "C" by Thomson BankWatch, Inc. and
investments maturing within one year from the date of acquisition in direct
obligations of or obligations supported by, the full faith and credit of,
the United States of America, (iv) make any significant acquisitions or
investments in any properties other than gas processing, transmission,
gathering and storage facilities and domestic oil and gas properties and
(v) make other investments unless (1) no Default or Event of Default has
occurred and is continuing at the time such investment is made and (2) such
investments, together with all repurchases and dividends declared or paid
by Borrower since March 31, 1994 in accordance with the provisions of
Section 5.2(a), do not, in the aggregate, exceed the sum of (I)
$35,000,000; plus (II) fifty percent (50.0%) of Borrower's Consolidated
----
cumulative net income earned after March 31, 1994 if such figure is
positive (zero percent, if negative); plus (III) fifty percent (50.0%) of
----
the cumulative net proceeds received by Borrower and its Subsidiaries at
any time after March 31, 1994 from the sale of any equity securities issued
by Borrower or any of its Subsidiaries. Notwithstanding the foregoing, if
any Related Person makes an acquisition of any Person in accordance with
the provisions of this Section 5.2(f), and if the historical cash earnings
of the Person so acquired would have to be included in the calculation of
the Mandatory Prepayment Ratio most recently delivered to Agent and Lenders
hereunder to support the Indebtedness, if any, incurred by such Related
Person in making the acquisition, Borrower shall promptly notify Agent and
Lenders of such fact and Lenders shall have the right to require a
recalculation of the Mandatory Prepayment Ratio in accordance with the
provisions of Section 2.5(a) which ratio shall become effective at the time
of such acquisition."
Section 2.14. Amendment to Covenant Regarding Limitation on Credit
----------------------------------------------------
Extensions.
- - ----------
Section 5.2(g) of the Original Agreement is hereby amended in its entirety
to read as follows:
"(g) Limitation on Credit Extensions. No Related Person will extend
-------------------------------
credit, make advances or make loans other than (i) normal and prudent
extensions of credit to customers buying goods and services in the ordinary
course of business, which extensions shall not be for longer periods than
those extended by similar businesses operated in a normal and prudent
manner, (ii) loans to Borrower or to any Guarantor made in the ordinary
course of business and (iii) loans made by Borrower to its employees
pursuant to
- 12 -
<PAGE>
the Stock Option Agreements; provided that the aggregate amount of all such
loans so made shall not exceed $10,000,000."
Section 2.15. Amendment to Covenant Regarding Tangible Net Worth.
--------------------------------------------------
Section 5.2(j) of the Original Agreement is hereby amended in its entirety
to read as follows:
"(j) Tangible Net Worth. Borrower's Consolidated Tangible Net Worth
------------------
will never be less than the Tangible Net Worth Minimum (as defined below in
this subsection). As used in this subsection, the term "Consolidated
Tangible Net Worth" means the remainder of (A) all Consolidated assets of
such Borrower, other than intangible assets (including without limitation
as intangible assets such assets as patents, copyrights, licenses,
franchises, goodwill, trade names, trade secrets and leases other than oil,
gas or mineral leases or leases required to be capitalized under Generally
Accepted Accounting Principles, but treating as tangible assets with
respect to Borrower all gas purchase and sale contracts acquired by
Borrower), minus (B) Borrower's Consolidated Debt. As used in this
-----
subsection, the term "Consolidated Debt" means all Consolidated liabilities
and similar balance sheet items of Borrower, together with all other
contingent and indirect liabilities ("contingent and indirect liabilities"
shall include only those liabilities that are required to be included in
amounts accrued in accordance with Generally Accepted Accounting
Principles) of Borrower or any of its Subsidiaries which are of a character
required to be included in Borrower's audited Consolidated annual financial
statements required hereunder (if any) (including the notes thereto). As
used in this subsection the term "Tangible Net Worth Minimum" means the sum
of (i) $400,000,000; plus (ii) fifty percent (50.0%) of Borrower's
----
Consolidated cumulative net income earned after March 31, 1994, if such
figure is positive (zero percent, if negative); plus (iii) seventy-five
----
percent (75.0%) of the cumulative net proceeds received by Borrower at any
time after March 31, 1994 from the sale of any equity securities issued by
Borrower or any of its Subsidiaries."
Section 2.16. Amendment to Covenant Regarding Debt to Capitalization
------------------------------------------------------
Ratio.
Section 5.2(m) of the Original Agreement is hereby amended in its entirety
to read as follows:
"(m) Debt to Capitalization Ratio. Borrower's Debt to Capitalization
----------------------------
Ratio will never be greater than (i) 0.60 to
- 13 -
<PAGE>
1.0 at any time until and including October 31, 1995 and (ii) 0.55 to 1.0
at any time thereafter."
Section 2.17. Deletion of Covenant Regarding Earnings Ratio.
---------------------------------------------
Section 5.2(n) of the Original Agreement is hereby deleted in its entirety
and Sections 5.2(o) and (p) of the Original Agreement are hereby redesignated as
Sections 5.2(n) and (o), respectively.
Section 2.18. Amendment to Covenant Regarding Current Ratio.
---------------------------------------------
Section 5.2(n) of the Original Agreement, redesignated as such in Section
2.9 of this Amendment, is hereby amended in its entirety to read as follows:
"(n) Current Ratio. The ratio of Borrower's Consolidated current
-------------
assets to Borrower's Consolidated current liabilities shall not be less
than 1.0 to 1.0 at the end of any calendar month. For purposes of this
subsection, Borrower's Consolidated current liabilities will be calculated
without including any payments of principal of any Indebtedness of Borrower
which are required to be repaid within one year from the time of
calculation and Borrower's Consolidated current assets will include any
unused portion of the Commitment which is then available for borrowing."
Section 2.19. Addition of Covenant Regarding EBITDA to Interest Ratio.
-------------------------------------------------------
The following Section 5.2(p) is hereby added to the Original Agreement in
its entirety as follows:
"(p) EBITDA/Interest Ratio. As of the end of each Fiscal Quarter,
---------------------
the ratio of Borrower's Consolidated EBITDA for the four immediately
preceding consecutive Fiscal Quarters to Borrower's Consolidated Interest
Charges for such period shall never be less than (i) 3.25 to 1.0 at any
time after the date hereof until and including October 31, 1995, and (ii)
3.75 to 1.0 at any time from and including November 1, 1995 and thereafter.
For purposes of this subsection, the term "Borrower's Consolidated EBITDA"
means the sum of (I) Borrower's Consolidated earnings (or loss), after
deduction of all expenses and other charges other than interest and income
taxes plus (II) amounts deducted in the computation of such Consolidated
earnings (or loss) for depreciation, amortization and other non-cash items.
For purposes of this subsection the term "Borrower's Consolidated Interest
Charges" means the aggregate amount of
- 14 -
<PAGE>
interest treated as an expense or capitalized on Borrower's Consolidated
financial statements."
Section 2.20. Amendment to Default Provisions.
-------------------------------
Section 7.1(l) of the Original Agreement is hereby deleted in its entirety
and Section 7.1(m) of the Original Agreement is hereby redesignated as Section
7.1(l). The following Section 7.1(m) is hereby added in its entirety as
follows:
"(m) Any Related Person breaches or defaults in the performance of
any agreement or instrument creating or evidencing any asset securitization
or any associated prefunding facility referred to in Section 5.2(b)(ix),
and any such breach or default continues beyond any applicable period of
grace provided therefor, or any early or accelerated amortization of
Indebtedness or other obligations or rights commences to occur under such
facility without a replacement facility permitted by such Section being
effective to provide for replacement funding therefor."
ARTICLE III.
Conditions of Effectiveness
---------------------------
Section 3.1. Effective Date. This Amendment shall become effective as of
--------------
the date first above written when, and only when, (i) Agent shall have received,
at Agent's office, a counterpart of this Amendment executed and delivered by
Borrower and each Majority Lenders and (ii) Agent shall have additionally
received each of the following, each document (unless otherwise indicated) being
dated the date of receipt thereof by Agent, duly authorized, executed and
delivered, and in form and substance satisfactory to Agent:
(a) Supporting Documents. Agent shall have received (i) a certificate
--------------------
of the Secretary of Borrower dated the date of this Amendment certifying
that: (A) the resolutions adopted by the Board of Directors of Borrower
authorizing the execution of this Amendment, with a copy of such
resolutions attached as Exhibit A, were duly authorized and continue in
full force and effect, (B) the incumbency and authorization of the officers
of Borrower authorized to sign Loan Documents, with signature specimens of
such officers, (C) attached copies of the certified charter documents of
Borrower (including by-laws and certificates of qualification to do
business), (D) no Default that has not been expressly waived by Lenders
exists on and as of the date hereof and (E) all of the representations and
warranties set forth in Article IV hereof and Article V of the Original
Agreement are true and correct at and as of their respective times of
effectiveness and (ii) such supporting documents as Agent may reasonably
request.
- 15 -
<PAGE>
(b) Revolver Loan Agreement Documents. Agent shall have received all
---------------------------------
documents and other items required in Section 4.1 of the Revolver Loan
Agreement.
ARTICLE IV.
Representations and Warranties
------------------------------
Section 4.1. Representations and Warranties of Borrower. In order to
------------------------------------------
induce each Lender to enter into this Amendment, Borrower represents and
warrants to each Lender that:
(a) The representations and warranties contained in each subsection of
Section 4.1 of the Original Agreement are true and correct at and as of the
time of the effectiveness hereof.
(b) Borrower is duly authorized to execute and deliver this Amendment
and is and will continue to be duly authorized to borrow monies and to
perform its obligations under the Loan Agreement. Borrower has duly taken
all corporate action necessary to authorize the execution and delivery of
this Amendment and to authorize the performance of the obligations of
Borrower hereunder and thereunder.
(c) The execution and delivery by Borrower of this Amendment, the
performance by Borrower of its obligations hereunder and the consummation
of the transactions contemplated hereby do not and will not conflict with
any provision of law, statute, rule or regulation or of the articles of
incorporation and bylaws of Borrower, or of any material agreement,
judgment, license, order or permit applicable to or binding upon Borrower,
or result in the creation of any lien, charge or encumbrance upon any
assets or properties of Borrower. Except for those which have been
obtained, no consent, approval, authorization or order of any court or
governmental authority or third party is required in connection with the
execution and delivery by Borrower of this Amendment or to consummate the
transactions contemplated hereby.
(d) When duly executed and delivered, this Amendment and the Loan
Agreement will be a legal and binding obligation of Borrower, enforceable
in accordance with its terms, except as limited by bankruptcy, insolvency
or similar laws of general application relating to the enforcement of
creditors' rights and by equitable principles of general application.
(e) The audited annual Consolidated financial statements of Borrower
dated as of December 31, 1993 and the unaudited quarterly Consolidated
financial statements of Borrower dated as of June 30, 1994 fairly present
Borrower's Consolidated financial position at such dates and the
Consolidated results of Borrower's operations and changes in
- 16 -
<PAGE>
Borrower's Consolidated cash flow for the respective periods thereof.
Copies of such financial statements have heretofore been delivered to each
Lender. Since June 30, 1994, no material adverse change has occurred in
the financial condition or businesses or in the Consolidated financial
condition or businesses of Borrower.
ARTICLE V.
Miscellaneous
-------------
Section 5.1. Ratification of Agreements. The Original Agreement as hereby
--------------------------
amended and each other Loan Document affected hereby are ratified and confirmed
in all respects. Any reference to the Loan Agreement in any Loan Document shall
be deemed to be a reference to the Original Agreement as hereby amended. The
execution, delivery and effectiveness of this Amendment shall not, except as
expressly provided herein, operate as a waiver of any right, power or remedy of
Agent or Lenders under the Loan Agreement or any other Loan Document nor
constitute a waiver of any provision of the Loan Agreement or any other Loan
Document.
Section 5.2. Survival of Agreements. All representations, warranties,
----------------------
covenants and agreements of Borrower herein shall survive the execution and
delivery of this Amendment and the performance hereof, including without
limitation the making or granting of the Loans, and shall further survive until
all of the Obligations are paid in full. All statements and agreements
contained in any certificate or instrument delivered by Borrower or any Related
Person hereunder or under the Loan Agreement to any Lender shall be deemed to
constitute representations and warranties by, and/or agreements and covenants
of, Borrower under this Amendment and under the Loan Agreement.
Section 5.3. Loan Documents. This Amendment is a Loan Document, and all
--------------
provisions in the Loan Agreement pertaining to Loan Documents apply hereto.
Section 5.4. Governing Law. This Amendment shall be governed by and
-------------
construed in accordance the laws of the State of Texas and any applicable laws
of the United States of America in all respects, including construction,
validity and performance.
Section 5.5. Counterparts. This Amendment may be separately executed in
------------
counterparts and by the different parties hereto in separate counterparts, each
of which when so executed shall be deemed to constitute one and the same
Amendment.
- 17 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first written above by their duly authorized officers.
WESTERN GAS RESOURCES, INC.
By:__________________________
Name:
Title:
NATIONSBANK OF TEXAS, N.A.
By:___________________________
Name:
Title:
BANKERS TRUST COMPANY
By:__________________________
Name:
Title:
BANK OF MONTREAL
By:__________________________
Name:
Title:
CIBC INC.
By:__________________________
Name:
Title:
- 18 -
<PAGE>
CONFIRMATION, ACKNOWLEDGEMENT AND CONSENT OF GUARANTORS
Each of the undersigned hereby acknowledge and consent to the foregoing
Amendment, respectively confirm each Restated Guaranty dated as of August 31,
1993 executed by each of the undersigned in favor of Agent and the Lenders
pursuant to the Original Agreement and agree that each of the undersigned's
obligations and covenants with respect to each such Restated Guaranty shall
remain in full force and effect after the execution of the foregoing Amendment.
John C. Walter, Vice President-General Counsel and Secretary of Western Gas
Resources Oklahoma, Inc., Western Gas Resources Texas, Inc., Western Gas
Resources Storage, Inc., Mountain Gas Resources, Inc., MGTC, Inc. and MIGC,
Inc., is executing this Confirmation, Acknowledgment and Consent of Guarantors
in his capacity of officer of each such corporation.
Dated as of the 2nd day of September, 1994.
WESTERN GAS RESOURCES OKLAHOMA, INC.
WESTERN GAS RESOURCES TEXAS, INC.
WESTERN GAS RESOURCES STORAGE, INC.
MOUNTAIN GAS RESOURCES, INC.
MGTC, INC.
MIGC, INC.
By:_______________________________
John C. Walter, Vice-President,
General Counsel and Secretary
- 19 -
<PAGE>
EXHIBIT 10.67
[Execution Copy]
LETTER AMENDMENT NO. 2
to
AMENDED AND RESTATED MASTER SHELF AGREEMENT
August 31, 1994
The Prudential Insurance Company
of America
c/o Prudential Capital Group
1201 Elm Street, Suite 4900
Dallas, Texas 75270
Ladies and Gentlemen:
We refer to the Amended and Restated Master Shelf Agreement dated as
of December 19, 1991 among the undersigned and you (such agreement, as amended,
being referred to as the "AGREEMENT"). Unless otherwise defined herein, the
terms defined in the Agreement shall be used herein as therein defined.
The Company has requested that you amend certain covenants in the
Agreement. You have indicated your willingness to so agree. Accordingly, it is
hereby agreed by you and us as follows:
The Agreement is, effective the date first above written, hereby
amended as follows:
1. PARAGRAPH 6A(2). CURRENT RATIO. Paragraph 6A(2) is amended by
amending the first sentence thereof in its entirety to read as follows:
"6A(2). CURRENT RATIO. The ratio of Consolidated Current Assets to
Consolidated Current Liabilities to be less than 1.0 to 1.0 at any time.
For the purpose of determining compliance with this paragraph 6A(2), (x)
'Consolidated Current Liabilities' will be calculated without including any
payments of principal of any Debt of the Company which are required to be
repaid within one year from the time of calculation and (y) 'Consolidated
Current Assets' shall include the amount of funds that are available to be
borrowed under the NCNB Agreement, where 'available' means, as of the date
of determination, the banks parties to the NCNB Agreement are committed to
advance such funds, no default exists under the NCNB Agreement and all
conditions to such banks advancing such funds would be satisfied; provided
--------
that the portion of such funds that are required to be included in
'Consolidated Current Assets' for the Company to satisfy the provisions of
the first sentence of this paragraph 6A(2)
<PAGE>
shall be considered 'Debt' for the purposes of determining the Company's
compliance with paragraph 6A(3) hereof. Prudential acknowledges that the
Company currently calculates the current ratio only as of the end of each
calendar month."
2. PARAGRAPH 6A(3). DEBT MAINTENANCE. Paragraph 6A(3) is amended
in its entirety to read as follows:
"6A(3). DEBT MAINTENANCE. Adjusted Consolidated Debt to exceed (i)
from August 31, 1994 through October 31, 1995, 60% of Consolidated Net
Tangible Assets and (ii) at any time after October 31, 1995, 55% of
Consolidated Net Tangible Assets; and"
For purposes of determining compliance with this paragraph 6A(3), Adjusted
Consolidated Debt shall not include Debt secured by Liens described in paragraph
6C(1)(i), (ii), (iii) or (viii) unless such obligations would be considered Debt
under clause (i) of the definition of Debt and, in any event, Adjusted
Consolidated Debt shall include all indebtedness included in determining
compliance with the similar covenant in the NCNB Agreement.
3. PARAGRAPH 6A(4). FIXED CHARGE COVERAGE RATIO. Paragraph 6A(4)
is amended in its entirety to read as follows:
"6A(4). FIXED CHARGE COVERAGE RATIO. For each fiscal quarter of the
Company, the ratio of (i) the sum of (a) the consolidated earnings of the
Company for the four immediately preceding fiscal quarters of the Company
plus (b) the Company's consolidated interest expense, provision for income
----
taxes, depreciation and amortization for the four immediately preceding
fiscal quarters of the Company that were taken into account in determining
such consolidated earnings to (ii) the Company's consolidated accrued
interest expense for the four immediately preceding fiscal quarters to be
less than (x) 3.25 to 1.00 for the period commencing August 31, 1994 and
ending September 30, 1994 and (y) 3.75 to 1.00 at any time thereafter."
4. PARAGRAPH 6C(1). LIENS. Paragraph 6C(1) is amended in its
entirety to read as follows:
"6C(1). LIENS. Create, assume or suffer to exist any Lien upon any
of its properties or assets, whether now owned or hereafter acquired
(whether or not provision is made for the equal and ratable securing of the
Notes in accordance with the provisions of Paragraph 5C), except
------
(i) Liens for taxes not yet due or which are being actively
contested in good faith by appropriate proceedings,
(ii) other statutory Liens incidental to the conduct of its
business or the ownership of its property and assets (including
landlord liens) that are not incurred in connection with the borrowing
of money or the obtaining of advances or credit or guaranteeing the
obligations of a Person, and which do not in the aggregate materially
detract from the value of its property or assets or materially impair
the use thereof in the operation of its business,
-2-
<PAGE>
(iii) Liens on property or assets of a Subsidiary to secure
obligations of such Subsidiary to the Company or a Wholly Owned
Subsidiary,
(iv) existing Liens on property of the Company described in
Schedule 6C(2) attached hereto and securing Debt permitted by clause
(iii) of Paragraph 6C(2),
(v) in the case of transactions that occur after the date
hereof, Liens existing on any real property of any corporation at the
time it becomes a Subsidiary, or existing prior to the time of
acquisition upon any property acquired by the Company or any
Subsidiary through purchase, merger or consolidation or otherwise,
whether or not assumed by the Company or such Subsidiary, or placed on
property at the time of acquisition by the Company or any Subsidiary
to secure all or a portion of (or to secure Debt incurred to pay all
or a portion of) the purchase price thereof, provided that (a) all of
--------
such property is not or shall not thereby become encumbered in any
amount in excess of the lesser of the cost thereof or Fair Market
Value thereof and (b) any such Lien shall not encumber any other
property of the Company or such Subsidiary,
(vi) Liens on deposit and other bank accounts of the Company
created by the right of a lender party to the NCNB Agreement or the
Inventory Loan Agreement to offset obligations of the Company owing
under such agreements, respectively, against such accounts if, and
only if, there is no agreement between any such lender and the Company
which requires the Company to maintain any deposit or other funds in
any account with such lender other than as provided in (viii) below,
(vii) Liens on deposits of the Company under the NCNB Agreement
to secure the face amount of outstanding letters of credit issued
pursuant to the NCNB Agreement,
(viii) Liens securing sales or transfer of accounts receivable
permitted by paragraph 6C(9), and
(ix) other Liens on the property of the Company,
provided that the aggregate amount of Debt secured by Liens permitted
--------
by clauses (iv), (v) and (ix), together with the amount of undrawn
letters of credit subject to the obligation to provide deposits
referred to in clause (viii), whether or not such deposits have been
provided, does not exceed at any time an amount in excess of 5% of
Consolidated Tangible Net Worth.
5. PARAGRAPH 6C(5). MERGER AND SALE OF ASSETS. Paragraph 6C(5) is
amended by (I) deleting the word "and" after clause (vii) thereof and (II)
inserting after clause (viii) the word "and" and the following new clause (ix):
-3-
<PAGE>
"(ix) sales of accounts receivables pursuant to paragraph 6C(9)
hereof in an aggregate amount not to exceed $75,000,000."
6. PARAGRAPH 6C(7). LIMITATION ON CREDIT EXTENSIONS. Paragraph
6C(7) is amended in its entirety to read as follows:
"6C(7). LIMITATION ON CREDIT EXTENSIONS. Extend credit, make
advances or make loans other than (i) normal and prudent extensions of
credit in the ordinary course of business, which extensions shall not be
for longer periods than those extended by similar businesses operated in a
normal and prudent manner, (ii) loans from Wholly Owned Subsidiaries to the
Company or loans from the Wholly Owned Subsidiaries or the Company to any
Subsidiary, in each case made in the ordinary course of business, and (iii)
loans made by the Company to its employees pursuant to the Stock Option
Agreements; provided that the aggregate amount of all such loans permitted
--------
by this clause (iii) outstanding at any time shall not exceed $10,000,000."
7. PARAGRAPH 6C(9). SALE OR DISCOUNT OF RECEIVABLES. Paragraph
6C(9) is amended in its entirety to read as follows:
"6C(9). SALE OR DISCOUNT OF RECEIVABLES. Sell with recourse, or
discount (other than to the extent of finance and interest charges included
therein) or otherwise sell for less than face value thereof, any of its
notes or accounts receivable except notes or accounts receivable the
collection of which is doubtful in accordance with general accepted
accounting principles; provided, however, that the Company shall be
--------- -------
permitted to sell, transfer of otherwise dispose of, at not less than face
value, on a revolving basis, an undivided interest in a pool of the
Company's accounts receivable to a special-purpose entity whose commercial
paper is rated at least A-1+/P-1 at the time of such sale, in an amount not
to exceed, at any time, $75,000,000, plus an amount not to exceed 10% of
the amount sold or transferred for the purpose of providing the purchaser
with over-collateralization; and provided, further, that the agreement
-------- -------
pursuant to which such transfer is made shall be terminable at the sole
discretion of the Company. In connection with such sales, the Company may
grant the purchaser a security interest in such receivables (including
receivables transferred to provide the purchaser with over-
collateralization) and the proceeds therefrom."
8. PARAGRAPH 7A. ACCELERATION. Paragraph 7A is amended by adding
the word "or" after the end of enumerated Event of Default (xv) and inserting
thereafter a new Event of Default (xvi) to read as follows:
"(xvi) the Company or any Affiliate breaches or defaults in the
performance of any agreement or instrument creating or evidencing any asset
sale referred to in the first proviso of paragraph 6C(9) or breaches or
defaults in the performance of any prefunding facility associated
therewith, and any such breach or default continues beyond any applicable
period of grace provided therefor, or any early or accelerated amortization
of any obligations or rights commences to occur under any such facility
without a replacement facility (on terms consistent with those set forth in
paragraph 6C(9)) being effective to provide for replacement funding
therefor."
-4-
<PAGE>
9. PARAGRAPH 7A. EVENTS OF DEFAULT. Paragraph 7A is further amended
by amending clause (x) of the proviso following subclause (d) of the final
- -
paragraph of paragraph 7A in its entirety to read as follows:
"(x) the event whose occurrence permits such declaration is an Event
-
of Default specified in any of clauses (i) to (vi), inclusive, or (xvi) of
this paragraph 7A,"
10. PARAGRAPH 10B. OTHER TERMS. Paragraph 10B is amended by (I)
amending the definition of "Debt" as follows and (II) inserting the following
new definitions in alphabetical order:
"'DEBT' shall mean, without duplication:
(i) any obligation that, under generally accepted accounting
principles, is shown on the balance sheet as a liability (including,
without limitation, any obligation for borrowed money, any notes
payable and drafts accepted representing extensions of credit, whether
or not representing obligations for borrowed money, and Capitalized
Lease Obligations but excluding accounts payable and accrued expenses
in the ordinary course of business, reserves for deferred income taxes
and other reserves to the extent that such reserves do not constitute
an obligation),
(ii) any obligation secured by a Lien on, or payable out of the
proceeds of production from, property, whether or not the obligation
secured thereby shall have been assumed by the owner of such property,
(iii) liabilities in respect of unfunded vested benefits under
Plans and liabilities in respect of postretirement benefits that,
under generally accepted accounting principles in effect at the time
in question, are shown on the balance sheet as a liability, and
(iv) any obligation described in paragraph 6C(10) (Guaranties)
for which a maximum amount is quantifiable.
'ADJUSTED CONSOLIDATED DEBT' shall mean Consolidated Debt plus Excess
----
Working Capital Deficit.
'EXCESS WORKING CAPITAL DEFICIT' shall mean (i) if the Company's
Working Capital is greater than or equal to negative $10,000,000, zero, or
(ii) if the Company's Working Capital is less than negative $10,000,000,
the product of (A) the amount of such Working Capital plus $10,000,000
----
multiplied by (B) negative one (for example, if Working Capital equals
-------------
negative $15,000,000, the Excess Working Capital Deficit would equal
$5,000,000). For purposes of this definition, 'Working Capital' means the
remainder of the Company's Consolidated Current Assets minus the Company's
-----
Consolidated Current Liabilities, excluding current maturities of long-term
Debt."
-5-
<PAGE>
On and after the effective date of this letter amendment, each
reference in the Agreement to "this Agreement", "hereunder", "hereof", or words
of like import referring to the Agreement, and each reference in the Notes to
"the Agreement", "thereunder", "thereof", or words of like import referring to
the Agreement, shall mean the Agreement as amended by this letter amendment.
The Agreement, as amended by this letter amendment, is and shall continue to be
in full force and effect and is hereby in all respects ratified and confirmed.
The execution, delivery and effectiveness of this letter amendment shall not,
except as expressly provided herein, operate as a waiver of any right, power or
remedy under the Agreement nor constitute a waiver of any provision of the
Agreement.
This letter amendment may be executed in any number of counterparts
and by any combination of the parties hereto in separate counterparts, each of
which counterparts shall be an original and all of which taken together shall
constitute one and the same letter amendment.
If you agree to the terms and provisions hereof, please evidence your
agreement by executing and returning at least a counterpart of this letter
amendment to the Company at its address at 12200 N. Pecos Street, Suite 230,
Denver, CO 80234, Attention of John C. Walter, Vice President-General Counsel.
This letter amendment shall become effective as of the date first above written
when and if (i) counterparts of this letter amendment shall have been executed
by us and you, (ii) the consent attached hereto shall have been executed by each
Guarantor, (iii) the NCNB Agreement shall been amended in a manner similar to
this letter amendment and (iv) the Note Purchase Agreements between the Company
and the purchasers relating to the Company's 7.65% Senior Notes due April 30,
2003 shall have been amended in a manner similar to this letter amendment to the
extent applicable.
Very truly yours,
WESTERN GAS RESOURCES, INC.
By:____________________________
Title:
Agreed as of the date
first above written:
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By:_____________________________
Vice President
-6-
<PAGE>
CONSENT TO AMENDMENT
Each of the undersigned is a Guarantor ("GUARANTOR" and, collectively,
"GUARANTORS") under separate guaranties (each being a "GUARANTY") dated as of
October 27, 1992 or August 31, 1993 in favor of The Prudential Insurance Company
of America ("PRUDENTIAL"), for itself and on behalf of affiliates of Prudential
with respect to the obligations of Western Gas Resources, Inc. (the "COMPANY")
under a Master Shelf Agreement dated as of December 19, 1991, as amended (the
"ORIGINAL AGREEMENT"). The terms used herein have the meaning specified in each
Guaranty unless otherwise defined herein. Prudential and the Company entered
into an Amended and Restated Master Shelf Agreement dated as of December 19,
1991 (as subsequently amended, the "AMENDED AGREEMENT") which amended the
Original Agreement. Prudential and the Company are entering into a Letter
Amendment No. 2 to Amended and Restated Master Shelf Agreement dated as of
August 31, 1994 to which this consent is attached (the "LETTER AMENDMENT").
Each of the undersigned hereby consents to the Letter Amendment and each hereby
confirms and agrees that its Guaranty is, and shall continue to be, in full
force and effect and is hereby confirmed and ratified in all respects except
that, upon the effectiveness of, and on and after the date of this consent, all
references in the Guaranty of the undersigned to the "Shelf Agreement",
"thereunder", "thereof" or words of like import referring to the Shelf Agreement
shall mean the Amended Agreement as amended by the Letter Amendment.
Dated as of August 31, 1994.
MGTC, INC. WESTERN GAS RESOURCES STORAGE, INC.
By:_______________________ By:_______________________
Title: Title:
MOUNTAIN GAS RESOURCES, INC. WESTERN GAS RESOURCES - TEXAS, INC.
By:_______________________ By:_______________________
Title: Title:
WESTERN GAS RESOURCES MIGC, INC.
OKLAHOMA, INC.
By:_______________________
By:_______________________ Title:
Title:
-7-
<PAGE>
EXHIBIT 10.68
AMENDMENT NO. 2 TO NOTE PURCHASE AGREEMENTS
THIS AMENDMENT NO. 2 TO NOTE PURCHASE AGREEMENTS (this "Amendment"), by and
among Western Gas Resources, Inc., a Delaware corporation, each of the
Guarantors listed on Attachment 1 attached hereto and incorporated herein by
reference and each of the Purchasers listed on Attachment 1 attached hereto and
incorporated herein by reference, dated as of August 31, 1994.
W I T N E S S E T H:
-------------------
WHEREAS, prior hereto, the Company and the Guarantors have entered into
those certain Note Purchase Agreements dated as of April 30, 1993, as amended by
that certain Amendment No. 1 dated August 31, 1993, with each of the Purchasers
(as amended, the "Note Purchase Agreements"), pursuant to which the Company sold
its 7.65% Senior Notes due April 30, 2003 to the Purchasers;
WHEREAS, the Company and the Guarantors have requested that certain
sections of the Note Purchase Agreements be amended; and
WHEREAS, the Required Holders (as that term is defined in the Note Purchase
Agreements) have agreed to amend the Note Purchase Agreements, as set forth
herein.
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein, the parties hereto agree as follows:
Section 1. Defined Terms. Unless otherwise defined herein, the terms
-------------
used herein shall be as defined in the Note Purchase Agreements.
Section 2. Amendment Relating to Securitization of Receivables. (a)
---------------------------------------------------
Section 7.4(b) of each Note Purchase Agreement is hereby deleted in its entirety
and replaced, in lieu thereof, with the following:
"(B) SALE OF ASSETS. The Company will not at any time, and will not at
any time permit any Restricted Subsidiary to, sell, lease, transfer or otherwise
dispose of assets, except (1) sales of inventory and sales or other dispositions
of obsolete or worn-out equipment or delinquent receivables, in each case in the
ordinary course of business, (2) sales, leases, transfers or other dispositions
to the Company or a Wholly-Owned Restricted Subsidiary, (3) sales permitted by
Section 7.4(a) hereof, (4)
<PAGE>
in any year, sales or other dispositions of Surplus Equipment having an
aggregate book value of less than Two Million Dollars ($2,000,000.00), (5) the
Panhandle Transaction and (6) sales of receivables pursuant to Section 7.15
hereof (all sales, leases, transfers and other dispositions referred to in the
foregoing clauses (1) through (6) are hereinafter referred to as "Excluded
Transfers"); provided that the foregoing restriction shall not apply to the sale
of an asset for a cash consideration to any Person other than an Affiliate if
all of the following conditions are met:
(i) the book value of such asset and the aggregate book value of each
other asset sold (other than in Excluded Transfers) during the period of
three hundred sixty-five (365) consecutive days immediately preceding the
consummation of such sale does not exceed fifteen percent (15%) of
Consolidated Net Tangible Capitalization measured as of the end of the
fiscal quarter of the Company immediately preceding such sale;
(ii) in the good faith opinion of the Board of Directors (or
management of the Company if the Board of Directors has authorized
management to make such determination, either generally or in the specific
instance), the sale is for Fair Market Value and is in the best interests
of the Company; and
(iii) immediately after the consummation of such sale, and after
giving effect thereto, no Default or Event of Default exists or would exist
under any provision of this Agreement.
For the purpose of determining the book value of assets constituting
Restricted Subsidiary Stock being sold as provided in clause (i) above, such
book value shall be deemed to be the net book value of the Restricted Subsidiary
which shall have issued such Restricted Subsidiary Stock."
(b) The following provision shall be added to Section 7.5(a) of each Note
Purchase Agreement as an additional excepted lien:
"(xi) Liens securing sales or transfers of receivables permitted pursuant
to Section 7.15 hereof."
(c) Section 7.15 of each Note Purchase Agreement is hereby deleted in its
entirety and replaced, in lieu thereof, with the following:
"Notwithstanding anything else contained in this Note Purchase Agreement to
the contrary, the Company shall be permitted to sell, transfer or otherwise
dispose of, at not less than face value, on a revolving basis, an undivided
interest in a pool of the Company's accounts receivable to a special-purpose
entity whose commercial paper is
2
<PAGE>
rated at least A-1+/P-1 at the time of such sale, in an amount not to exceed, at
any time, Seventy Five Million Dollars ($75,000,000), plus an amount not to
exceed ten percent (10%) of the amount sold or transferred for the purpose of
providing the purchaser with over-collateralization. In connection with such
sales, the Company may grant the purchaser a security interest in such
receivables (including receivables transferred to provide the purchaser with
over-collateralization) and the proceeds therefrom."
Section 3. Amendments Relating to Fixed Charge Coverage. (a) Section
--------------------------------------------
7.11 of each Note Purchase Agreement is hereby deleted in its entirety and
replaced, in lieu thereof, with the following:
"7.11 Fixed Charge Coverage
As at the end of each fiscal quarter of the Company, the ratio of Income
Available for Fixed Charges to Fixed Charges for the period of four consecutive
fiscal quarters of the Company then most recently ended, shall be not less than
3.25 for the period commencing August 31, 1994 and ending September 30, 1995,
and shall thereafter be no less than 3.75."
(b) The definition of the term "Income Available for Fixed Charges" set forth
in Section 11.1 of each Note Purchase Agreement is hereby deleted in its
entirety and replaced, in lieu thereof, with the following:
"Income Available for Fixed Charges - for any period shall mean
Consolidated Adjusted Net Income for such period plus income taxes (to the
extent deducted in computing Consolidated Adjusted Net Income for such period),
interest, depreciation and amortization."
Section 4. Effectiveness. This Amendment shall be effective as September
-------------
2, 1994; provided, however, that its effectiveness is conditioned upon: (i)
-------- -------
the Company having entered into that certain First Restated Loan Agreement
(Revolver), dated as of September 2, 1994, between the Company and NationsBank
of Texas, N.A. ("NationsBank"), that certain Second Amendment to Third Restated
Loan Agreement (Term), dated as of September 2, 1994, by and among the Company,
NationsBank, as Agent and Certain Banks as Lenders and that certain Letter
Amendment No. 2 to Amended and Restated Master Shelf between the Company and The
Prudential Insurance Company of America; and (ii) such agreements containing
covenants regarding the fixed charge coverage comparable to those set forth in
this Amendment.
3
<PAGE>
IN WITNESS WHEREOF, the undersigned have set their hands hereto as of this
August 31, 1994.
WESTERN GAS RESOURCES, INC.
By: ____________________________________________
William J. Krysiak,
Vice President-Controller
MGTC, INC.
MIGC, INC.
MOUNTAIN GAS RESOURCES, INC.
WESTERN GAS RESOURCES-OKLAHOMA, INC.
WESTERN GAS RESOURCES STORAGE, INC.
WESTERN GAS RESOURCES-TEXAS, INC.
By: ____________________________________________
William J. Krysiak,
Vice President-Controller
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY
BY: CIGNA Investments, Inc.
By:_____________________________________________
CIGNA PROPERTY AND CASUALTY
INSURANCE COMPANY
BY: CIGNA Investments, Inc.
By:_____________________________________________
4
<PAGE>
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY,
on behalf of one or more separate accounts
BY: CIGNA Investments, Inc.
By:_____________________________________________
INSURANCE COMPANY OF NORTH AMERICA
BY: CIGNA Investments, Inc.
By:_____________________________________________
5
<PAGE>
ATTACHMENT 1 TO
AMENDMENT NO. 2 TO
NOTE PURCHASE AGREEMENTS
------------------------
A. THE GUARANTORS.
MGTC, Inc.
MIGC, Inc.
Mountain Gas Resources, Inc.
Western Gas Resources-Oklahoma, Inc.
Western Gas Resources Storage, Inc.
Western Gas Resources-Texas, Inc.
B. THE PURCHASERS.
Connecticut General Life Insurance Company
Cigna Property and Casualty Insurance Company
Connecticut General Life Insurance Company
Insurance Company of North America
Life Insurance Company of North America
The Canada Life Assurance Company
Canada Life Insurance Company of America
Canada Life Insurance Company of New York
The Franklin Life Insurance Company
Royal Maccabees Life Insurance Company
<PAGE>
EXHIBIT 10.69
MASTER NOTE
September 2, 1994 San Francisco, California
FOR VALUE RECEIVED, the undersigned ("Borrower") promises to pay, in lawful
money of the United States of America and immediately available funds, to the
order of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("Bank") at
Bank's Corporate Service Center, 1850 Gateway Boulevard, Concord, California
94520, or such other place as the holder may from time to time designate, the
aggregate unpaid principal amount of all advances made by Bank from time to time
from and after the date hereof in its sole discretion to or for the benefit of
Borrower under this Note (each, an "Advance"), on the maturity dates (each, a
"Maturity Date") as may be offered by Bank and accepted by Borrower with respect
to such Advances (which acceptance shall in any event be deemed to occur upon
receipt by Borrower of the proceeds of any Advance), together with interest
accrued thereon, on the applicable Maturity Date and on such other interest
payment dates and at such rates as may be so offered and accepted. Any amount
not paid within five business days after the date due (whether at maturity, by
acceleration or otherwise) shall bear interest from such due date until the date
paid at a rate per annum equal to the rate announced from time to time by Bank
as its "reference rate" plus two percent (2.0%). Unless otherwise agreed by
Bank, no Advances will be made hereunder after September 30, 1994.
The loan account records maintained by Bank shall at any time be conclusive
evidence as to the amount of any Advance, and its Maturity Date, interest rate,
interest payment dates and outstanding amount at such time, absent manifest
error. All interest will be calculated on the basis of a 360-day year, actual
days elapsed. If any payment of principal of or interest on this Note shall
become due on a day other than a business day, such payment shall be made on the
next succeeding business day and such extension of time shall be included in
computing the amount of interest due and payable. For purposes hereof,
"business day" means any day other than a Saturday, Sunday or other day on which
commercial banks in San Francisco, California are authorized or required by law
to close.
Any of the following shall constitute an "Event of Default" hereunder:
(a) Borrower shall fail to pay in full the amount of any Advance, together
with all accrued interest, on the applicable Maturity Date, or any accrued
interest on any applicable interest payment date;
<PAGE>
(b) Borrower shall fail to pay when due any indebtedness under, or shall
fail to perform or observe any material term, covenant or condition under, or
there shall otherwise occur any default or event of default under, any
instrument or agreement relating to (i) borrowed money, (ii) reimbursement
obligations with respect to bonds, letters of credit or acceptances, (iii) the
deferred purchase price of property of services, or (iv) any capital lease;
(c) (i) Borrower shall become insolvent, or (ii) any voluntary or
involuntary case, action or proceeding seeking liquidation, reorganization,
appointment of a receiver, trustee or custodian, assignment for the benefit of
creditors, or similar relief shall be commenced by or against, and with respect
to, Borrower; or
(d) Borrower shall at any time fail to maintain availability under the Loan
Agreement (Revolver) dated August 31, 1993 among the Borrower, Nationsbank of
Texas, N.A. as agent and the banks parties thereto, as amended from time to time
(the "Loan Agreement") equal to or greater than $75,000,000 and such failure is
not remedied within ten (10) days. (For purposes hereof, "availability" shall
be determined by subtracting the aggregate outstanding amount of loans and
advances thereunder from the aggregate commitments of the lender under the Loan
Agreement; and shall be deemed equal to zero if the commitment under the Loan
Agreement shall be canceled or terminated.)
Upon the occurrence of any Event of Default, (i) the amount of all unpaid
Advances, together with all accrued interest, shall, at the option of the holder
(or, in the case of an Event of Default under cause (c) (ii) or paragraph (d),
automatically) become immediately due and payable, without demand, notice of
nonpayment, presentment, protest or notice of dishonor (all of which are
expressly waived), and (ii) Bank shall be under no obligation to fund any
further Advances, including any as to which an offer and acceptance of terms has
occurred. However, nothing in this Note shall be deemed a commitment by Bank to
make Advances to Borrower.
Borrower agrees to notify Bank in writing immediately upon the occurrence
of any Event of Default pursuant to paragraph (b) or (c) above. No Advance may
be voluntarily prepaid in whole or in part prior to its applicable Maturity
Date.
The request of Borrower for any Advance and the receipt by Borrower of the
proceeds thereof shall be deemed a representation by Borrower as of each such
date that no Event of Default has occurred and that Borrower is duly authorized
to incur such indebtedness hereunder. Borrower acknowledges that it may, for
its convenience, request Bank to make Advances from time to time on the basis of
telephonic or written requests. Borrower assumes all risks regarding the
validity, authenticity, due authorization and correct interpretation of any such
request purported to be made by or on behalf of Borrower and agrees that its
obligations hereunder
<PAGE>
shall not be affected in any way by Bank's failure to receive or provide written
confirmation of any such request or of the terms of any offer or acceptance
relating to any Advance. Borrower hereby authorizes Bank to charge any deposit
account of Borrower now or hereafter maintained with Bank for amounts due
hereunder.
Borrower shall pay holder upon demand for all costs, expenses and
attorneys' fees (including allocated costs of internal counsel) incurred in
connection with the enforcement or attempted enforcement of this Note.
At any time and from time to time, without notice to or consent of
Borrower, the holder may assign or otherwise transfer, in whole or in part, to
any person (an "Assignee") this Note or any Advance, or may sell a participation
therein to any person. Borrower agrees not to assert against any Assignee any
claim or defense which Borrower may have against Bank.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF
THE STATE OF CALIFORNIA. No delay or omission on the part of the holder in
exercising any right hereunder shall operate as a waiver of such right. If any
provision of this Note shall be held invalid or unenforceable in whole or in
part, such invalidity or unenforceability shall not affect the remaining
provisions hereof.
WESTERN GAS RESOURCES, INC.
a Delaware corporation
By:
----------------------------
Printed Name: John C. Walter
-----------------
Title: Executive Vice President
------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 19,701
<SECURITIES> 0
<RECEIVABLES> 110,187
<ALLOWANCES> 0
<INVENTORY> 52,187
<CURRENT-ASSETS> 184,942
<PP&E> 1,032,282
<DEPRECIATION> 164,185
<TOTAL-ASSETS> 1,133,070
<CURRENT-LIABILITIES> 228,469
<BONDS> 393,400
<COMMON> 2,573
0
456
<OTHER-SE> 433,194
<TOTAL-LIABILITY-AND-EQUITY> 1,133,070
<SALES> 770,578
<TOTAL-REVENUES> 779,843
<CGS> 627,805
<TOTAL-COSTS> 122,762
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,148
<INCOME-PRETAX> 6,128
<INCOME-TAX> 2,230
<INCOME-CONTINUING> 3,898
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,898
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
</TABLE>
