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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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COMMISSION FILE NUMBER 0-30475
TRANSTEXAS GAS CORPORATION
(Exact name of registrant as specified in its charter)
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DELAWARE 76-0401023
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification no.)
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1300 NORTH SAM HOUSTON PARKWAY EAST
SUITE 310
HOUSTON, TEXAS 77032
(Address of principal executive offices) (Zip code)
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Registrant's telephone number, including area code: (281) 987-8600
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Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
CLASS A COMMON STOCK, $0.01 PAR VALUE
SERIES A SENIOR PREFERRED STOCK, $1.00 PAR VALUE
SERIES A JUNIOR PREFERRED STOCK, $1.00 PAR VALUE
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant has filed all documents
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes [X] No [ ]
The aggregate market value of the common stock held by non-affiliates of
the registrant on April 24, 2000 was $3,755,681.
The number of shares of common stock of the registrant outstanding on April
24, 2000 was 1,250,000, consisting of 1,002,500 shares of Class A Common Stock
and 247,500 shares of Class B Common Stock.
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TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 6
Item 3. Legal Proceedings........................................... 7
Item 4. Submission of Matters to a Vote of Security Holders......... 7
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 8
Item 6. Selected Financial Data..................................... 9
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 10
Item 7A. Quantitative and Qualitative Disclosures about Market
Risk...................................................... 17
Item 8. Financial Statements and Supplementary Data................. 19
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.................................. 47
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 47
Item 11. Executive Compensation...................................... 48
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 50
Item 13. Certain Relationships and Related Transactions.............. 52
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K....................................................... 53
Signatures.................................................. 62
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PART I
ITEM 1. BUSINESS
GENERAL
TransTexas Gas Corporation (the "Company" or "TransTexas") is engaged in
the exploration for and development and production of natural gas and
condensate, primarily in South Texas and along the upper Gulf Coast. TransTexas'
business strategy is to utilize its experience in drilling and operating wells
in South Texas to find, develop and produce reserves at a low cost.
The Company's long-term goal is to convert unproven acreage to proved
reserves through drilling in underexploited areas. In order to meet its
long-term goals, TransTexas' strategy is to drill wells in areas of the Upper
Texas Gulf Coast where 3-D seismic data indicates productive potential and to
drill development wells in its proven producing areas such as the Eagle Bay
field and Wharton County. During fiscal 2000, TransTexas' drilling program was
restricted by capital available from operations and debtor-in-possession
financing.
As of February 1, 2000, TransTexas' net proved reserves, as estimated by
Netherland, Sewell & Associates, Inc., were 118 Bcfe. As of January 31, 2000,
TransTexas owned approximately 333,400 gross (210,000 net) acres of mineral
interests. TransTexas' average net daily natural gas production for the year
ended January 31, 2000 was approximately 77 MMcfd, for a total net production of
27.8 Bcf of natural gas. TransTexas' average net daily condensate and oil
production for the year ended January 31, 2000 was approximately 5,005 Bpd, for
a total net production of 1,827 MBbls of condensate and oil. TransTexas' average
net daily production of natural gas liquids for the year ended January 31, 2000
was approximately 120,519 gallons per day, for a total net production of 44
million gallons of natural gas liquids.
REORGANIZATION
On April 19, 1999, TransTexas filed a voluntary petition for relief under
Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for
the District of Delaware. On April 20, 1999, the Company's then parent,
TransAmerican Energy Corporation ("TEC"), and TEC's subsidiary, TransAmerican
Refining Corporation ("TARC"), also filed voluntary petitions under Chapter 11.
On May 20, 1999, the cases were transferred to the United States Bankruptcy
Court for the Southern District of Texas, Corpus Christi Division (the
"Bankruptcy Court"). The Company's Second Amended, Modified and Restated Plan of
Reorganization dated January 25, 2000 (the "Plan") was confirmed by the
Bankruptcy Court on February 7, 2000.
On March 17, 2000, the Effective Date of the Plan, the Company consummated
several transactions, most of which were dated as of March 15, 2000. The
Company:
- filed an Amended and Restated Certificate of Incorporation;
- issued 1,002,500 shares of Class A Common Stock and 247,500 shares of
Class B Common Stock;
- issued 625,000 warrants to purchase shares of Class A Common Stock at an
exercise price of $120 per share;
- filed a Certificate of Designation relating to, and issued 222,455,320
shares of, Series A Senior Preferred Stock;
- filed a Certificate of Designation relating to, and issued 20,716,080
shares of, Series A Junior Preferred Stock;
- entered into an Indenture relating to, and issued $200 million of, 15%
Senior Secured Notes due 2005;
- entered into a $52.5 million Oil and Gas Credit Facility;
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- entered into a $15 million Accounts Receivable Credit Facility; and
- sold a Production Payment with a primary sum outstanding as of March 15,
2000 of $35 million.
These transactions are more fully described in "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity" under
Item 7 of this report.
As a result of the effectiveness of the Plan, the Company adopted
"fresh-start" reporting as of January 31, 2000, and a new reporting entity was
created. The Company's assets are recorded at reorganization value and
liabilities are recorded at the present value of amounts to be paid at January
31, 2000. Information prior to January 31, 2000 is that of the predecessor
entity.
EXPLORATION AND PRODUCTION
The exploration and production activities of TransTexas consist of
geological and geophysical evaluation of current and prospective properties, the
acquisition of mineral interests in prospects and the drilling, development and
operation of leased properties for the production and sale of natural gas,
condensate and crude oil. TransTexas' technical staff consists of geologists,
geophysicists and engineers. TransTexas' technical staff selects drilling
locations based on the interpretation of available well data, and 3-D and 2-D
seismic data. TransTexas operates substantially all of its producing properties.
During fiscal 1998, the Company sold the stock of TransTexas Transmission
Corporation ("TTC"), its subsidiary that owned substantially all of TransTexas'
Lobo Trend producing properties and related pipeline transmission system, for an
adjusted sales price of approximately $1.1 billion (the "Lobo Sale").
TransTexas' operating data for fiscal 1998 reflect the impact of the Lobo Sale.
Primary Operating Areas
Eagle Bay. In January 1998, TransTexas announced that it had successfully
drilled and completed the State Tract 331 #1 discovery well in Eagle Bay,
Galveston County, Texas. The well is located approximately one mile off the
coast of the City of San Leon, in a water depth of less than 10 feet. This
discovery well tested at a rate of 76.4 MMcfd of natural gas and 11,002 Bpd of
condensate. TransTexas has successfully drilled, completed and produced four
additional wells, drilled one dry hole and, as of January 31, 2000, was drilling
a sixth well in the Eagle Bay field.
In order to facilitate commercial production of natural gas and oil from
the Eagle Bay field and other contemplated production in the Galveston Bay area,
in July 1998, Galveston Bay Processing Corporation, a wholly owned subsidiary of
the Company, completed construction of onshore production facilities at Winnie,
Texas, approximately 60 miles east of Houston. These facilities are designed to
separate produced natural gas and condensate streams, dehydrate and treat
natural gas and stabilize condensate produced from the Eagle Bay field.
Production from Eagle Bay is currently transported to Winnie through a
third-party pipeline that crosses Galveston Bay.
TransTexas intends to drill additional development wells in Eagle Bay as a
part of its strategy to further increase reserves and production and has
identified additional drilling locations from 3-D seismic data. For the fiscal
year ended January 31, 2000, TransTexas produced 23.7 Bcf (13.5 Bcf net) of
natural gas, 1.6 million barrels of condensate and 44 million gallons of natural
gas liquids from the Eagle Bay field at average net daily rates of 37 MMcfd,
4,450 Bpd and 120,519 gallons per day, respectively. Production from the Eagle
Bay field represents a significant percentage of the Company's total production.
See "Drilling and Production Data." As of January 31, 2000, TransTexas owned a
75% working interest on approximately 5,636 gross (5,592 net) acres in the Eagle
Bay area.
Bob West North. In late 1994, TransTexas made a natural gas discovery in
the Bob West North area of southern Zapata County, Texas. As of January 31,
2000, TransTexas had drilled 56 wells and completed 53 wells in the area. As of
January 31, 2000, TransTexas' mineral interests in the Bob West North area
consisted of a 100% working interest in 11,533 gross (9,786 net) acres. For the
fiscal year ended January 31, 2000, TransTexas produced 9.2 Bcf (6.6 Bcf net) of
natural gas from the Bob West North area at an average net
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daily rate of 18 MMcfd. 3-D seismic data indicates the potential for additional
drilling locations to further develop productive reservoirs in the area.
Southwest Bonus. In 1998, TransTexas completed the Obenhaus #2 discovery
well in the Southwest Bonus field of Wharton County, Texas. Restrictions on the
availability of capital prevented TransTexas from additional drilling until late
1999. In 1999, a development drilling program commenced with the drilling and
completion of the Schweinle #1. TransTexas is currently drilling two additional
development wells in the field as a part of its strategy to further increase
reserves and production, and has identified additional drilling locations from
seismic data. As of January 31, 2000, TransTexas held a 100% working interest
covering approximately 4,901 gross (3,868 net) acres in the Southwest Bonus
area. For the fiscal year ended January 31, 2000, TransTexas' Southwest Bonus
properties produced 2.3 Bcf (1.8 Bcf net) of natural gas, at an average net
daily rate of 5 MMcfd.
Dinero. In June 1998, TransTexas announced the successful drilling of the
McNeil #1 well in Live Oak County, Texas. This discovery well tested at a rate
of 19.2 MMcfd of natural gas with production commencing in August 1998. As of
January 31, 2000, TransTexas had drilled three wells, completed two wells and
was in the process of completing one well in the Dinero field. TransTexas
intends to drill additional wells to develop the field as a part of its strategy
to further increase reserves and production, and has identified potential
drilling locations from 3-D seismic data. For the fiscal year ended January 31,
2000, TransTexas' Live Oak County properties produced 1.0 Bcf (0.7 Bcf net) of
natural gas, at an average net daily rate of 2 MMcfd. As of January 31, 2000,
TransTexas owned an 80% working interest in approximately 8,179 gross (8,102
net) acres in Live Oak County.
Trout Point. In 1998, TransTexas commenced drilling an exploratory well in
the Trout Point prospect in Galveston Bay. TransTexas drilled the Trout Point
sub-salt prospect to a depth of 21,442 feet. The well encountered gas-bearing
zones beneath the salt when drilling problems resulted in the loss of the hole.
Two sidetrack holes were drilled to establish production in the sub-salt zones.
During completion of the second sidetrack, a gas flow from a lower zone caused
an underground blowout and failure of the 9 5/8" casing. Cement was pumped into
the well to control the underground gas flow. The replacement Sheldon 1-R well
was drilled to a total depth of 22,298 feet. During completion of the well,
casing collapsed in the salt section and the well bore was lost. Currently, the
Company is sidetracking the Sheldon 1-R to test the sub-salt zones in the
prospect.
Including Trout Point, TransTexas owns a 99% working interest in 17,584
gross (17,246 net) acres in Chambers County, Texas. As of January 31, 2000,
TransTexas had drilled 10 wells, completed four wells and was in the process of
completing one well and drilling one well in Chambers County. For the fiscal
year ended January 31, 2000, TransTexas' Chambers County properties produced 2.3
Bcf (1.6 Bcf net) of natural gas, at an average daily net rate of 4.4 MMcfd.
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Drilling and Production Data
During the five years ended January 31, 2000, TransTexas completed
approximately 65% of 413 wells. As of January 31, 2000, TransTexas was drilling
two gross (two net) wells. As of January 31, 2000, TransTexas had a total of 116
productive wells. TransTexas had a working interest in the following numbers of
wells that were drilled during the periods indicated:
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YEAR ENDED JANUARY 31,
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2000 1999 1998(3)
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GROSS NET GROSS NET GROSS NET
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Exploratory Wells(1):
Productive(2).................................. 1 1 9 9 13 11
Non-Productive................................. 6 5 6 5 16 14
% Productive................................... 14% 17% 60% 63% 45% 44%
Development Wells(1):
Productive(2).................................. 5 5 14 12 47 43
Non-Productive................................. 2 2 9 9 31 27
% Productive................................... 71% 71% 61% 58% 60% 62%
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(1) The number of net wells is the sum of the fractional working interests owned
in gross wells.
(2) Productive wells consist of producing wells and wells capable of production,
including gas wells awaiting pipeline connection. Wells that are completed
in more than one producing zone are counted as one well.
(3) Includes wells in the Lobo Trend properties sold in fiscal 1998.
The following table sets forth information with respect to net production
and average unit prices and costs for the periods indicated:
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YEAR ENDED JANUARY 31,
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2000 1999 1998(4)
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Production:
Gas (Bcf)(1)............................................. 27.8 35.6 72.4
NGLs (MMgals)............................................ 44.0 8.4 62.4
Condensate and oil (MBbls)............................... 1,827 1,120 619
Average sales prices:
Gas (dry) (per Mcf)(2)................................... $ 2.32 $ 2.10 $2.09
NGLs (per gallon)........................................ .32 .21 .29
Condensate and oil (per Bbl)............................. 19.88 11.91 19.20
Average lifting cost per Mcfe(3)........................... .41 .37 .34
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(1) Net gas production volumes for the year ended January 31, 1998 include 7.3
Bcf delivered pursuant to volumetric production payments.
(2) Average prices for the year ended January 31, 1998 include 7.3 Bcf delivered
pursuant to volumetric production payments. The average gas price for
TransTexas' undedicated production for this period was $2.10 per Mcf.
(3) Condensate and oil are converted to a common unit of measure on the basis of
six Mcf of natural gas to one barrel of condensate or oil. The components of
production costs may vary substantially among wells depending on the methods
of recovery employed and other factors. The calculation of average lifting
cost per Mcfe for the year ended January 31, 1998 includes volumes delivered
to third parties under volumetric production payments.
(4) Includes production from the Lobo Trend properties sold in fiscal 1998.
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TRANSPORTATION, PROCESSING AND MARKETING
TransTexas believes that there is currently adequate pipeline
transportation capacity for its hydrocarbon production in all of its operating
areas.
TransTexas has entered into various agreements for the gathering,
transportation, processing and sale of substantially all of its natural gas and
natural gas liquids produced from its Eagle Bay prospects. Unless otherwise
stated, these agreements, described below, expire on June 30, 2003. TransTexas
is continuing to negotiate additional agreements in order to meet future
production increases.
Galveston Bay Processing Corporation operates onshore facilities to
separate produced natural gas and condensate, dehydrate and treat natural gas
for the removal of CO(2) and stabilize condensate from the Company's Eagle Bay
field. These facilities are located approximately 60 miles east of Houston at
Winnie, Texas.
TransTexas entered into firm and interruptible contracts with Tejas Ship
Channel LLC for transportation of its production from the Eagle Bay field to the
Winnie facilities at a fixed negotiated rate. Under the firm agreement, the
Company is committed to deliver a minimum of 75,000 MMBtu per day of natural gas
and condensate.
The Company also entered into a contract with Centana Intrastate Pipeline
Company for transportation of natural gas on a firm and interruptible basis from
the Winnie facility to natural gas liquids recovery facilities located in the
Beaumont/Port Arthur, Texas area, and residue gas from these facilities to
various distribution points. Under the agreement, the Company is committed to
deliver up to a maximum of 56,250 Mcf of natural gas and 19,500 MMBtu of residue
gas. Transportation fees for natural gas are based on a fixed negotiated rate.
Transportation fees for residue gas are based on a published industry index.
A connection was established with Sun Pipeline at the Winnie facilities for
the transportation or sale of the stabilized condensate. Enron Reserve
Acquisition Corp. purchases 3,000 Bpd of condensate at a price based on a
published industry index pursuant to a six-month contract expiring April 30,
2000.
TransTexas and Duke Energy Field Services, Inc. entered into a contract to
extract natural gas liquids from the high-Btu natural gas stream leaving the
Winnie facilities. TransTexas can elect, at its discretion on a monthly basis,
whether to process the natural gas to recover natural gas liquids. The Company's
decision whether to process the natural gas is based on prevailing market
prices.
TransTexas entered into gas purchase agreements with Tejas Gas Marketing,
LLC and PanEnergy Marketing Company, covering the sale by TransTexas of
substantially all of its gas production from the Eagle Bay field. The agreements
provide for deliveries in excess of 50,000 MMBtu per day of residue gas at a
price based on a published industry index.
For the year ended January 31, 2000, three purchasers accounted for a total
of 55% of the consolidated natural gas, condensate and NGLs revenues of
TransTexas. TransTexas believes that the loss of any single purchaser would not
have a material adverse effect on TransTexas due to the availability of other
purchasers for TransTexas' production at comparable prices.
COMPETITION
TransTexas encounters significant competition from major oil and gas
companies and independent operators in the acquisition of desirable undeveloped
natural gas leases and in the sale of natural gas. Many of its competitors are
large, well-established companies with substantially greater capital and human
resources than TransTexas' and which, in many instances, have been engaged in
the energy business for a much longer time than TransTexas.
The primary bases for competition in the natural gas and oil exploration
and production businesses are available capital and the costs involved in
finding and developing gas and oil resources combined with commodity sales
prices and market access.
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EMPLOYEES
As of January 31, 2000, TransTexas had approximately 200 employees.
TransTexas may engage the services of independent geological, engineering, land
and other consultants from time to time. None of TransTexas' employees are
parties to a collective bargaining agreement.
GOVERNMENTAL REGULATION
TransTexas' gas exploration, production and related operations are subject
to extensive rules and regulations promulgated by federal and state agencies.
Failure to comply with such rules and regulations can result in substantial
penalties. The regulatory burden on the gas industry increases TransTexas' cost
of doing business and affects its profitability. Because such rules and
regulations are frequently amended or reinterpreted, TransTexas is unable to
predict the future cost or impact of complying with such laws.
The State of Texas (through the Texas Railroad Commission) and many other
states require permits for drilling operations, drilling bonds and reports
concerning operations, and impose other requirements related to the exploration
and production of natural gas. Such states also have statutes or regulations
addressing conservation matters, including provisions for the unitization or
pooling of gas properties, the establishment of maximum rates of production from
gas wells and the regulation of spacing, plugging and abandonment of such wells.
The statutes and regulations of the State of Texas limit the rate at which
natural gas can be produced from TransTexas' properties. Management believes
that these statutes and regulations have not materially impacted TransTexas'
results of operations; however, there can be no assurance that such statutes and
regulations will not affect TransTexas' operating results in the future.
Several major regulatory changes have been implemented by the Federal
Energy Regulatory Commission ("FERC") since 1985 that affect the economics of
natural gas production, transportation and sales. In addition, the FERC
continues to promulgate revisions to various aspects of the rules and
regulations affecting those segments of the natural gas industry, most notably
interstate natural gas transmission companies, that remain subject to the FERC's
jurisdiction. These initiatives may also affect the intrastate transportation of
gas under certain circumstances. The stated purpose of many of these regulatory
changes is to promote competition among the various sectors of the gas industry.
The ultimate impact on TransTexas of these complex and overlapping rules and
regulations, many of which are repeatedly subjected to judicial challenge and
interpretation, cannot be predicted.
ENVIRONMENTAL MATTERS
See Note 14 of Notes to Consolidated Financial Statements for a discussion
of environmental matters affecting TransTexas.
ITEM 2. PROPERTIES
ACREAGE AND PRODUCTIVE WELLS
The following table sets forth TransTexas' total developed and undeveloped
acreage and productive wells as of January 31, 2000:
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DEVELOPED UNDEVELOPED PRODUCTIVE
ACREAGE ACREAGE WELLS(1)
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Gross................................................ 19,440 313,935 116
Net(2)............................................... 16,852 193,112 102
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(1) Of the total productive wells, 108 gross (98 net) were gas wells and 8 gross
(4 net) were oil wells. As of January 31, 2000, TransTexas had interests in
2 productive wells which had multiple completions.
(2) The number of net acres and net wells is the sum of the fractional working
interests owned in gross acres and gross wells, respectively.
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RESERVES
As of February 1, 2000, TransTexas had total proved reserves of 95.6 Bcf of
natural gas and 3,686 MBbls of condensate and oil. See Note 17 of Notes to
Consolidated Financial Statements, which contains supplemental information
regarding TransTexas' proved reserves. Proved reserves are the estimated
quantities of natural gas, condensate and oil that geological and engineering
data demonstrate with reasonable certainty to be recoverable in future years
from known reservoirs under existing economic and operating conditions. Proved
developed reserves are proved reserves that can be expected to be recovered
through existing wells with existing equipment and operating methods. The
estimation of reserves requires substantial judgment on the part of petroleum
engineers, resulting in imprecise determinations, particularly with respect to
recent discoveries. The accuracy of any reserve estimate depends on the quality
of available data and engineering and geological interpretation and judgment.
Results of drilling, testing and production after the date of the estimate may
result in revisions of the estimate. Accordingly, estimates of reserves are
often materially different from the quantities of natural gas, condensate and
oil that are ultimately recovered, and these estimates will change as future
production and development information becomes available. The reserve data
represent estimates only and should not be construed as being exact.
TITLE TO PROPERTIES/LIENS AND CLAIMS
As is customary in the oil and gas industry, TransTexas performs only a
preliminary title investigation before leasing undeveloped properties.
Accordingly, working interest percentages and gross and net acreage amounts for
undeveloped properties are preliminary. However, a title opinion is typically
obtained before the commencement of drilling operations and any material defects
in title are remedied prior to the time actual drilling of a well on the lease
is commenced. TransTexas has not obtained title opinions on all of its
properties. The Company is uncertain as to the impact that failure to obtain a
title opinion has on its title to developed properties. TransTexas' properties
are subject to customary royalty interests, liens incident to operating
agreements, liens for current taxes, liens of vendors and lenders and other
burdens.
ITEM 3. LEGAL PROCEEDINGS
On April 19, 1999 (the "Petition Date"), TransTexas filed a voluntary
petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the United
States Bankruptcy Court for the District of Delaware. On April 20, 1999, TEC and
TARC also filed voluntary petitions under Chapter 11. On May 20, 1999, the cases
were transferred to the United States Bankruptcy Court for the Southern District
of Texas, Corpus Christi Division. The bankruptcy cases are being jointly
administered under the caption "In re: TransTexas Gas Corporation, et al.,
Debtors," Case No. 99-21550-C-11. TransTexas filed a Plan of Reorganization with
the Bankruptcy Court on July 16, 1999. A first amended Plan was filed on July
23, 1999 and a second amended Plan was filed on September 29, 1999. The Debtors
filed a Joint Disclosure Statement with the Bankruptcy Court on August 13, 1999.
A first amended Joint Disclosure Statement was filed with and approved by the
Bankruptcy Court on September 29, 1999. The Company's Second Amended, Modified
and Restated Plan of Reorganization dated January 25, 2000 was confirmed by the
Bankruptcy Court on February 7, 2000. High River Partnership has appealed the
confirmation order. The Company has filed a motion to dismiss High River's
appeal on the grounds of mootness. The Effective Date of the Plan was March 17,
2000.
TransTexas is a party to various claims and routine litigation arising in
the normal course of its business. Any obligations of the Company in respect of
such claims and litigation arising out of activities prior to the Petition Date
will be discharged pursuant to the Plan. Recovery of these obligations, if any,
will be limited to any collateral held by the claimant and/or such claimant's
pro rata share of amounts available to pay general unsecured claims.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
three months ended January 31, 2000.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Prior to the Effective Date, prices for the common stock of TransTexas were
quoted on Nasdaq's Over The Counter Bulletin Board ("OTCBB") under the symbol
"TTGGQ." TransTexas' common stock traded on the New York Stock Exchange ("NYSE")
under the symbol "TTG" from October 30, 1997 until trading was suspended on
April 19, 1999 due to the Company's bankruptcy filing. The following table sets
forth, on a per-share basis for the periods indicated, the high and low sales or
bid prices, as the case may be, for TransTexas' common stock as reported by the
OTCBB and NYSE.
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HIGH LOW
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Fiscal year ended January 31, 2000:
Fourth Quarter............................................ $ 1.500 $ 0.130
Third Quarter............................................. 0.625 0.188
Second Quarter*........................................... 0.563 0.250
First Quarter*............................................ 1.688 0.375
Fiscal year ended January 31, 1999:
Fourth Quarter............................................ $ 4.688 $ 1.938
Third Quarter............................................. 6.938 1.000
Second Quarter............................................ 12.625 7.000
First Quarter............................................. 17.125 11.875
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* Price information is not available from April 20, 1999 through May 12, 1999.
On the Effective Date, the Company's then existing securities, including
the common stock, were canceled, and the Company issued (i) $200 million
principal amount of 15% Senior Secured Notes due 2005, (ii) 1,002,500 shares of
Class A Common Stock; (iii) 247,500 shares of Class B Common Stock, (iv)
222,455,320 shares of Series A Senior Preferred Stock, (v) 20,716,080 shares of
Series A Junior Preferred Stock, and (vi) warrants to purchase 625,000 shares of
Class A Common Stock at an exercise price of $120 per share. These securities
were issued in consideration of the discharge of claims of certain creditors
against the Company pursuant to the Plan. The Company relied on the exemption
from the registration requirements of the Securities Act of 1933, as amended,
included in Section 1145(a)(1) of the Bankruptcy Reform Act of 1978, as amended,
Title 11, United States Code.
On April 20, 2000, prices for the Class A Common Stock commenced quotation
on the OTCBB under the symbol "TTXG." As of April 24, 2000, there were 112
record holders of the Class A Common Stock. The last sale price of the Class A
Common Stock on April 24, 2000 was $3.75.
TransTexas has not paid any cash dividends on its common stock since
inception, except a dividend of approximately $33 million to TransAmerican from
the proceeds of its initial public offering in March 1994. TransTexas' ability
to pay dividends on its common stock is restricted by TransTexas' existing debt
instruments and will depend on TransTexas' debt levels, earnings levels and book
value and discounted value of certain tangible assets. The Company does not
anticipate paying any dividends on its common stock in the foreseeable future.
Pursuant to the terms of the Company's Preferred Stock, if either (i) more
than 75 million shares of Senior Preferred Stock are outstanding at any time
after March 15, 2006 or (ii) the Company fails to pay dividends on the Senior
Preferred Stock on any two dividend payment dates, one-half of the Senior
Preferred Stock and all of the Junior Preferred Stock would automatically
convert into shares of Class A Common Stock. Such a conversion would result in
very substantial dilution to the holders of the Class A Common Stock.
8
<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected historical financial data for the
Company as of and for each of the periods presented. From April 19, 1999 through
March 17, 2000, TransTexas operated under Chapter 11 of the United States
Bankruptcy Code. The Company adopted fresh-start reporting as of January 31,
2000; therefore, the Company does not believe that the consolidated balance
sheet data as of January 31, 2000 is comparable to that of previous years in
certain material respects. The data for the years ended January 31, 2000, 1999,
1998 and 1997, the six months ended January 31, 1996 and the year ended July 31,
1995 are derived from the audited consolidated financial statements of the
Company. The data for the six months ended January 31, 1995 is derived from
unaudited consolidated financial statements of the Company. The following data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Company's financial
statements included elsewhere in this report.
<TABLE>
<CAPTION>
PREDECESSOR
-----------------------------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JANUARY 31, YEAR ENDED
------------------------------------------ ------------------- JULY 31,
2000 1999 1998 1997 1996 1995 1995
-------- --------- -------- -------- -------- -------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Gas, condensate and NGLs
revenue......................... $111,400 $ 91,319 $164,538 $363,459 $124,663 $143,304 $275,627
Transportation revenues........... -- -- 12,055 34,423 15,892 19,161 36,787
Gain (loss) on the sale of
assets.......................... (438) 61,247 543,365 7,865 474 -- --
Other revenues.................... 2,770 4,200 3,313 600 127 52 285
-------- --------- -------- -------- -------- -------- --------
113,732 156,766 723,271 406,347 141,156 162,517 312,699
Operating costs and expenses...... 28,437 29,482 62,356 137,019 45,629 50,893 99,310
Depreciation, depletion, and
amortization.................... 75,044 86,137 82,659 132,453 60,894 70,345 129,964
General and administrative
expenses........................ 19,883 21,938 48,156 45,596 13,685 12,595 31,935
Litigation settlements............ -- -- -- (96,000) (18,300) -- --
Loss on asset impairment.......... -- 425,966 -- -- -- -- --
-------- --------- -------- -------- -------- -------- --------
Operating income (loss)......... (9,632) (406,757) 530,100 187,279 39,248 28,684 51,490
Net interest expense(1)........... 38,054 78,716 68,187 91,463 40,436 29,059 65,797
Reorganization items.............. (50,511) -- -- -- -- -- --
Income taxes and other............ 10,000 (38,882) 161,669 12,491 (416) (131) (2,415)
Extraordinary loss, net of
taxes........................... (436,490) 1,142 72,043 -- -- -- 56,637
-------- --------- -------- -------- -------- -------- --------
Net income (loss)............... $429,315 $(447,733) $228,201 $ 83,325 $ (772) $ (244) $(68,529)
======== ========= ======== ======== ======== ======== ========
Net income (loss) per share:
Income (loss) before extraordinary
item............................ $ (0.13) $ (7.76) $ 4.49 $ 1.13 $ (0.01) $ -- $ (0.16)
Extraordinary item.............. 7.59 (.02) (1.08) -- -- -- (0.77)
-------- --------- -------- -------- -------- -------- --------
Net income (loss)............... $ 7.46 $ (7.78) $ 3.41 $ 1.13 $ (0.01) $ -- $ (0.93)
======== ========= ======== ======== ======== ======== ========
Dividends declared per common
share(2)........................ -- -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
--------- ---------------------------------------------
JANUARY 31,
---------------------------------------------------------
2000 1999 1998 1997 1996
--------- --------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)(3)................... $ 8,900 $ 27,072 $(22,122) $ 71,586 $ 43,602
Net property and equipment..................... 327,087 292,143 701,598 846,393 715,340
Total assets................................... 369,254 345,367 816,635 1,053,152 938,827
Liabilities subject to compromise.............. -- 718,139 -- -- --
Total debt(4).................................. 251,570 56,260 630,103 941,922 824,241
Stockholders' equity (deficit)................. -- (430,015) 24,637 (150,795) (154,440)
</TABLE>
- ---------------
(1) Interest expense for the year ended January 31, 2000 excludes $55.5 million
in interest stayed as a result of the bankruptcy filing.
9
<PAGE> 12
(2) TransTexas' existing debt instruments contain certain restrictions with
respect to the payment of dividends on TransTexas' common stock.
(3) Working capital as of January 31, 1997 and 1996 includes $46.0 million of
cash restricted for the payment of interest.
(4) Excludes long-term debt included in liabilities subject to compromise of
$583.1 million as of January 31, 1999.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with TransTexas'
Consolidated Financial Statements and Notes thereto included under Item 8 of
this report.
RESULTS OF OPERATIONS
TransTexas' results of operations are dependent upon natural gas and
condensate production volumes and unit prices from sales of natural gas,
condensate and NGLs. The profitability of TransTexas also depends on its ability
to minimize finding and lifting costs and maintain its reserve base while
maximizing production. See "Liquidity."
From April 19, 1999 through March 17, 2000, the Company operated as a
debtor-in-possession under Chapter 11 of the United States Bankruptcy Code.
Effective January 31, 2000, the Company adopted fresh-start reporting in
accordance with AICPA Statement of Position 90-7. Pursuant to fresh-start
reporting, a new reporting entity is created. The new reporting entity's assets
are recorded at the reorganization value based on the confirmed Plan of
Reorganization, and post petition liabilities are recorded at the present value
of amounts to be paid. The Company's reorganization value was estimated by
management to be approximately $369 million based primarily on an analysis of
discounted cash flows. The value of liabilities postpetition was estimated to be
$369 million. The present value of liabilities has been adjusted for imputed
interest at a rate of 15% for the period from February 1, 2000 to the Effective
Date of the Plan. The imputed interest will be charged to interest expense
during the first quarter of fiscal 2001.
In fiscal 1998, TransTexas sold the stock of TransTexas Transmission
Corporation ("TTC"), its subsidiary that owned substantially all of TransTexas'
Lobo Trend producing properties and related pipeline transmission system, for an
adjusted sales price of approximately $1.1 billion (the "Lobo Sale").
Accordingly, TransTexas' operating results for the fiscal year ended January 31,
1998 reflect the impact of the Lobo Sale. TransTexas recorded a gain of $543.4
million on the Lobo Sale.
TransTexas' operating data for the years ended January 31, 2000, 1999 and
1998, are as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
------------------------
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
Sales volumes:
Gas (Bcf)(1)............................................. 27.8 35.6 72.4
NGLs (MMgals)............................................ 44.0 8.4 62.4
Condensate and oil (MBbls)............................... 1,827 1,120 619
Average prices:
Gas (dry) (per Mcf)(2)................................... $ 2.32 $ 2.10 $ 2.09
NGLs (per gallon)........................................ .32 .21 .29
Condensate and oil (per Bbl)............................. 19.88 11.91 19.20
Number of gross wells drilled.............................. 14 38 107
Percentage of wells completed.............................. 43% 61% 56%
</TABLE>
- ---------------
(1) Sales volumes for the year ended January 31, 1998 include 7.3 Bcf delivered
pursuant to volumetric production payments.
10
<PAGE> 13
(2) Average prices for the year ended January 31, 1998 include amounts delivered
pursuant to volumetric production payments. The average gas price for
TransTexas' undedicated production for this period was $2.10 per Mcf.
TransTexas uses the full-cost method of accounting for exploration and
development costs. Under the full-cost method, the cost for successful, as well
as unsuccessful, exploration and development activities is capitalized and
amortized on a unit-of-production basis over the life of the remaining proved
reserves. Net capitalized costs of gas and oil properties are limited to the
lower of unamortized cost or the cost center ceiling, defined as the sum of the
present value (10% discount rate) of estimated unescalated future net revenues
from proved reserves; plus the cost of properties not being amortized, if any;
plus the lower of cost or estimated fair value of unproved properties included
in the costs being amortized, if any; less related income tax effects. For the
year ended January 31, 1999, TransTexas recorded pre-tax impairments of its gas
and oil properties aggregating $426 million primarily as a result of the
limitations on net capitalized costs of gas and oil properties. Due to higher
gas and oil prices realized by the Company subsequent to January 31, 1999, the
impairment was less than would have been recorded using January 31, 1999 prices.
A summary of TransTexas' operating expenses is set forth below (in millions
of dollars):
<TABLE>
<CAPTION>
PREDECESSOR
------------------------
YEAR ENDED JANUARY 31,
------------------------
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
Operating costs and expenses:
Lease..................................................... $ 9.4 $10.4 $15.2
Pipeline and gathering.................................... 9.2 8.7 32.6
Other..................................................... -- 3.3 3.1
----- ----- -----
18.6 22.4 50.9
Taxes other than income taxes(1)............................ 9.8 7.1 11.4
----- ----- -----
$28.4 $29.5 $62.3
===== ===== =====
</TABLE>
- ---------------
(1) Taxes other than income taxes include severance, property and other taxes.
TransTexas' average depletion rates have been as follows:
<TABLE>
<CAPTION>
PREDECESSOR
------------------------
YEAR ENDED JANUARY 31,
------------------------
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
Depletion rates (per Mcfe).................................. $1.89 $1.96 $1.11
===== ===== =====
</TABLE>
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"), which establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. In July
1999, the FASB issued SFAS 137, "Deferral of the Effective Date of FASB
Statement No 133," which delays the effective date for one year, to fiscal years
beginning after June 15, 2000. TransTexas is evaluating the impact of the
provisions of SFAS 133.
YEAR ENDED JANUARY 31, 2000, COMPARED WITH THE YEAR ENDED JANUARY 31, 1999
Gas, condensate and NGL revenues for the year ended January 31, 2000
increased by $20.1 million from the prior period due primarily to increases in
condensate and NGL sales volumes and higher prices for all products offset in
part by a decrease in natural gas sales volumes. The average monthly prices
received per Mcf of gas ranged from $1.74 to $2.90 in the year ended January 31,
2000, compared to a range of $1.90 to $2.36 in the prior period. Other revenues
decreased by $1.4 million for the year ended January 31, 2000 due to
11
<PAGE> 14
the sale of certain drilling services division assets in the prior period. For
the year ended January 31, 1999, TransTexas recognized a pretax gain of $63.6
million from the sale of certain drilling services division assets and a pretax
loss of $2.4 million due to postclosing adjustments to the Lobo Sale purchase
price.
Lease operating expenses for the year ended January 31, 2000 decreased $1.0
million from the prior period due primarily to decreases in maintenance costs.
Pipeline and gathering expenses increased $0.5 million primarily due to
operations at Galveston Bay Processing's natural gas treating facility at
Winnie, Texas. Other expenses for the year ended January 31, 2000 decreased $3.3
million due to the sale of certain drilling assets in the prior period.
Depreciation, depletion and amortization expense for the year ended January 31,
2000 decreased $11.1 million due to a decrease in natural gas volumes and a
$0.07 decrease in the depletion rate. General and administrative expenses
decreased by $1.8 million primarily as a result of a decrease in personnel and
related costs. Taxes other than income taxes increased by $2.7 million over the
prior period due primarily to increases in property taxes. The impairment loss
of $426.0 million for the year ended January 31, 1999 related to a write-down of
$420.5 million of TransTexas' net capitalized costs of gas and oil properties to
the cost center ceiling and a $5.5 million write-down of an underutilized
pipeline system that was exchanged as part of a settlement of certain natural
gas delivery commitments.
Interest income for the year ended January 31, 2000 decreased by $0.7
million as compared to the prior period due to lower cash balances available for
investment. Interest expense decreased $41.4 million primarily as a result of
discontinuing interest accruals on prepetition unsecured debt obligations.
Reorganization items of $8.3 million for the year ended January 31, 2000
included legal and other professional fees and expenses directly related to
TransTexas' Chapter 11 proceedings and an adjustment to record assets at
reorganization value. The extraordinary item for the year ended January 31, 2000
represents the discharge of certain liabilities subject to compromise pursuant
to the Plan.
Based on the reorganization value of the Company, the fair value of the
Preferred Stock and Common Stock was estimated to be zero. The Senior Preferred
Stock and Junior Preferred Stock are mandatorily redeemable in 2006 and 2010,
respectively. As a result, the Company will accrete, in the form of a non-cash
dividend deducted from net income available to common stockholders and charged
to retained earnings, an amount equal to the combined redemption amount totaling
$243.2 million (initial liquidation value) over the period prior to redemption.
In addition, earnings available to common stockholders will be reduced by
dividends paid on the Preferred Stock.
YEAR ENDED JANUARY 31, 1999, COMPARED WITH THE YEAR ENDED JANUARY 31, 1998
Gas, condensate and NGL revenues for the year ended January 31, 1999
decreased by $73.2 million from the prior year, due primarily to decreases in
gas and NGLs sales volumes attributable to the divestiture of producing
properties as a result of the Lobo Sale and normal production declines on other
properties. These declines were partially offset by increased production from
Eagle Bay. The average monthly prices received per Mcf of gas ranged from $1.90
to $2.36 in the year ended January 31, 1999, compared to a range of $1.49 to
$3.01 in the prior year. As of January 31, 1999, TransTexas had a total of 127
producing wells compared to 157 producing wells at January 31, 1998.
Transportation revenues decreased $12.1 million over the prior year due
primarily to the divestiture of the pipeline system in connection with the Lobo
Sale. Other revenues decreased by $0.4 million for the year ended January 31,
1999 due to a decrease in services provided to third parties prior to the sale
of the drilling services division. TransTexas' net gain on the sale of assets
includes a pre-tax gain of $63.6 million for the sale of certain drilling
services division assets and a pre-tax loss of $2.4 million due to post-closing
adjustments to the Lobo Sale purchase price.
Lease operating expenses for the year ended January 31, 1999 decreased by
$4.8 million from the prior year due primarily to the Lobo Sale offset by
increased operating expenses for the Eagle Bay field. Pipeline and gathering
expenses decreased by $9.4 million from the prior year due primarily to the
divestiture of the pipeline system. NGL costs decreased by $14.5 million from
the prior year due to the Lobo Sale and the resulting decrease in the volumes of
natural gas processed. Other expenses for the year ended January 31, 1999
increased $0.2 million primarily due to increased costs related to providing
services to the new operator of the Lobo Trend properties prior to divestiture
of the Company's drilling services assets. Depreciation, depletion
12
<PAGE> 15
and amortization expense for the year ended January 31, 1999 increased $3.5
million due to a $0.85 per Mcfe increase in the depletion rate due to higher
acquisition cost of properties and increased drilling and development costs,
partially offset by the Lobo Sale and the resulting decrease in TransTexas'
undedicated natural gas production. General and administrative expenses
decreased by $26.3 million primarily as a result of a decrease in litigation
expense. Taxes other than income taxes decreased by $4.3 million over the prior
year due primarily to decreases in ad valorem, severance and excise taxes as a
result of the decrease in the number of producing wells, partially offset by an
increase in franchise taxes. The impairment loss of $426.0 million for the year
ended January 31, 1999 relates to an aggregate write-down of $420.5 million of
TransTexas' net capitalized costs of gas and oil properties as a result of the
limitation on net capitalized costs of gas and oil properties and a $5.5 million
write-down of an underutilized pipeline system.
Interest income for the year ended January 31, 1999 decreased by $11.2
million as compared to the prior period due to lower cash balances available for
investment. Interest expense decreased by $0.7 million primarily as a result of
the retirement of the Senior Secured Notes in June 1997, offset in part by an
increase in interest attributable to the issuance of dollar-denominated
production payments and a decrease in the amount of interest capitalized in
connection with unevaluated leasehold acreage.
LIQUIDITY AND CAPITAL RESOURCES
On April 19, 1999, TransTexas filed a voluntary petition for relief under
Chapter 11 of the U.S. Bankruptcy Code. As a result of the Chapter 11 filing,
the Company was prohibited from paying, and creditors were prohibited from
attempting to collect, claims or debts arising prior to the bankruptcy. The
United States Bankruptcy Court for the Southern District of Texas, Corpus
Christi Division confirmed the Company's Second Amended, Modified and Restated
Plan of Reorganization dated January 25, 2000 (the "Plan") on February 7, 2000.
The Effective Date of the Plan is March 17, 2000. In connection with the
Effective Date of the Plan, the Company
(1) paid approximately $2.6 million in cash to settle certain accounts
payable and royalty claims;
(2) agreed to pay approximately $28.3 million to settle certain
accounts payable, severance, property and franchise taxes. The $28.3
million is payable in quarterly installments generally over a five year
period with stated interest ranging from 8% to 10%. The Company agreed to
pay approximately $8.0 million of this amount in fiscal 2001.
(3) paid approximately $21.9 million in cash, issued $200 million
principal amount of 15% Senior Secured Notes due 2005 (the "Notes"),
222,455,320 shares of Series A Senior Preferred Stock, 20,716,080 shares of
Series A Junior Preferred Stock, 1,002,500 shares of Class A Common Stock,
247,500 shares of Class B Common Stock and 625,000 warrants to purchase
Class A Common Stock to settle the TransTexas Senior Secured Notes Claims.
A portion of this distribution was reallocated pursuant to the Plan as
follows:
(a) $20 million in cash and five million shares of Senior Preferred
Stock to settle on a pro rata basis all general prepetition unsecured
claims;
(b) $1.8 million in cash, 2,455,320 shares of Senior Preferred
Stock and all of the Junior Preferred Stock to the holders of TransTexas
13 3/4% Senior Subordinated Notes;
(c) 52,500 shares of Class A Common Stock and warrants exercisable
to purchase 109,375 shares of Class A Common Stock at a price of $120
per share to the holders of the old TransTexas common stock who are not
Affiliates of the Debtor (as defined in the Plan); and
(d) all of the Class B Common Stock and warrants exercisable to
purchase 515,625 shares of Class A Common Stock at an exercise price of
$120 per share to John R. Stanley.
(4) issued $6.7 million in secured notes in exchange for old secured
notes and related accrued interest; and
(5) canceled all of the old TransTexas common stock and 13 3/4% Senior
Subordinated Notes.
13
<PAGE> 16
On the Effective Date, the Company, as Borrower, and Galveston Bay
Processing Corporation and Galveston Bay Pipeline Company, as Guarantors,
entered into an Oil and Gas Revolving Credit and Term Loan Agreement, dated as
of March 15, 2000 (the "Oil and Gas Facility") with GMAC Commercial Credit LLC
("GMACC"), as a Lender and as Agent. The Oil and Gas Facility consists of a term
loan (the "Term Loan") in the amount of $22.5 million and a revolving facility
(the "Revolving Loan") in a maximum amount of $30 million (all of which was
funded on the Effective Date). The Term Loan bears interest at a rate of 14% per
annum and the Revolving Loan bears interest at a rate of 13 1/2% per annum.
Interest on the Term Loan and the Revolving Loan is payable monthly in arrears.
Principal amortization of the Term Loan is due in 20 quarterly installments of
$56,250 each, with the balance due March 14, 2005. The principal amount of the
Revolving Loan is due on March 14, 2005; however the Company may, and in certain
circumstances must, make prepayments of such amount. If, subsequent to such
prepayments, the Company demonstrates sufficient collateral value meeting the
requirements of the Oil and Gas Facility provisions, the Company may be entitled
to borrow additional advances under the Revolving Loan. The Oil and Gas Facility
is secured by substantially all of the assets of the Company. The security
interest in accounts receivable and inventory securing the Oil and Gas Facility
is subordinated to the security interest of GMACC under the Accounts Receivable
Facility.
On the Effective Date, the Company, as Issuer, Galveston Bay Pipeline
Company and Galveston Bay Processing Corporation, as Guarantors, and Firstar
Bank, N.A., as Trustee, entered into an Indenture dated as of March 15, 2000,
pursuant to which the Company issued the Notes. Interest on the Notes is due
semi-annually on March 15 and September 15. The Notes are secured by
substantially all of the assets of the Company other than accounts receivable
and inventory. The Indenture contains certain covenants that restrict the
Company's ability to incur indebtedness, engage in related party transactions,
dispose of assets or engage in sale/leaseback transactions, issue dividends on
common stock, change its line of business, consolidate or merge with or into
another entity or convey, transfer or lease all or substantially all of its
assets, and suffer a change of control. The security interest in favor of the
Trustee is subordinated to the security interest in favor of the agent under the
Oil and Gas Facility.
On the Effective Date, the Company and GMACC entered into a Third Amended
and Restated Accounts Receivable Management and Security Agreement, dated as of
March 15, 2000 (the "Accounts Receivable Facility"). The Accounts Receivable
Facility is a revolving credit facility secured by accounts receivable and
inventory. The maximum loan amount under the facility is $15 million, against
which the Company may from time to time, subject to the conditions of the
Accounts Receivable Facility, borrow, repay and reborrow. As of April 28, 2000,
$0.5 million was available for lending. Advances under the facility bear
interest at a rate per annum equal to the higher of (i) the prime commercial
lending rate of The Bank of New York plus 1/2 of 1%, and (ii) the Federal Funds
Rate plus 1%, payable monthly in arrears. The outstanding principal balance
under the Accounts Receivable Facility will be due on March 14, 2005.
As of the Effective Date, the Company has outstanding 222,455,320 shares of
Series A Senior Preferred Stock (the "Senior Preferred Stock") with a
liquidation preference of $1.00 per share plus accrued and unpaid dividends. The
terms of the Senior Preferred Stock include a cumulative dividend preference,
payable quarterly out of funds legally available therefor, if any. During the
first two years following the Effective Date, the Company will be required to
pay cash dividends at a rate of $0.10 per share per annum, or, at its option,
in-kind dividends of additional shares of Senior Preferred Stock at a rate of
$0.20 per share per annum. The Senior Preferred Stock is mandatorily redeemable
on March 15, 2006 at a rate of $1.00 per share plus accrued and unpaid
dividends. One-half of the then-outstanding shares of Senior Preferred Stock is
mandatorily convertible into shares of Class A Common Stock at the rate of
0.3461 shares of Class A Common Stock per $1.00 of liquidation preference if
either (i) more than 75 million shares of Senior Preferred Stock remain
outstanding after March 15, 2006 or (ii) the Company fails to pay dividends on
the Senior Preferred Stock on any two dividend payment dates. The Certificate of
Designation for the Senior Preferred Stock includes restrictive covenants
comparable to those included in the Indenture.
As of the Effective Date, the Company had outstanding 20,716,080 shares of
Series A Junior Preferred Stock (the "Junior Preferred Stock") with a
liquidation preference of $1.00 per share plus accrued and unpaid dividends. The
terms of the Junior Preferred Stock include a cumulative dividend preference,
payable
14
<PAGE> 17
quarterly out of funds legally available therefor, if any. During the first six
years following the Effective Date, the Company will be required to pay in-kind
dividends of additional shares of Junior Preferred Stock at a rate of $0.10 per
share per annum. Thereafter, dividends will be payable both in cash at a rate of
$0.10 per share per annum and in kind at a rate of $0.10 per share per annum.
The Junior Preferred Stock is mandatorily redeemable on March 15, 2010 at a rate
of $1.00 per share plus accrued and unpaid dividends. Each share of Junior
Preferred Stock is mandatorily convertible into shares of Class A Common Stock
at the rate of 0.1168 shares of Class A Common Stock per $1.00 of liquidation
preference if either (i) more than 75 million shares of Senior Preferred Stock
remain outstanding after March 15, 2006 or (ii) the Company fails to pay
dividends on the Senior Preferred Stock on any two dividend payment dates. The
Certificate of Designation for the Junior Preferred Stock includes restrictive
covenants comparable to those included in the Indenture. Such covenants will
become effective when all of the Notes (and any refinancings thereof) have been
repaid and all of the Senior Preferred Stock has been redeemed.
There can be no assurance that the Company will have sufficient funds or
funds legally available for the payment of either cash or in kind dividends.
In February and September 1998, TransTexas entered into two production
payment agreements with an unaffiliated third party pursuant to which the
Company conveyed certain properties (the "Original Subject Interests") in the
form of a term overriding royalty interest. As of January 31, 2000, the
outstanding balance of these production payments was $35.1 million.
In March 2000, the Original Subject Interests were reconveyed to TransTexas
and a new production payment drilling program agreement was entered into between
TransTexas and two unaffiliated third parties in the form of a term overriding
royalty interest carved out of and burdening certain properties including the
Original Subject Interests (collectively, the "New Subject Interests"). The
Company has the right to offer additional properties ("Offered Wells") to the
production payment parties at a negotiated purchase price, up to an aggregate
maximum for all such wells, of up to $52 million. Upon acceptance of the Offered
Wells, one of the third parties would be committed to pay to the Company either
the drilling costs of the Offered Wells or, at the third party's discretion, a
higher, mutually agreed upon amount. The production payment calls for the
repayment of the primary sum plus an amount equivalent to a 15% annual interest
rate on the unpaid portion of such primary sum. The Oil and Gas Facility places
certain restrictions on the amount that may be outstanding under the production
payment. As of March 15, 2000, the primary sum outstanding under the production
payment was $35 million.
In connection with the new production payment, the Company entered into
various marketing and processing agreements with one of the third parties.
Pursuant to these agreements, the Company will pay a nominal marketing fee with
respect to the Company's production associated with the New Subject Interests.
In addition, the third party will pay a fee for certain processing services to
be provided by Galveston Bay Processing. See Item 7A for information about
certain hedging provisions in the new production payment agreements.
After the Effective Date, TransTexas remains highly leveraged and will have
significant cash requirements for debt service and significant charges for
Preferred Stock dividends to net income available for common stockholders.
In order to maintain or increase proved oil and gas reserves, TransTexas is
required to make substantial capital expenditures for the exploration and
development of natural gas and oil reserves in the normal course of business.
For the fiscal year ended January 31, 2000, total capital expenditures incurred
were $54 million, including $6 million for lease acquisitions, $42 million for
drilling and development and $6 million for gas gathering, other equipment and
seismic acquisitions. Capital expenditures for fiscal 2001 are estimated to be
approximately $66 million which amount is in excess of anticipated cash flows
from operating activities. Management's plans are to fund its 2001 debt service
requirements and planned capital expenditures with cash flows from existing
producing properties and certain identified relatively low risk exploratory
prospects to be drilled and completed during fiscal 2001. Expected reserves from
these prospects will be used to obtain additional production payment financing
which, together with excess cash flow from these prospects, is necessary to
continue to fund debt service and capital expenditure requirements. Should these
prospects not be
15
<PAGE> 18
productive or should prices decline for a prolonged period, absent other sources
of capital, the Company would substantially reduce its capital expenditures
which would limit its ability to maintain or increase production and in turn
meet its debt service requirements. Asset sales and financings are restricted
under the terms of TransTexas' debt documents and Senior Preferred Stock.
Potential Tax Liability
Based upon independent legal advice, including an opinion from a nationally
recognized law firm, TransTexas did not report any significant federal income
tax liability as a result of the Lobo Sale. There are, however, significant
uncertainties regarding TransTexas' tax position and no assurance can be given
that TransTexas' position will be sustained if challenged by the Internal
Revenue Service (the "IRS"). Prior to the bankruptcy, TransTexas was part of an
affiliated group for tax purposes (the "TNGC Consolidated Group"), which
included TNGC Holdings Corporation, the sole stockholder of TransAmerican
("TNGC"), TransAmerican, TEC, TransTexas and TARC. If the IRS were to
successfully challenge TransTexas' position, each member of the TNGC
Consolidated Group would be severally liable under the consolidated tax return
regulations for the resulting taxes, in the estimated amount of up to $270
million (assuming the use of none of the available tax attributes of the TNGC
Consolidated Group), possible penalties equal to 20% of the amount of the tax,
and interest at the statutory rate (currently 9%) on the tax and penalties (if
any). Assuming the use of available tax attributes of the TNGC Consolidated
Group, primarily the carryback of net operating loss carryovers ("NOLs"), this
estimated tax would be reduced to approximately $10 million (with the NOL
carrybacks reducing interest as of the end of the tax year in which the
carryback arose and not reducing penalties). In this event, a substantial
portion of TransTexas' NOLs would be utilized and thus not available to
TransTexas after the bankruptcy. Pursuant to the tax allocation agreement among
the members of the TNGC Consolidated Group, TransAmerican is obligated to fund
the entire tax deficiency (if any) resulting from the Lobo Sale. There can be no
assurance that TransAmerican would be able to make any such payment and the
other members of the TNGC Consolidated Group, including TransTexas as a former
member, may be required to pay the tax, penalties and interest. There can be no
assurance that TransTexas could pay this contingency.
Part of the refinancing of TransAmerican's debt in 1993 involved the
cancellation of approximately $65.9 million of accrued interest and of a
contingent liability for interest of $102 million owed by TransAmerican.
TransAmerican has taken the federal tax position that the entire amount of this
debt cancellation is excluded from its income under the cancellation of
indebtedness provision (the "COD Exclusion") of the Internal Revenue Code of
1986, as amended (the "Tax Code"), and has reduced its tax attributes (including
its net operating loss and credit carryforwards) as a consequence of the COD
Exclusion. No federal tax opinion was rendered with respect to this transaction,
however, and TransAmerican has not obtained a ruling from the IRS regarding this
transaction. TransTexas believes that there is substantial legal authority to
support the position that the COD Exclusion applies to the cancellation of
TransAmerican's indebtedness. However, due to factual and legal uncertainties,
there can be no assurance that the IRS will not challenge this position, or that
any such challenge would not be upheld. Under the Tax Allocation Agreement,
TransTexas has agreed to pay an amount equal to any federal tax liability (which
would be approximately $25.4 million) attributable to the inapplicability of the
COD Exclusion. Any such tax would be offset in future years by alternative
minimum tax credits and retained loss and credit carryforwards to the extent
recoverable from TransAmerican.
As a former member of the TNGC Consolidated Group, TransTexas will be
severally liable for any tax liability resulting from any transaction of the
TNGC Consolidated Group that occurred during any taxable year of the TNGC
Consolidated Group during which TransTexas was a member, including the above-
described transactions. The IRS has commenced an audit of the consolidated
federal income tax returns of the TNGC Consolidated Group for its taxable years
ended July 31, 1994 and July 31, 1995. The Company has not been advised by the
IRS as to whether any tax deficiencies will be proposed by the IRS as a result
of its review.
TransTexas expects that a significant portion of its NOLs will be
eliminated and the use of those NOLs that are not eliminated will be severely
restricted as a consequence of the Plan. In addition, certain other tax
16
<PAGE> 19
attributes of TransTexas may under certain circumstances be eliminated or
reduced as a consequence of the Plan. The elimination or reduction of NOLs and
such other tax attributes may substantially increase the amount of tax payable
by TransTexas following the consummation of the Plan as compared with the amount
of tax payable had no such attribute reduction or restriction been required.
Inflation and Changes in Prices
TransTexas' results of operations and the value of its gas properties are
highly dependent upon the prices TransTexas receives for its natural gas,
condensate and oil. Substantially all of TransTexas' sales of natural gas,
condensate and oil are made pursuant to long-term contracts at market prices.
Accordingly, the prices received by TransTexas for its natural gas production
are dependent upon numerous factors beyond the control of TransTexas, including
the level of consumer product demand, the North American supply of natural gas,
government regulations and taxes, the price and availability of alternative
fuels, the level of foreign imports of oil and natural gas and the overall
economic environment. Demand for natural gas is seasonal, with demand typically
higher during the summer and winter, and lower during the spring and fall, with
concomitant changes in price. As a result of high demand for drilling services
in 1998 and 1999, TransTexas experienced increases in the cost of oilfield
services and equipment used in exploration and development drilling, and to a
lesser extent well completion and production costs.
Any significant decline in current prices for natural gas could have a
material adverse effect on TransTexas' financial condition, results of
operations and quantities of reserves recoverable on an economic basis. Based on
an assumed average net daily production level of approximately 97 MMcfd,
TransTexas estimates that a $0.10 per MMBtu change in average gas prices
received would change annual operating income by approximately $3.6 million.
Forward-Looking Statements
Forward-looking statements, within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
are included throughout this report. All statements other than statements of
historical facts included in this report regarding TransTexas' financial
position, business strategy, and plans and objectives of management for future
operations, including, but not limited to words such as "anticipates,"
"expects," "estimates," "believes" and "likely" indicate forward-looking
statements. TransTexas' management believes its current views and expectations
are based on reasonable assumptions; however, there are significant risks and
uncertainties that could significantly affect expected results. Factors that
could cause actual results to differ materially from those in the
forward-looking statements include fluctuations in the commodity prices for
natural gas, crude oil, condensate and natural gas liquids, the extent of
TransTexas' success in discovering, developing and producing reserves,
conditions in the equity and capital markets, competition and the ultimate
resolution of litigation.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from adverse changes in prices for
natural gas, condensate and oil and interest rates as discussed below.
The Company's revenues, profitability, access to capital and future rate of
growth are substantially dependent upon the prevailing prices of natural gas,
condensate and oil. These prices are subject to wide fluctuations in response to
relatively minor changes in supply and demand and a variety of additional
factors beyond the Company's control. From time to time, the Company has
utilized hedging transactions with respect to a portion of its gas and oil
production to achieve a more predictable cash flow, as well as to reduce
exposure to price fluctuations. While hedging limits the downside risk of
adverse price movements, it may also limit future revenues from favorable price
movements. Because gains or losses associated with hedging transactions are
included in gas and oil revenues when the hedged volumes are delivered, such
gains and losses
17
<PAGE> 20
are generally offset by similar changes in the realized prices of commodities.
The Company had no open hedging transactions at January 31, 2000.
Pursuant to the terms of the Company's production payment agreement entered
into in March 2000, the production payment purchasers entered into the following
hedge arrangements with respect to a portion of the natural gas and condensate
production associated therewith and which effectively hedge a portion of the
Company's production:
<TABLE>
<CAPTION>
CONTRACT PRICE
---------------
COLLAR
VOLUMES IN ---------------
PERIOD MMBTUS/BBLS FLOOR CEILING
- ------ ----------- ----- -------
<S> <C> <C> <C>
Natural Gas:
April 2000 -- October 2000............................ 3,745,000 $2.10 $3.40
November 2000 -- March 2001........................... 1,887,500 2.35 3.95
Condensate:
April 2000 -- September 2000.......................... 228,750 18.50 32.50
October 2000 -- March 2001............................ 182,000 18.50 29.95
</TABLE>
Under these contracts, the counterparty is required to make payment to the
production payment purchaser if the settlement price for the period is below the
floor, and the production payment purchaser is required to make payment to the
counterparty if the settlement price for any period is above the ceiling price.
Because substantially all of its long-term obligations at January 31, 2000
are at fixed rates, the Company considers its interest rate exposure to be
minimal. The Company's borrowings under its credit facility are subject to a
rate of interest that fluctuates based on short-term interest rates ($4.2
million outstanding at January 31, 2000). The Company had no open interest rate
hedge positions at January 31, 2000.
18
<PAGE> 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... 20
Financial Statements:
Consolidated Balance Sheet................................ 21
Consolidated Statement of Operations...................... 22
Consolidated Statement of Stockholders' Equity
(Deficit).............................................. 23
Consolidated Statement of Cash Flows...................... 24
Notes to Consolidated Financial Statements................ 25
</TABLE>
19
<PAGE> 22
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
TransTexas Gas Corporation:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statement of operations, of stockholders' equity (deficit) and of
cash flows present fairly, in all material respects, the financial position of
TransTexas Gas Corporation (successor) at January 31, 2000 and TransTexas Gas
Corporation (predecessor) at January 31, 1999 (successor and predecessor are
collectively referred to as the "Company"), and the results of the predecessor's
operations and its cash flows for each of the three years in the period ended
January 31, 2000, in conformity with accounting principles generally accepted in
the United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 2 to the consolidated financial statements, on April
19, 1999, the Company filed a voluntary petition for relief under Chapter 11 of
the U.S. Bankruptcy Code. The Company's Plan of Reorganization, as amended,
became effective on March 17, 2000 and the Company emerged from Chapter 11. In
connection with its emergence from Chapter 11, the Company adopted fresh-start
reporting as of January 31, 2000.
PricewaterhouseCoopers LLP
Houston, Texas
May 1, 2000
20
<PAGE> 23
TRANSTEXAS GAS CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
--------- -----------
JANUARY 31,
-----------------------
2000 1999
--------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 18,288 $ 3,775
Accounts receivable....................................... 19,592 16,091
Receivable from affiliates................................ 1,107 1,286
Inventories............................................... 1,741 3,210
Other current assets...................................... 926 3,693
-------- ----------
Total current assets.............................. 41,654 28,055
-------- ----------
Property and equipment...................................... 327,087 1,459,630
Less accumulated depreciation, depletion and amortization... -- 1,167,487
-------- ----------
Net property and equipment -- based on the full cost
method of accounting for gas and oil properties of
which $90,000 and $20,477 are excluded from
amortization at January 31, 2000 and 1999,
respectively........................................... 327,087 292,143
-------- ----------
Other assets, net........................................... 513 25,169
-------- ----------
$369,254 $ 345,367
======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt...................... $ 6,934 $ --
Accounts payable.......................................... 15,759 --
Accrued liabilities....................................... 10,061 983
-------- ----------
Total current liabilities......................... 32,754 983
-------- ----------
Production payments, less current portion................... 32,460 56,260
Long-term debt, less current maturities..................... 48,290 --
Note payable to affiliate................................... 196,346 --
Deferred income taxes....................................... 10,000 --
Other liabilities........................................... 49,404 --
Liabilities subject to compromise........................... -- 718,139
Commitments and contingencies (Note 14)..................... -- --
Stockholders' equity (deficit) (Note 2):
Common stock, $0.01 par value, 100,000,000 shares
authorized, 57,515,566 shares issued and outstanding at
January 31, 2000 and 1999, respectively................ 740 740
Additional paid-in capital................................ (740) 19,915
Accumulated deficit....................................... -- (188,265)
-------- ----------
-- (167,610)
Treasury stock, at cost, 16,484,434 shares................ -- (262,405)
-------- ----------
Total stockholders' equity (deficit).............. -- (430,015)
-------- ----------
$369,254 $ 345,367
======== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
21
<PAGE> 24
TRANSTEXAS GAS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREDECESSOR
---------------------------------------
YEAR ENDED JANUARY 31,
---------------------------------------
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Gas, condensate and natural gas liquids............. $ 111,400 $ 91,319 $ 164,538
Transportation...................................... -- -- 12,055
Gain (loss) on the sale of assets................... (438) 61,247 543,365
Other............................................... 2,770 4,200 3,313
----------- ----------- -----------
Total revenues.............................. 113,732 156,766 723,271
----------- ----------- -----------
Costs and expenses:
Operating........................................... 18,649 22,352 50,957
Depreciation, depletion and amortization............ 75,044 86,137 82,659
General and administrative.......................... 19,883 21,938 48,156
Taxes other than income taxes....................... 9,788 7,130 11,399
Impairment of gas and oil properties................ -- 425,966 --
----------- ----------- -----------
Total costs and expenses.................... 123,364 563,523 193,171
----------- ----------- -----------
Operating income (loss)............................. (9,632) (406,757) 530,100
----------- ----------- -----------
Other income (expense):
Interest income..................................... 472 1,205 12,393
Interest expense, net............................... (38,526) (79,921) (80,580)
----------- ----------- -----------
Total other income (expense)................ (38,054) (78,716) (68,187)
----------- ----------- -----------
Income (loss) before reorganization items,
income taxes and extraordinary item....... (47,686) (485,473) 461,913
Reorganization items:
Legal and professional fees......................... (8,325) -- --
Revaluation of assets to fair market value.......... 58,836 -- --
----------- ----------- -----------
Total reorganization items.................. 50,511 -- --
----------- ----------- -----------
Income tax expense (benefit).......................... 10,000 (38,882) 161,669
----------- ----------- -----------
Income (loss) before extraordinary item..... (7,175) (446,591) 300,244
Extraordinary item -- gain (loss) on early
extinguishment of debt, net of tax.................. 436,490 (1,142) (72,043)
----------- ----------- -----------
Net income (loss)........................... $ 429,315 $ (447,733) $ 228,201
=========== =========== ===========
Basic and diluted net income (loss) per share:
Income (loss) before extraordinary item............. $ (0.13) $ (7.76) $ 4.49
Extraordinary item.................................. 7.59 (0.02) (1.08)
----------- ----------- -----------
$ 7.46 $ (7.78) $ 3.41
=========== =========== ===========
Weighted average number of shares outstanding for
basic and diluted net income (loss) per share....... 57,515,566 57,515,566 66,905,903
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
22
<PAGE> 25
TRANSTEXAS GAS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
RETAINED
COMMON STOCK ADDITIONAL EARNINGS
-------------------- PAID-IN CAPITAL (ACCUMULATED TREASURY ADVANCES
SHARES AMOUNT (CAPITAL DEFICIT) DEFICIT) STOCK TO AFFILIATES
----------- ------ ----------------- ------------ --------- -------------
<S> <C> <C> <C> <C> <C> <C>
PREDECESSOR:
Balance at January 31, 1997.............. 74,000,000 $ 740 $(123,524) $ 31,267 $ -- $(59,278)
Purchase of treasury stock, at cost,
16,484,434 shares.................... -- -- -- -- (262,405) --
Advance to affiliate................... -- -- (13,304) -- -- --
Contribution from affiliate............ -- -- 21,513 -- -- --
Assumption of tax liability by
TransAmerican........................ -- -- 129,549 -- -- --
Contribution of debt issue costs by
TEC.................................. -- -- 12,600 -- --
Collection of advances to affiliates... -- -- -- -- -- 59,278
Net income............................. -- -- -- 228,201 -- --
----------- ----- --------- --------- --------- --------
Balance at January 31, 1998.............. 74,000,000 740 26,834 259,468 (262,405) --
Advance to affiliate................... -- -- (6,919) -- -- --
Net loss............................... -- -- -- (447,733) -- --
----------- ----- --------- --------- --------- --------
Balance at January 31, 1999.............. 74,000,000 740 19,915 (188,265) (262,405) --
Contribution from TEC.................. -- -- 700 -- -- --
Adoption of fresh-start reporting...... (21,355) (241,050) 262,405 --
Net income............................. -- -- -- 429,315 -- --
SUCCESSOR:
----------- ----- --------- --------- --------- --------
Balance at January 31, 2000.............. 1,250,000 $ 740 $ (740) $ -- $ -- $ --
=========== ===== ========= ========= ========= ========
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY (DEFICIT)
----------------
<S> <C>
PREDECESSOR:
Balance at January 31, 1997.............. $(150,795)
Purchase of treasury stock, at cost,
16,484,434 shares.................... (262,405)
Advance to affiliate................... (13,304)
Contribution from affiliate............ 21,513
Assumption of tax liability by
TransAmerican........................ 129,549
Contribution of debt issue costs by
TEC.................................. 12,600
Collection of advances to affiliates... 59,278
Net income............................. 228,201
---------
Balance at January 31, 1998.............. 24,637
Advance to affiliate................... (6,919)
Net loss............................... (447,733)
---------
Balance at January 31, 1999.............. (430,015)
Contribution from TEC.................. 700
Adoption of fresh-start reporting...... --
Net income............................. 429,315
SUCCESSOR:
---------
Balance at January 31, 2000.............. $ --
=========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
23
<PAGE> 26
TRANSTEXAS GAS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
PREDECESSOR
----------------------------------
YEAR ENDED JANUARY 31,
----------------------------------
2000 1999 1998
--------- --------- ----------
<S> <C> <C> <C>
Operating activities:
Net income (loss)......................................... $ 429,315 $(447,733) $ 228,201
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Reorganization adjustments:
Extraordinary item.................................... (436,490) 1,142 72,043
Revaluation of assets................................. (58,836) -- --
Depreciation, depletion and amortization................ 75,044 86,137 82,659
Impairment of gas and oil properties.................... -- 425,966 --
Amortization of debt issue costs........................ 1,641 5,730 2,030
Accretion on subordinated notes......................... -- -- 4,941
(Gain) loss on the sale of assets....................... 438 (61,247) (543,365)
Deferred income taxes................................... 10,000 (38,882) 161,670
Repayment of volumetric production payments............. -- -- (45,134)
Amortization of deferred revenue........................ -- -- (9,420)
Changes in assets and liabilities:
Accounts receivable................................... (3,501) 965 61,604
Receivable from affiliates............................ 179 (1,286) 3,248
Inventories........................................... 1,469 13,227 (3,953)
Other current assets.................................. 2,767 7,026 10,265
Accounts payable...................................... 5,430 7,981 18,451
Accrued interest payable to affiliates................ 14,628 1,851 6,762
Accrued liabilities................................... (3,271) 9,177 (50,966)
Transactions with affiliates, net..................... 700 (6,166) 31,223
Other assets.......................................... 378 126 65
Other liabilities..................................... 6,691 (5,384) (8,371)
--------- --------- ----------
Net cash provided (used) by operating activities... 46,582 (1,370) 21,953
--------- --------- ----------
Investing activities:
Capital expenditures...................................... (42,342) (190,601) (423,915)
Proceeds from the sale of assets.......................... 445 156,212 1,062,490
Withdrawals from cash restricted for interest............. -- -- 46,000
Advances to affiliate..................................... -- (1,648) --
Payment of advances by affiliate.......................... -- -- 24,750
Contribution to affiliate................................. -- -- (13,304)
--------- --------- ----------
Net cash provided (used) by investing activities... (41,897) (36,037) 696,021
--------- --------- ----------
Financing activities:
Issuance of note payable.................................. 30,000 -- --
Issuance of long-term debt................................ -- 19,650 14,946
Principal payments on long-term debt...................... (1,896) (62,235) (10,128)
Revolving credit agreement, net........................... 3,860 (7,572) (18,351)
Issuance of production payments........................... -- 69,824 20,977
Principal payments on production payments................. (22,136) (17,355) (29,504)
Issuance of note payable to affiliate..................... -- 1,395 486,991
Retirement of senior secured notes........................ -- -- (892,000)
Debt issue costs.......................................... -- (1,027) (13,559)
Increase in cash restricted for share repurchases......... -- -- (399,284)
Withdrawals from cash restricted for share repurchases.... -- -- 399,284
Purchases of treasury stock............................... -- -- (262,405)
--------- --------- ----------
Net cash provided (used) by financing activities... 9,828 2,680 (703,033)
--------- --------- ----------
Increase (decrease) in cash and cash equivalents... 14,513 (34,727) 14,941
Beginning cash and cash equivalents......................... 3,775 38,502 23,561
--------- --------- ----------
Ending cash and cash equivalents............................ $ 18,288 $ 3,775 $ 38,502
========= ========= ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
24
<PAGE> 27
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
TransTexas Gas Corporation (together with its subsidiaries, the "Company"
or "TransTexas") was incorporated in Delaware in May 1993. Prior to March 17,
2000 (the "Effective Date"), TransTexas was a subsidiary of TransAmerican Energy
Corporation ("TEC"), which is wholly owned by TEC/TransAmerican LLC, which is
wholly owned by TransAmerican Natural Gas Corporation ("TransAmerican"). Unless
otherwise noted, the term "TransTexas" refers to TransTexas Gas Corporation and
its subsidiaries, including Galveston Bay Processing Corporation and Galveston
Bay Pipeline Company.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date(s) of the financial
statements and the reported amounts of revenues and expenses during the
reporting period(s). TransTexas' most significant financial estimates are based
on remaining proved gas and oil reserves. Actual results could differ from these
estimates.
Cash and Cash Equivalents
TransTexas considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Cash and cash
equivalents at January 31, 2000 includes $1.4 million restricted for payments of
future goods and services provided by certain vendors.
Inventories
TransTexas' inventories, consisting primarily of tubular goods, are stated
at the lower of average cost (which, at January 31, 2000, was estimated fair
value) or market.
Gas and Oil Properties
TransTexas uses the full cost method of accounting for exploration and
development costs. Under this method of accounting, the cost for successful as
well as unsuccessful exploration and development activities are capitalized.
Such capitalized costs and estimated future development and reclamation costs
are amortized on a unit-of-production method. Net capitalized costs of gas and
oil properties are limited to the lower of unamortized cost or the cost center
ceiling, defined as the sum of the present value (10% discount rate) of
estimated unescalated future net revenues from proved reserves; plus the cost of
properties not being amortized, if any; plus the lower of cost or estimated fair
value of unproved properties included in the costs being amortized, if any; less
related income tax effects. As of January 31, 1999, TransTexas' net capitalized
costs of gas and oil properties exceeded the cost center ceiling. TransTexas
adjusted its net capitalized costs resulting in a non-cash pre-tax loss of
approximately $426 million for the year ended January 31, 1999. Due to higher
gas and oil prices realized by the Company subsequent to January 31, 1999, the
impairment was less than would have been recorded using January 31, 1999 prices.
Proceeds from the sale of gas and oil properties are applied to reduce the
costs in the cost center unless the sale involves a significant quantity of
reserves in relation to the cost center, in which case a gain or loss is
recognized.
Unevaluated properties and associated costs not currently being amortized
and included in gas and oil properties were $92.2 million and $20 million at
January 31, 2000 and 1999, respectively. The properties represented by these
costs were undergoing exploration activities at such date, or are properties on
which
25
<PAGE> 28
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
TransTexas intends to commence such activities in the future. TransTexas
believes that the unevaluated properties at January 31, 2000 will be
substantially evaluated in 12 to 24 months and it will begin to amortize these
costs at such time.
Other Property and Equipment
Other property and equipment are stated at cost. The cost of repairs and
minor replacements is charged to operating expense while the cost of renewals
and betterments is capitalized. At the time depreciable assets are retired or
otherwise disposed of, the cost and related accumulated depreciation or
amortization are removed from the accounts. Gains or losses on dispositions in
the ordinary course of business are included in the consolidated statement of
operations. Impairment of other property and equipment is reviewed whenever
events or changes in circumstances indicate that the carrying value of assets
may not be recoverable.
Depreciation of oilfield services equipment and other buildings and
equipment is computed by the straight-line method at rates that will amortize
the unrecovered cost of depreciable property over their estimated useful lives
of 4 to 10 years.
Costs of improving leased property are amortized over the estimated useful
lives of the assets or the terms of the leases, whichever is shorter.
Environmental Remediation Costs
Environmental expenditures are expensed or capitalized as appropriate,
depending on their future economic benefit. Expenditures that relate to an
existing condition caused by past operations and that do not have future
economic benefits are expensed. Liabilities for these expenditures are provided
when the responsibility to remediate is probable and the amount of associated
costs is reasonably estimable.
Debt Issue Costs
Costs related to the issuance of long-term debt are classified as "Other
assets." Capitalized debt costs are amortized to interest expense over the
scheduled maturity of the debt utilizing the interest method. In the event of a
redemption of long-term debt, the related debt issue costs will be charged to
income in the period of presentation.
Defined Contribution Plan
TransTexas maintains a defined contribution plan, which incorporates a
"401(k) feature" as allowed under the Internal Revenue Code. All investments are
made through Massachusetts Mutual Life Insurance Company. Employees who are at
least 21 years of age and have completed one year of credited service are
eligible to participate on the next semiannual entry date. TransTexas matches
10%, 20% or 50% of employee contributions up to a maximum of 3% of the
participant's compensation, based on years of plan participation. TransTexas'
contributions with respect to this plan totaled $0.2 million, $0.3 million and
$0.5 million for years ended January 31, 2000, 1999 and 1998, respectively. All
Company contributions are currently funded.
Fair Value of Financial Instruments
TransTexas includes fair value information in the Notes to Consolidated
Financial Statements when the fair value of its financial instruments can be
determined and is different from the book value. TransTexas generally assumes
the book value of those financial instruments that are classified as current
approximate fair value because of the short maturity of these instruments. For
noncurrent financial instruments, TransTexas uses quoted market prices or, to
the extent that there are no available quoted market prices, market prices for
similar instruments. Due to the adoption of fresh-start reporting, all financial
instruments were recorded at estimated fair value, based on the present value of
amounts to be paid, at January 31, 2000.
26
<PAGE> 29
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Revenue Recognition
TransTexas recognizes revenues from the sales of natural gas, condensate
and natural gas liquids in the period of delivery. Revenues are recognized from
transportation of natural gas in the period the service is provided. The sales
method is used for natural gas imbalances that arise from jointly produced
properties. Volumetric production is monitored to minimize these natural gas
imbalances. A natural gas imbalance liability is recorded in other liabilities
if TransTexas' excess sales of natural gas exceed its estimated remaining
recoverable reserves for such properties.
Concentrations
Financial instruments that potentially expose TransTexas to credit risk
consist principally of cash and trade receivables. TransTexas selects depository
banks based upon management's review of the financial stability of the
institution. Balances generally exceed the $100,000 level covered by federal
deposit insurance. To date, TransTexas has not incurred any losses due to excess
deposits in any financial institution. Trade accounts receivable are generally
from companies with significant natural gas marketing activities, which would be
impacted by conditions or occurrences affecting that industry. TransTexas
performs ongoing credit evaluations and, generally, requires no collateral from
its customers. TransTexas is not aware of any significant credit risk relating
to its customers and has not experienced significant credit losses associated
with such receivables.
Approximately 65% of the Company's production was produced from four wells
in the Company's Eagle Bay field.
Hedging Agreements
From time to time, TransTexas enters into commodity price swap agreements
(the "Hedge Agreements") to reduce its exposure to price risk in the spot market
for natural gas. The Hedge Agreements are accounted for as hedges if the pricing
of the hedge agreement correlates with the pricing of the natural gas and oil
production hedged. Accordingly, gains or losses are deferred and recognized as
an increase or decrease in revenues in the respective month the physical volumes
are sold.
Pursuant to the terms of the Company's production payment agreement entered
into in March 2000, the production payment purchasers entered into the following
hedge arrangements with respect to a portion of the natural gas and condensate
production associated therewith and which effectively hedge a portion of the
Company's production:
<TABLE>
<CAPTION>
CONTRACT PRICE
----------------
COLLAR
VOLUMES IN ----------------
PERIOD MMBTUS/BBLS FLOOR CEILING
- ------ ----------- ------ -------
<S> <C> <C> <C>
Natural Gas:
April 2000 -- October 2000.......................... 3,745,000 $ 2.10 $ 3.40
November 2000 -- March 2001......................... 1,887,500 2.35 3.95
Condensate:
April 2000 -- September 2000........................ 228,750 18.50 32.50
October 2000 -- March 2001.......................... 182,000 18.50 29.95
</TABLE>
Under these contracts, the counterparty is required to make payment to the
production payment purchaser if the settlement price for the period is below the
floor, and the production payment purchaser is required to make payment to the
counterparty if the settlement price for any period is above the ceiling price.
27
<PAGE> 30
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes
Prior to the Effective Date, TransTexas filed a consolidated tax return
with TransAmerican. Income taxes were due from or payable to TransAmerican in
accordance with a tax allocation agreement, as amended, between TransTexas, TNGC
Holdings Corporation, TransAmerican and TransAmerican's other subsidiaries (the
"Tax Allocation Agreement"). It is TransTexas' policy to record income tax
expense as though TransTexas had filed separately. Subsequent to the Effective
Date, TransTexas is a stand alone taxpayer. Deferred income taxes are
recognized, at enacted tax rates, to reflect the future effects of temporary
differences arising between the financial reporting and tax bases of assets and
liabilities. Income taxes include federal and state income taxes.
Net Income (Loss) Per Share
Basic and diluted net income (loss) per share has been calculated based on
the weighted average number of shares of common stock outstanding during each
period, excluding treasury shares. After adoption of fresh-start reporting, the
number of common shares used to calculate basic earnings per share will be
1,250,000. Potential common shares to be included in diluted earnings per share,
if they are dilutive, will be 81,286,424, as follows:
<TABLE>
<S> <C>
Series A Senior Preferred Stock.......................... 76,991,786
Series A Junior Preferred Stock.......................... 2,419,638
Class A Common Stock..................................... 1,002,500
Class B Common Stock..................................... 247,500
Class A Common Stock Warrants............................ 625,000
----------
Total potential common shares....................... 81,286,424
==========
</TABLE>
Recently Issued Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"), which establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. In July
1999, the FASB issued SFAS 137, "Deferral of the Effective Date of FASB
Statement No 133," which delays the effective date for one year, to fiscal years
beginning after June 15, 2000. TransTexas is evaluating the impact of the
provisions of SFAS 133.
2. REORGANIZATION
On April 19, 1999, TransTexas filed a voluntary petition for relief under
Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for
the District of Delaware. On April 20, 1999, TEC and its wholly owned
subsidiary, TransAmerican Refining Corporation ("TARC"), also filed voluntary
petitions under Chapter 11. On May 20, 1999, the cases were transferred to the
United States Bankruptcy Court for the Southern District of Texas, Corpus
Christi Division (the "Bankruptcy Court"). The bankruptcy cases are being
jointly administered. TransTexas' Chapter 11 filing did not include its
subsidiaries, including Galveston Bay Processing and Galveston Bay Pipeline.
TransTexas filed its bankruptcy petition in order to preserve cash and to give
the Company the opportunity to restructure its debt. The Company's Second
Amended, Modified and Restated Plan of Reorganization dated January 25, 2000
(the "Plan") was confirmed by the Bankruptcy Court on February 7, 2000. The
Effective Date of the Plan is March 17, 2000.
The consolidated financial statements as of January 31, 2000 and for the
year then ended have been prepared in accordance with the American Institute of
Certified Public Accountants Statement of Position
28
<PAGE> 31
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code" ("SOP 90-7"). In accordance with guidance provided by SOP 90-7, the
consummation of the Plan (the "Reorganization") has been reflected through the
adoption of fresh-start reporting as though effective on January 31, 2000.
As a result of the bankruptcy filing, a significant amount of the Company's
liabilities, including secured debt, was subject to compromise. As of January
31, 2000 and 1999, liabilities subject to compromise included the following (in
thousands of dollars):
<TABLE>
<CAPTION>
PREDECESSOR
-------------------
JANUARY 31,
-------------------
2000(*) 1999
-------- --------
<S> <C> <C>
Long-term debt.............................................. $124,324 $125,170
Notes payable to affiliates................................. 456,533 457,928
Accounts payable............................................ 69,280 66,231
Accrued interest payable to affiliates...................... 23,241 8,613
Accrued liabilities......................................... 36,905 46,073
Other liabilities........................................... 21,927 14,124
-------- --------
$732,210 $718,139
======== ========
</TABLE>
- ---------------
(*) Immediately prior to adoption of fresh-start reporting.
As of the petition date, in accordance with SOP 90-7, TransTexas
discontinued the accrual of interest and amortization of deferred debt issue
costs related to liabilities subject to compromise. If such interest had
continued to be accrued, based on contractual terms without increase for default
provisions, and related deferred debt issue costs continued to be amortized,
interest expense for the fiscal year ended January 31, 2000 would have increased
approximately $55.5 million.
In connection with the Effective Date of the Plan, the Company
(1) paid approximately $2.6 million in cash to settle certain accounts
payable and royalty claims;
(2) agreed to pay approximately $28.3 million to settle certain
accounts payable, severance, property and franchise taxes. The $28.3
million is payable in quarterly installments generally over a five year
period with stated interest ranging from 8% to 10%. The Company agreed to
pay approximately $8.0 million of this amount in fiscal 2001.
(3) paid approximately $21.9 million in cash, issued $200 million
principal amount of 15% Senior Secured Notes due 2005 (the "Notes"),
222,455,320 shares of Series A Senior Preferred Stock, 20,716,080 shares of
Series A Junior Preferred Stock, 1,002,500 shares of Class A Common Stock,
247,500 shares of Class B Common Stock and 625,000 warrants to purchase
Class A Common Stock to settle the TransTexas Senior Secured Notes Claims.
A portion of this distribution was reallocated pursuant to the Plan as
follows:
(a) $20 million in cash and five million shares of Senior Preferred
Stock to settle on a pro rata basis all general prepetition unsecured
claims;
(b) $1.8 million in cash, 2,455,320 shares of Senior Preferred
Stock and all of the Junior Preferred Stock to the holders of TransTexas
13 3/4% Senior Subordinated Notes;
(c) 52,500 shares of Class A Common Stock and warrants exercisable
to purchase 109,375 shares of Class A Common Stock at a price of $120
per share to the holders of the old TransTexas common stock who were not
Affiliates of the Debtor (as defined in the Plan); and
29
<PAGE> 32
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(d) all of the Class B Common Stock and warrants exercisable to
purchase 515,625 shares of Class A Common Stock at an exercise price of
$120 per share to John R. Stanley.
(4) issued $6.7 million in secured notes in exchange for old secured
notes and related accrued interest; and
(5) canceled all of the old TransTexas common stock and 13 3/4% Senior
Subordinated Notes.
Under provisions of SOP 90-7, the January 31, 2000 consolidated balance
sheet is the opening balance sheet of reorganized TransTexas, the successor
company. The January 31, 2000 consolidated balance sheet includes all
adjustments necessary to reflect assets at the reorganization value and the
Plan's treatment of creditor claims and previous equity interests. Since the
January 31, 2000 consolidated balance sheet was affected by fresh-start
reporting, it is not comparable in certain material respects to the consolidated
balance sheets of any prior period. The consolidated statements of operations
and cash flows for the years ended January 31, 2000, 1999 and 1998 reflect the
activities of the predecessor reporting entity; however, the statements for
fiscal 2000 reflect certain reorganization items.
Pursuant to fresh-start reporting, the Company's reorganization value was
estimated by management and allocated to identified assets based on their
relative fair values. Postpetition liabilities were valued at the present value
of amounts to be paid. The present value of liabilities has been adjusted for
imputed interest at a rate of 15% for the period from February 1, 2000 to the
Effective Date of the Plan. The imputed interest will be charged to interest
expense during the first quarter of fiscal 2001.
Reorganization value was determined to be approximately $369 million
primarily based on discounted estimated future cash flows. Discounted cash flows
were based on projected cash flows over six years before interest and deducting
capital expenditures with a terminal value which was a multiple of year six cash
flows. The Company used a discount rate of 17%, and projected average prices of
$2.46 per Mcf for natural gas and $17.62 per Bbl for condensate and oil. Average
prices were based on a three-year trailing average.
Oil and gas prices are historically volatile and exploring for, developing
and producing oil and gas involves risk. A change in prices from estimated
amounts or higher than anticipated costs to find and develop additional gas and
oil reserves could result in a reduction in cash flows from operations which
could reduce cash flows available for capital expenditures which could impair
the Company's ability to maintain or increase its production. This in turn would
reduce the estimated fair value of the Company's assets.
30
<PAGE> 33
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The effects of the fresh start reporting adjustments at January 31, 2000
are as follows:
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
----------- ----------- PRO FORMA
JANUARY 31, JANUARY 31, PRO FORMA JANUARY 31,
2000(1) REORGANIZATION FRESH-START 2000 ADJUSTMENTS 2000
----------- -------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........... $ 18,288 $ -- $ -- $ 18,288 $ 32,500(g) $ 16,364
(10,000)(h)
4,500(i)
(1,284)(g)
(27,640)(h)
Accounts receivable................. 19,592 -- -- 19,592 -- 19,592
Receivable from affiliates.......... 1,107 -- -- 1,107 -- 1,107
Inventories......................... 1,741 -- -- 1,741 -- 1,741
Other current assets................ 926 -- -- 926 -- 926
--------- --------- --------- -------- -------- --------
Total current assets......... 41,654 -- -- 41,654 (1,924) 39,730
--------- --------- --------- -------- -------- --------
Property and equipment................ 268,251 -- 58,836(b) 327,087 3,458(k) 330,545
--------- --------- --------- -------- -------- --------
Other assets.......................... 22,997 (22,484)(a) -- 513 1,284(g) 1,797
--------- --------- --------- -------- -------- --------
$ 332,902 $ (22,484) $ 58,836 $369,254 $ 2,818 $372,072
========= ========= ========= ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Current maturities of long-term
debt.............................. $ -- $ -- $ 6,934(c) $ 6,934 $ (1,841)(h) $ 5,222
129(j)
Accounts payable.................... 11,921 -- 3,838(c) 15,759 (3,561)(h) 12,269
71(j)
Accrued liabilities................. 7,432 -- 2,629(c) 10,061 4,500(i) 14,610
49(j)
--------- --------- --------- -------- -------- --------
Total current liabilities.... 19,353 -- 13,401 32,754 (653) 32,101
--------- --------- --------- -------- -------- --------
Production payments, less current
portion............................. 32,460 -- -- 32,460 -- 32,460
196,346(g)
Long-term debt, less current
maturities.......................... 34,205 -- 14,085(c) 48,290 32,500(g) 271,052
(10,000)(h)
3,916(j)
Note payable to affiliate............. -- -- 196,346(c) 196,346 (196,346)(g) --
Deferred income taxes................. 10,000 -- -- 10,000 -- 10,000
(22,238)(h)
Other liabilities..................... -- -- 49,404(c) 49,404 641(j) 27,807
Redeemable preferred stock............ -- -- -- -- --(f) --
Liabilities subject to compromise..... 732,210 (458,974)(a) (273,236)(c) -- -- --
Stockholders' equity (deficit):
Common stock........................ 740 740 (728)(e) 12
Additional paid-in capital.......... 20,615 (21,355)(d) (740) 728(e) (12)
Accumulated deficit................. (254,276) 436,490(a) 58,836(b) -- (4,806)(j) (1,348)
(241,050)(d) 3,458(k)
--------- --------- --------- -------- -------- --------
(232,921) 436,490 (203,569) -- (1,348) (1,348)
Treasury stock...................... (262,405) -- 262,405(d) -- --
--------- --------- --------- -------- -------- --------
Total stockholders' equity
(deficit).................. (495,326) 436,490 58,836 -- (1,348) (1,348)
--------- --------- --------- -------- -------- --------
$ 332,902 $ (22,484) $ 58,836 $369,254 $ 2,818 $372,072
========= ========= ========= ======== ======== ========
</TABLE>
31
<PAGE> 34
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- ---------------
(1) Immediately prior to adopting fresh-start reporting.
(a) Discharge of indebtedness, net of related debt issue costs.
(b) Allocation of reorganization value to gas and oil properties.
(c) Establish new debt.
(d) Elimination of the accumulated deficit and treasury stock.
(e) Cancellation of old common stock and issuance of 1,002,500 shares of new
Class A Common Stock and 247,500 shares of new Class B Common Stock.
(f) Issuance of Redeemable Senior and Junior Preferred Stock.
(g) Issuance and assumption of long-term debt, net of debt issue costs.
(h) Payment of long-term debt and prepetition claims.
(i) Issuance of production payment.
(j) Accretion of discount on reorganization liabilities.
(k) Capitalization of interest on unevaluated properties.
Based on the reorganization value of the Company, the fair value of the
Preferred Stock and Common Stock was estimated to be zero. The Senior Preferred
Stock and Junior Preferred Stock are mandatorily redeemable in 2006 and 2010,
respectively. As a result, the Company will accrete, in the form of a non-cash
dividend deducted from net income available to common stockholders and charged
to retained earnings, an amount equal to the combined redemption amount totaling
$243.2 million (initial liquidation value) over the period prior to redemption.
In addition, earnings available to common stockholders will be reduced by
dividends paid on the Preferred Stock.
On the Effective Date, the Company's capital consists of (i) 1,002,500
shares of Class A Common Stock, $0.01 par value, (ii) 247,500 shares of Class B
Common Stock, $0.01 par value, (iii) 222,455,320 shares of Series A Senior
Preferred Stock, $1.00 par value, (iv) 20,716,080 shares of Series A Junior
Preferred Stock, $1.00 par value, and (v) warrants exercisable to purchase
625,000 shares of Class A Common Stock at a price of $120 per share.
The Series A Senior Preferred Stock (the "Senior Preferred Stock") has a
liquidation preference of $1.00 per share plus accrued and unpaid dividends. The
terms of the Senior Preferred Stock include a cumulative dividend preference,
payable quarterly out of funds legally available therefor, if any. During the
first two years following the Effective Date, the Company will be required to
pay cash dividends at a rate of $0.10 per share per annum, or, at its option,
in-kind dividends of additional shares of Senior Preferred Stock at a rate of
$0.20 per share per annum. The Senior Preferred Stock is mandatorily redeemable
on March 15, 2006 at a rate of $1.00 per share plus accrued and unpaid
dividends. One-half of the then-outstanding shares of Senior Preferred Stock is
mandatorily convertible into shares of Class A Common Stock at the rate of
0.3461 shares of Class A Common Stock per $1.00 of liquidation preference if
either (i) more than 75 million shares of Senior Preferred Stock remain
outstanding after March 15, 2006 or (ii) the Company fails to pay dividends on
the Senior Preferred Stock on any two dividend payment dates. The Certificate of
Designation for the Senior Preferred Stock includes restrictive covenants
comparable to those included in the Indenture.
The Series A Junior Preferred Stock (the "Junior Preferred Stock") has a
liquidation preference of $1.00 per share plus accrued and unpaid dividends. The
terms of the Junior Preferred Stock include a cumulative dividend preference,
payable quarterly out of funds legally available therefor, if any. During the
first six years following the Effective Date, the Company will be required to
pay in-kind dividends of additional shares of Junior Preferred Stock at a rate
of $0.10 per share per annum. Thereafter, dividends will be payable both in cash
at a rate of $0.10 per share per annum and in kind at a rate of $0.10 per share
per annum. The Junior Preferred Stock is mandatorily redeemable on March 15,
2010 at a rate of $1.00 per share plus accrued
32
<PAGE> 35
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and unpaid dividends. Each share of Junior Preferred Stock is mandatorily
convertible into shares of Class A Common Stock at the rate of 0.1168 shares of
Class A Common Stock per $1.00 of liquidation preference if either (i) more than
75 million shares of Senior Preferred Stock remain outstanding after March 15,
2006 or (ii) the Company fails to pay dividends on the Senior Preferred Stock on
any two dividend payment dates. The Certificate of Designation for the Junior
Preferred Stock includes restrictive covenants comparable to those included in
the Indenture. Such covenants will become effective when all of the Notes (and
any refinancings thereof) have been repaid and all of the Senior Preferred Stock
has been redeemed.
3. LIQUIDITY
In order to maintain or increase proved oil and gas reserves, TransTexas is
required to make substantial capital expenditures for the exploration and
development of natural gas and oil reserves in the normal course of business.
TransTexas remains highly leveraged and a substantial portion of its cash
flow will be required for debt service. In addition, cash flow from operations
is dependent on the level of gas and oil prices which are historically volatile.
Management's plans are to fund its 2001 debt service and planned capital
expenditures with cash flows from existing producing properties and certain
identified relatively low risk exploratory prospects to be drilled and completed
during fiscal 2001. Expected reserves from these prospects will be used to
obtain additional production payment financing which, together with excess cash
flow from these prospects, is necessary to continue to fund debt service and
capital expenditure requirements. Should these prospects not be productive or
should prices decline for a prolonged period, absent other sources of capital,
the Company would substantially reduce its capital expenditures which would
limit its ability to maintain or increase production and in turn meet its debt
service requirements. Asset sales and financings are restricted under the terms
of TransTexas' debt documents and Senior Preferred Stock.
4. OTHER CURRENT ASSETS
The major components of other current assets are as follows (in thousands
of dollars):
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
--------- -----------
JANUARY 31,
-----------------------
2000 1999
--------- -----------
<S> <C> <C>
Prepayments:
Trade................................................. $ 478 $ 676
Insurance............................................. 240 2,300
Other................................................... 208 717
------ ------
$ 926 $3,693
====== ======
</TABLE>
5. PROPERTY AND EQUIPMENT
The major components of property and equipment, at cost (estimated fair
value at January 31, 2000), are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
--------- -----------
JANUARY 31,
-----------------------
2000 1999
--------- -----------
<S> <C> <C>
Gas and oil properties................................ $279,844 $1,394,325
Gas gathering and transportation...................... 40,920 53,761
Equipment and other................................... 6,323 11,544
-------- ----------
$327,087 $1,459,630
======== ==========
</TABLE>
33
<PAGE> 36
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In May 1997, TransTexas consummated a stock purchase agreement with an
unaffiliated buyer (the "Lobo Sale Agreement"), to effect the sale (the "Lobo
Sale") of the stock of TransTexas Transmission Corporation ("TTC"), its
subsidiary that owned substantially all of TransTexas' Lobo Trend producing
properties and related pipeline transmission system, for an adjusted sales price
of approximately $1.1 billion. TransTexas recorded a gain of $543.4 million on
the Lobo Sale. In accordance with the full cost method, the cost of the
properties sold was determined based on relative fair market value.
In January 1998, TransTexas sold a portion of its Lodgepole producing
properties for a sales price of $19.1 million. The proceeds from this sale were
credited to the full cost pool.
On April 30, 1998, TransTexas sold its oilfield stimulation, cementing and
coiled tubing equipment and related facilities to an unaffiliated third party
for a sales price of $30 million, subject to post-closing adjustments. For the
year ended January 31, 1999, TransTexas recorded a $10.5 million pre-tax gain as
a result of this sale.
On June 26, 1998, TransTexas sold its drilling rigs and related facilities
to an unaffiliated third party for a sales price of $75 million. On August 17,
1998, TransTexas sold its remaining drilling services assets to an unaffiliated
third party for a sales price of $20.5 million. TransTexas recorded pre-tax
gains of $51.2 million and $5.3 million, respectively, as a result of these
sales.
Additional purchase price adjustments related to the Lobo Sale resulted in
a pre-tax loss on the sale of assets of $2.4 million during the year ended
January 31, 1999.
In December 1998, TransTexas sold certain gas and oil properties for net
proceeds of approximately $16.7 million.
6. OTHER ASSETS
The major components of other assets are as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
--------- -----------
JANUARY 31,
-----------------------
2000 1999
--------- -----------
<S> <C> <C>
Debt issue costs, net of accumulated amortization of
$2,030 at January 31, 1999............................ $ -- $24,278
Other................................................... 513 891
---- -------
$513 $25,169
==== =======
</TABLE>
7. LONG-TERM DEBT AND PRODUCTION PAYMENTS
Long-Term Debt
Long-term debt consists of the following (in thousands of dollars):
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
PRO FORMA ----------- -----------
JANUARY 31, JANUARY 31,
2000 2000 1999(*)
----------- ----------- -----------
<S> <C> <C> <C>
15% Senior Secured Notes due 2005..................... $200,000 $ -- $ --
Revolving credit agreements........................... 34,205 4,205 345
Term Note............................................. 22,500 -- --
Notes payable, ranging from 8% to 15%, due through
2005................................................ 19,569 49,212 9,010
13 3/4% Senior Subordinated Notes due 2001............ -- 1,807 115,815
-------- ------- --------
Total long-term debt........................ 276,274 55,224 125,170
Current maturities.................................... 5,222 6,934 --
-------- ------- --------
$271,052 $48,290 $125,170
======== ======= ========
</TABLE>
- ---------------
(*) Subject to compromise (see Note 2).
34
<PAGE> 37
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On the Effective Date, the Company, as Issuer, Galveston Bay Pipeline
Company and Galveston Bay Processing Corporation, as Guarantors, and Firstar
Bank, N.A., as Trustee, entered into an Indenture dated as of March 15, 2000,
pursuant to which the Company issued the Notes. Interest on the Notes is due
semi-annually on March 15 and September 15. The Notes are secured by
substantially all of the assets of the Company other than accounts receivable
and inventory. The security interest in favor of the Trustee is subordinated to
the Security Interest in favor of the Agent under the Oil and Gas Facility.
On the Effective Date, the Company and GMACC entered into a Third Amended
and Restated Accounts Receivable Management and Security Agreement, dated as of
March 15, 2000 (the "Accounts Receivable Facility"). The Accounts Receivable
Facility is a revolving credit facility secured by accounts receivable and
inventory. The maximum loan amount under the facility is $15 million, against
which the Company may from time to time, subject to the conditions of the
Accounts Receivable Facility, borrow, repay and reborrow. As of April 28, 2000,
$0.5 million was available for lending. Advances under the facility bear
interest at a rate per annum equal to the higher of (i) the prime commercial
lending rate of The Bank of New York plus 1/2 of 1%, and (ii) the Federal Funds
Rate plus 1%, payable monthly in arrears. The outstanding principal balance
under the Accounts Receivable Facility will be due on March 14, 2005.
On the Effective Date, the Company, as Borrower, and Galveston Bay
Processing Corporation and Galveston Bay Pipeline Company, as Guarantors,
entered into an Oil and Gas Revolving Credit and Term Loan Agreement, dated as
of March 15, 2000 (the "Oil and Gas Facility") with GMAC Commercial Credit LLC
("GMACC"), as a Lender and as Agent. The Oil and Gas Facility consists of a term
loan (the "Term Loan") in the amount of $22.5 million and a revolving facility
(the "Revolving Loan") in a maximum amount of $30 million (all of which was
funded on the Effective Date). The Term Loan bears interest at a rate of 14% per
annum and the Revolving Loan bears interest at a rate of 13 1/2% per annum.
Interest on the Term Loan and the Revolving Loan is payable monthly in arrears.
Principal amortization of the Term Loan is due in 20 quarterly installments of
$56,250 each, with the balance due March 14, 2005. The principal amount of the
Revolving Loan is due on March 14, 2005; however the Company may, and in certain
circumstances must, make prepayments of such amount. If, subsequent to such
prepayments, the Company demonstrates sufficient collateral value meeting the
requirements of the Oil and Gas Facility provisions, the Company may be entitled
to borrow additional advances under the Revolving Loan. The Oil and Gas Facility
is secured by substantially all of the assets of the Company. The security
interest in accounts receivable and inventory securing the Oil and Gas Facility
is subordinated to the security interest of GMACC under the Accounts Receivable
Facility.
In December 1998, TransTexas borrowed $5.65 million from an unaffiliated
third party in order to meet a portion of its December 31, 1998 interest payment
obligations. In accordance with the Plan, the principal amount of the note was
increased to $6.7 million, bears interest at 8% and is collateralized by a
pledge of the stock of Galveston Bay Processing Corporation and a mortgage on
the Winnie processing facility.
Additional notes payable totaling $13.9 million consist of amounts payable
pursuant to the Plan in settlement of the claims of certain creditors. Such
amounts are generally payable over a five year period with stated interest
ranging from 8% to 10%.
Prior to the Effective Date, the Company had outstanding $115.8 million
principal amount of 13 3/4% Senior Subordinated Notes due 2001 (the
"Subordinated Notes"). The fair value of the Subordinated Notes, based on quoted
market prices as of January 31, 1999, was $34.7 million. As described in Note 2,
in accordance with the Plan, the holders of the Subordinated Notes received $1.8
million cash, 2,455,320 shares of Senior Preferred Stock and 20,716,080 shares
of Junior Preferred Stock and the Subordinated Notes were canceled. The balance
of $1.8 million at January 31, 2000 represents the fair value of the
Subordinated Notes in accordance with fresh-start reporting.
35
<PAGE> 38
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Aggregate principal payments on the Company's (Successor) long-term debt as
of the effective date total $5.2 million, $3.1 million, $1.9 million, $3.6
million and $.4 million for the fiscal years ended January 31, 2001, 2002, 2003,
2004 and 2005, respectively.
Production Payments
In February and September 1998, TransTexas entered into two production
payment agreements with an unaffiliated third party pursuant to which the
Company conveyed certain properties (the "Original Subject Interests") in the
form of a term overriding royalty interest. As of January 31, 2000, the
outstanding balance of these production payments was $35.1 million.
In March 2000, the Original Subject Interests were reconveyed to TransTexas
and a new production payment drilling program agreement was entered into between
TransTexas and two unaffiliated third parties in the form of a term overriding
royalty interest carved out of and burdening certain properties including the
Original Subject Interests (collectively, the "New Subject Interests"). The
Company has the right to offer additional properties ("Offered Wells") to the
production payment parties at a negotiated purchase price, up to an aggregate
maximum for all such wells, of up to $52 million. Upon acceptance of the Offered
Wells, one of the third parties would be committed to pay to the Company either
the drilling costs of the Offered Wells or, at the third party's discretion, a
higher, mutually agreed upon amount. The production payment calls for the
repayment of the primary sum plus an amount equivalent to a 15% annual interest
rate on the unpaid portion of such primary sum. The Oil and Gas Facility places
certain restrictions on the amount that may be outstanding under the production
payment.
In connection with the new production payment, the Company entered into
various marketing and processing agreements with one of the third parties.
Pursuant to these agreements, the Company will pay a nominal marketing fee with
respect to the Company's production associated with the New Subject Interests.
In addition, the third party will pay a fee for certain processing services to
be provided by Galveston Bay Processing.
8. NOTES PAYABLE TO AFFILIATES
Notes payable to affiliates consist of the following (in thousands of
dollars):
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
----------- -----------
PRO FORMA JANUARY 31,
JANUARY 31, -------------------------
2000 2000 1999(*)
----------- ----------- -----------
<S> <C> <C> <C>
TransTexas Intercompany Loan........................ $ -- $196,346 $450,000
Notes payable to affiliates......................... -- -- 7,928
-------- -------- --------
$ -- $196,346 $457,928
======== ======== ========
</TABLE>
- ---------------
(*) Subject to compromise (see Note 2).
Prior to the Effective Date, the Company had outstanding a $450 million
note payable to TEC (the "TransTexas Intercompany Loan"). The TransTexas
Intercompany Loan accrued interest at a rate of 10 7/8% per annum and was
pledged to secure TEC's obligations on its 11 1/2% Senior Secured Notes and 13%
Senior Secured Discount Notes due 2002 (the "TEC Notes"). The fair value of the
TransTexas Intercompany Loan was $121.5 million at January 31, 1999. As
described in Note 2, the TransTexas Intercompany Loan was settled on the
Effective Date pursuant to the Plan.
During the year ended January 31, 1999, TEC made advances to TransTexas
pursuant to a $50 million promissory note which was scheduled to mature on June
14, 2002. The note accrued interest at a rate of 11.375% per annum. At January
31, 1999, the outstanding balance on the note was $6.5 million. This note was
canceled on the Effective Date pursuant to the Plan.
36
<PAGE> 39
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In December 1998, TransTexas executed a note payable to TransAmerican in
the original principal amount of $1.4 million plus interest at a rate of 15% per
annum. The proceeds from this loan were used to meet a portion of the Company's
interest payment obligations on December 31, 1998. This note was fully repaid in
December 1999.
9. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The following information reflects TransTexas' noncash investing and
financing activities (in thousands of dollars):
<TABLE>
<CAPTION>
PREDECESSOR
----------------------------
YEAR ENDED JANUARY 31,
----------------------------
2000 1999 1998
------- ------- --------
<S> <C> <C> <C>
INVESTING ACTIVITIES:
Accounts payable and long-term liabilities for property
and equipment........................................ $48,381 $38,841 $ 32,666
======= ======= ========
FINANCING ACTIVITIES:
Assumption of tax liability by TransAmerican........... $ -- $ -- $129,549
======= ======= ========
Contribution from affiliate............................ $ -- $ -- $ 21,513
======= ======= ========
Exchange of Subordinated Notes......................... $ -- $ -- $115,815
======= ======= ========
Contribution of debt issue costs from affiliate........ $ -- $ -- $ 12,600
======= ======= ========
</TABLE>
Cash paid for interest is as follows (in thousands of dollars):
<TABLE>
<CAPTION>
PREDECESSOR
--------------------------
YEAR ENDED JANUARY 31,
--------------------------
2000 1999 1998
------ ------- -------
<S> <C> <C> <C>
Interest................................................. $9,616 $69,970 $52,563
====== ======= =======
</TABLE>
Cash paid during the year ended January 31, 2000 for reorganization items
was $6.2 million.
TransTexas incurred approximately $41.2 million, $89.6 million and $96.4
million of interest charges of which approximately $2.7 million, $9.7 million
and $15.8 million were capitalized for the years ended January 31, 2000, 1999
and 1998, respectively.
10. ACCRUED LIABILITIES
Accrued liabilities classified as current liabilities consist of the
following (in thousands of dollars):
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
--------- -----------
JANUARY 31,
-----------------------
2000 1999
--------- -----------
<S> <C> <C>
Royalties................................................... $ 1,581 $ --
Taxes other than income taxes............................... 899 --
Accrued interest............................................ 44 --
Payroll..................................................... 1,197 --
Current portion of production payments...................... 2,647 983
Reorganization claims....................................... 2,629 --
Other....................................................... 1,064 --
------- ----
$10,061 $983
======= ====
</TABLE>
37
<PAGE> 40
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. OTHER LIABILITIES
The major components of other liabilities are as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
--------- -----------
JANUARY 31,
-----------------------
2000 1999(*)
--------- -----------
<S> <C> <C>
Reorganization claims....................................... $34,404 --
Litigation accrual.......................................... -- 527
Litigation settlements...................................... -- 7,102
Long-term payables and other................................ 15,000 6,495
------- -------
$49,404 $14,124
======= =======
</TABLE>
- ---------------
(*) Subject to compromise (see Note 2).
12. INCOME TAXES
Income tax expense (benefit) includes the following (in thousands of
dollars):
<TABLE>
<CAPTION>
PREDECESSOR
-----------------------------
YEAR ENDED JANUARY 31,
-----------------------------
2000 1999 1998
------- -------- --------
<S> <C> <C> <C>
Federal:
Current............................................. $ -- $ -- $(21,380)
Deferred............................................ 10,000 (39,497) 144,256
------- -------- --------
$10,000 $(39,497) $122,876
======= ======== ========
</TABLE>
Total income tax expense differs from amounts computed by applying the
statutory federal income tax rate to income before income taxes. The items
accounting for this difference are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
PREDECESSOR
--------------------------------
YEAR ENDED JANUARY 31,
--------------------------------
2000 1999 1998
--------- --------- --------
<S> <C> <C> <C>
Federal income tax expense (benefit) at the
statutory rate................................... $ 153,760 $(170,530) $122,876
Increase (decrease) in tax resulting from:
Debt discharged pursuant to Plan................. (160,641) -- --
Adjustment of tax assumption..................... 10,000 (75,000) --
Valuation allowance.............................. 6,881 206,033 --
--------- --------- --------
$ 10,000 $ (39,497) $122,876
========= ========= ========
</TABLE>
38
<PAGE> 41
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of TransTexas' tax attributes are as follows (in
thousand of dollars):
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
--------- -----------
JANUARY 31,
------------------------
2000 1999
--------- -----------
<S> <C> <C>
Deferred tax liabilities:
Tax assumption............................................ $10,000 $ --
------- ---------
Deferred tax assets:
Depreciation, depletion and amortization.................. -- 75,368
Net operating loss carryforwards.......................... -- 127,901
Contingent liabilities.................................... -- 1,833
Other, net................................................ -- 931
------- ---------
-- 206,033
Valuation allowance......................................... -- (206,033)
------- ---------
Net deferred tax assets..................................... -- --
------- ---------
$10,000 $ --
======= =========
</TABLE>
Based upon independent legal advice, including an opinion from a nationally
recognized law firm, TransTexas did not report any significant federal income
tax liability as a result of the Lobo Sale. There are, however, significant
uncertainties regarding TransTexas' tax position and no assurance can be given
that TransTexas' position will be sustained if challenged by the Internal
Revenue Service (the "IRS"). Prior to the bankruptcy, TransTexas was part of an
affiliated group for tax purposes (the "TNGC Consolidated Group"), which
included TNGC Holdings Corporation, the sole stockholder of TransAmerican
("TNGC"), TransAmerican, TEC, TransTexas and TARC. If the IRS were to
successfully challenge TransTexas' position, each member of the TNGC
Consolidated Group would be severally liable under the consolidated tax return
regulations for the resulting taxes, in the estimated amount of up to $270
million (assuming the use of none of the available tax attributes of the TNGC
Consolidated Group), possible penalties equal to 20% of the amount of the tax,
and interest at the statutory rate (currently 9%) on the tax and penalties (if
any). Assuming the use of available tax attributes of the TNGC Consolidated
Group, primarily the carryback of net operating loss carryovers ("NOLs"), this
estimated tax would be reduced to approximately $10 million (with the NOL
carrybacks reducing interest as of the end of the tax year in which the
carryback arose and not reducing penalties). In this event, a substantial
portion of TransTexas' NOLs would be utilized and thus not available to
TransTexas after the bankruptcy. Pursuant to the tax allocation agreement among
the members of the TNGC Consolidated Group, TransAmerican is obligated to fund
the entire tax deficiency (if any) resulting from the Lobo Sale. There can be no
assurance that TransAmerican would be able to make any such payment and the
other members of the TNGC Consolidated Group, including TransTexas as a former
member, may be required to pay the tax, penalties and interest. There can be no
assurance that TransTexas could pay this contingency.
Part of the refinancing of TransAmerican's debt in 1993 involved the
cancellation of approximately $65.9 million of accrued interest and of a
contingent liability for interest of $102 million owed by TransAmerican.
TransAmerican has taken the federal tax position that the entire amount of this
debt cancellation is excluded from its income under the cancellation of
indebtedness provision (the "COD Exclusion") of the Internal Revenue Code of
1986, as amended (the "Tax Code"), and has reduced its tax attributes (including
its net operating loss and credit carryforwards) as a consequence of the COD
Exclusion. No federal tax opinion was rendered with respect to this transaction,
however, and TransAmerican has not obtained a ruling from the IRS regarding this
transaction. TransTexas believes that there is substantial legal authority to
support the position that the COD Exclusion applies to the cancellation of
TransAmerican's
39
<PAGE> 42
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
indebtedness. However, due to factual and legal uncertainties, there can be no
assurance that the IRS will not challenge this position, or that any such
challenge would not be upheld. Under the Tax Allocation Agreement, TransTexas
has agreed to pay an amount equal to any federal tax liability (which would be
approximately $25.4 million) attributable to the inapplicability of the COD
Exclusion. Any such tax would be offset in future years by alternative minimum
tax credits and retained loss and credit carryforwards to the extent recoverable
from TransAmerican.
As a former member of the TNGC Consolidated Group, TransTexas will be
severally liable for any tax liability resulting from any transaction of the
TNGC Consolidated Group that occurred during any taxable year of the TNGC
Consolidated Group during which TransTexas was a member, including the above-
described transactions. The IRS has commenced an audit of the consolidated
federal income tax returns of the TNGC Consolidated Group for its taxable years
ended July 31, 1994 and July 31, 1995. The Company has not been advised by the
IRS as to whether any tax deficiencies will be proposed by the IRS as a result
of its review.
TransTexas expects that a significant portion of its NOLs will be
eliminated and the use of those NOLs that are not eliminated will be severely
restricted as a consequence of the Plan. In addition, certain other tax
attributes of TransTexas may under certain circumstances be eliminated or
reduced as a consequence of the Plan. The elimination or reduction of NOLs and
such other tax attributes may substantially increase the amount of tax payable
by TransTexas following the consummation of the Plan as compared with the amount
of tax payable had no such attribute reduction or restriction been required.
13. TRANSACTIONS WITH AFFILIATES
On June 13, 1997, a services agreement was entered into among
TransAmerican, TEC, TARC and TransTexas. Under the services agreement,
TransTexas provided accounting, legal, administrative and other services to
TARC, TEC and TransAmerican and its affiliates. TransAmerican provided advisory
services to TransTexas, TARC and TEC. As of January 31, 1999, the receivable
from TARC and TransAmerican for service agreement fees was $0.2 million. As of
January 31, 1999, receivables of $4.6 million for other services provided to
TransAmerican and certain of its affiliates were recorded as a reduction of
additional paid-in capital.
In connection with a December 15, 1998 transaction pursuant to which TARC
transferred its refinery assets to a minority-owned subsidiary, TCR Holding
Corporation, ("TCR Holding"), and TCR Holding transferred such assets to its
majority-owned subsidiary, Orion Refining Corporation, ("Orion"), TransTexas
entered into an Amended and Restated Services Agreement (the "TCR Group Services
Agreement") with TCR Holding and Orion. The TCR Group Services Agreement called
for TransTexas to provide certain accounting, legal, administrative and other
services to the TCR Group through December 15, 2000 and receive payment for such
services, through February 28, 1999, in the amount of $200,000 per month.
Subsequent to February 28, 1999, the monthly fee was adjusted based on an
assessment of the cost to TransTexas of providing such services. As of January
31, 2000, the receivable from Orion for such services was $0.1 million.
In March 2000, a services agreement was entered into between TNGC and the
Company. Pursuant to the agreement, TransTexas will provide certain accounting,
legal, administrative and other services to TNGC and its affiliates in exchange
for a monthly fee of $2,000.
During the year ended January 31, 1999, TEC made advances to TransTexas
pursuant to a $50 million promissory note which was scheduled to mature on June
14, 2002. The note accrued interest at a rate of 11.375% per annum. As of
January 31, 2000, the outstanding balance of the note was $6.5 million, and the
accrued interest was $0.3 million. This note was canceled on March 17, 2000
pursuant to the Plan.
40
<PAGE> 43
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In December 1998, TransTexas executed a note payable to TransAmerican in
the original principal amount of $1.4 million plus interest at a rate of 15% per
annum. On December 31, 1998, TransTexas used the proceeds from this loan to pay
a portion of its interest payment obligations on its public debt securities.
This note was secured by a lien on the assets of Galveston Bay Processing.
During the fiscal year ended January 31, 2000, Galveston Bay Processing made
payments of principal and interest under this note to TransAmerican of
approximately $1.6 million. As of January 31, 2000 and 1999, the balance due on
the note was $0 and $1.4 million, respectively.
In April 1999, TEC made a cash contribution of $0.7 million to TransTexas.
During the fiscal year ended January 31, 1998, TransTexas sold natural gas
to TARC under an interruptible long-term sales contract. Revenues from TARC
under this contract totaled approximately $1.1 million.
During the fiscal year ended January 31, 1998, TEC allocated $12.6 million
of debt issuance costs relating to the TEC Notes to TransTexas. TransTexas
recorded these costs as a contribution of capital.
During the fiscal year ended January 31, 1998, the Company recorded a
contribution to paid-in capital of approximately $129.5 million in connection
with TransAmerican's assumption of the Lobo Sale tax contingency.
During the fiscal year ended January 31, 1998, the Company contributed
$13.3 million to TransAmerican to retire debt related to certain oil and gas
properties. Those properties, which had a net book value of $21.5 million were
contributed to TransTexas.
During the fiscal year ended January 31, 1999, the Company paid
approximately $5.6 million of Texas franchise taxes on behalf of certain
affiliates pursuant to the Tax Allocation Agreement. Approximately $2.3 million
of the franchise taxes paid exceeded the payable to affiliates for such taxes
and was recorded as a reduction of additional paid-in capital.
14. COMMITMENTS AND CONTINGENCIES
Environmental Matters
TransTexas' operations and properties are subject to extensive federal,
state, and local laws and regulations relating to the generation, storage,
handling, emission, transportation, and discharge of materials into the
environment. Permits are required for various of TransTexas' operations, and
these permits are subject to revocation, modification, and renewal by issuing
authorities. TransTexas also is subject to federal, state, and local laws and
regulations that impose liability for the cleanup or remediation of property
which has been contaminated by the discharge or release of hazardous materials
or wastes into the environment. Governmental authorities have the power to
enforce compliance with their regulations, and violations are subject to fines
or injunctions, or both. Certain aspects of TransTexas' operations may not be in
compliance with applicable environmental laws and regulations, and such
noncompliance may give rise to compliance costs and administrative penalties. It
is not anticipated that TransTexas will be required in the near future to expend
amounts that are material to the financial condition or operations of TransTexas
by reason of environmental laws and regulations, but because such laws and
regulations are frequently changed and, as a result, may impose increasingly
strict requirements, TransTexas is unable to predict the ultimate cost of
complying with such laws and regulations.
Legal Proceedings
TransTexas is a party to various claims and routine litigation arising in
the normal course of its business. Any obligations of the Company in respect of
such claims and litigation arising out of activities prior to the Petition Date
will be discharged pursuant to the Plan. Recovery of these obligations, if any,
will be limited to
41
<PAGE> 44
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
any collateral held by the claimant and/or such claimant's pro rata share of
amounts available to pay general unsecured claims.
As described in Note 2, the Company's Plan was confirmed by the Bankruptcy
Court on February 7, 2000. High River Partnership has appealed the confirmation
order. The Company has filed a motion to dismiss High River's appeal on the
grounds of mootness.
Operating Leases
As of January 31, 2000, TransTexas had long-term leases covering land and
other property and equipment. Rental expense was approximately $3 million, $3
million and $2 million for the years ended January 31, 2000, 1999 and 1998,
respectively. Future minimum rental payments required under operating leases
that have initial or remaining noncancellable lease terms in excess of one year
as of January 31, 2000, are as follows (in thousands of dollars):
<TABLE>
<S> <C>
2001........................................................ $234
2002........................................................ 81
----
$315
====
</TABLE>
Gas Delivery Commitments
In March 2000, TransTexas entered into firm and interruptible contracts
with Tejas Ship Channel LLC for transportation of its production from the Eagle
Bay field to the Winnie facilities at a fixed negotiated rate. Under the firm
agreement, the Company is committed to deliver a minimum of 75,000 MMBtu per day
of natural gas and condensate.
The Company also entered into a contract with Centana Intrastate Pipeline
Company for transportation of natural gas on a firm and interruptible basis from
the Winnie facility to natural gas liquids recovery facilities located in the
Beaumont/Port Arthur, Texas area, and residue gas from these facilities to
various distribution points. Under the agreement, the Company is committed to
deliver up to a maximum of 56,250 Mcf of natural gas and 19,500 MMBtu of residue
gas. Transportation fees for natural gas are based on a fixed negotiated rate.
Transportation fees for residue gas are based on a published industry index.
15. BUSINESS SEGMENTS
TransTexas currently conducts its operations in one industry segment:
exploration and production ("E&P"). Prior to the Lobo Sale, TransTexas also
operated a gas transportation segment. The E&P segment explores for, develops,
produces and markets natural gas, condensate and natural gas liquids. The
transportation segment was engaged in intrastate natural gas transportation and
marketing. All of TransTexas' significant gas and oil operations are located in
South Texas, Louisiana and along the Texas Gulf Coast. TransTexas' revenues are
derived principally from sales to interstate and intrastate gas pipelines,
direct end users, industrial companies, marketers and refiners located in the
United States.
For the year ended January 31, 2000, three customers provided approximately
$62 million in E&P revenues. For the year ended January 31, 1999, five customers
provided approximately $65 million in E&P revenues. For the year ended January
31, 1998, three customers provided approximately $79 million in E&P and
transportation revenues.
42
<PAGE> 45
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
16. CONSOLIDATED SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
PREDECESSOR
----------------------------------------------
YEAR ENDED JANUARY 31, 2000
----------------------------------------------
1ST 2ND 3RD 4TH
QUARTER(4) QUARTER QUARTER(4) QUARTER
---------- ------- ---------- --------
<S> <C> <C> <C> <C>
Revenues......................................... $19,065 $28,573 $ 29,405 $ 36,689
Operating income (loss).......................... (13,217) (4,116) 2,855 4,846
Net income (loss)................................ (35,881) (6,954) (4,406) 476,556(1)
Net income (loss) per share -- basic and
diluted........................................ (0.62) (0.12) (0.08) 8.28
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR
-------------------------------------------
YEAR ENDED JANUARY 31, 1999
-------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
------- ------- --------- ---------
<S> <C> <C> <C> <C>
Revenues......................................... $33,467 $71,439 $ 32,793 $ 19,067
Operating income (loss).......................... 8,488 21,059(2) (162,674) (273,630)
Net income (loss)................................ (6,803) (806) (147,763) (292,361)
Net income (loss) per share -- basic and
diluted........................................ (0.12) (0.01) (2.57) (5.08)
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR
------------------------------------------
YEAR ENDED JANUARY 31, 1998
------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
-------- -------- ------- --------
<S> <C> <C> <C> <C>
Revenues.......................................... $ 82,351 $575,420 $37,233 $ 28,267
Operating income (loss)........................... 1,298 531,425(3) 9,586 (12,209)
Net income (loss)................................. (14,538) 262,745 (1,249) (18,757)
Net income (loss) per share -- basic and
diluted......................................... (0.20) 3.61 (0.02) (0.33)
</TABLE>
- ---------------
(1) Net income for the fourth quarter of 2000 includes a $436.5 million
extraordinary gain on the extinguishment of debt and a $50.5 million credit
for reorganization items.
(2) Operating income for the second quarter of 1999 includes a $47.6 million
gain on the sale of assets.
(3) Operating income for the second quarter of 1998 includes a $532.9 million
gain on the sale of assets.
(4) Operating income (loss) and net income (loss) for the first and third
quarters have been restated to increase depletion for the first quarter by
$1,473 or $0.02 per share and decrease depletion for the third quarter by
$366 or $0.01 per share.
17. SUPPLEMENTAL GAS AND OIL DISCLOSURE (UNAUDITED)
The accompanying tables present information concerning TransTexas' gas and
oil producing activities and are prepared in accordance with Statement of
Financial Accounting Standards No. 69, "Disclosures about Oil and Gas Producing
Activities."
Estimates of TransTexas' proved reserves and proved developed reserves were
prepared by Netherland, Sewell & Associates, Inc., an independent firm of
petroleum engineers, based on data supplied to them by TransTexas.
Such estimates are inherently imprecise and may be subject to substantial
revisions as additional information such as reservoir performance, additional
drilling, technological advancements and other factors become available.
43
<PAGE> 46
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Capitalized costs relating to gas and oil producing activities are as
follows (in thousands of dollars):
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
--------- -----------
JANUARY 31,
-----------------------
2000 1999
--------- -----------
<S> <C> <C>
Proved properties........................................... $230,764 $1,427,608
Unproved properties......................................... 90,000 20,477
-------- ----------
Total............................................. 320,764 1,448,085
Less accumulated depreciation, depletion and amortization... -- 1,164,224
-------- ----------
$320,764 $ 283,861
======== ==========
</TABLE>
Costs incurred for gas and oil producing activities are as follows (in
thousands of dollars):
<TABLE>
<CAPTION>
PREDECESSOR
-----------------------------
YEAR ENDED JANUARY 31,
-----------------------------
2000 1999 1998
------- -------- --------
<S> <C> <C> <C>
Property acquisitions................................. $ 6,175 $ 13,084 $ 56,205
Exploration........................................... 43,238 98,294 196,728
Development........................................... 4,350 77,322 123,273
------- -------- --------
$53,763 $188,700 $376,206
======= ======== ========
</TABLE>
Results of operations for gas and oil producing activities are as follows
(in thousands of dollars):
<TABLE>
<CAPTION>
PREDECESSOR
-------------------------------
YEAR ENDED JANUARY 31,
-------------------------------
2000 1999 1998
-------- --------- --------
<S> <C> <C> <C>
Revenues............................................ $111,400 $ 91,319 $164,538
-------- --------- --------
Expenses:
Production costs.................................. 28,437 27,694 60,832
Depreciation, depletion and amortization.......... 76,093 84,883 62,933
General and administrative........................ 10,572 9,767 9,635
Impairment of gas and oil properties.............. -- 425,966 --
-------- --------- --------
Total operating expenses.................. 115,102 548,310 133,400
-------- --------- --------
Income before income taxes................ (3,702) (456,991) 31,138
Income taxes (benefit).............................. (1,296) (159,947) 10,898
-------- --------- --------
$ (2,406) $(297,044) $ 20,240
======== ========= ========
Depletion rate per net equivalent Mcf............... $ 1.93 $ 1.96 $ 1.11
======== ========= ========
</TABLE>
Reserve Quantity Information
Proved reserves are estimated quantities of natural gas, condensate and
natural gas liquids which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions. Proved developed reserves are
those proved reserves that can be expected to be recovered through existing
wells with existing equipment and operating methods. Natural gas quantities
represent gas volumes which include amounts that will be extracted
44
<PAGE> 47
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
as natural gas liquids. TransTexas' estimated net proved reserves and proved
developed reserves of natural gas (billions of cubic feet) and condensate
(millions of barrels) are shown in the table below.
<TABLE>
<CAPTION>
PREDECESSOR
----------------------------------------------
YEAR ENDED JANUARY 31,
----------------------------------------------
2000 1999 1998
------------ --------------- -------------
GAS OIL GAS OIL GAS OIL
----- ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Proved reserves:
Beginning of year............................ 120.7 6.6 348.7 15.9 919.7 5.7
Increase (decrease) during the year
attributable to:
Revisions of previous estimates.............. (4.1) (1.2) (127.1)(1) (9.7) (103.8) (1.0)
Extensions, discoveries and other
additions................................. 6.8 0.1 26.1 2.0 123.7 15.1
Sales of reserves............................ -- -- (91.4) (0.5) (525.8) (3.3)
Purchase of reserves......................... -- -- -- -- -- --
Production................................... (27.8) (1.8) (35.6) (1.1) (65.1) (0.6)
----- ---- ------ ---- ------ ----
End of year (SUCCESSOR IN 2000)................ 95.6 3.7 120.7 6.6 348.7 15.9
===== ==== ====== ==== ====== ====
Proved developed reserves:
Beginning of year............................ 87.8 5.0 134.3 4.2 381.5 2.4
End of year (SUCCESSOR IN 2000).............. 82.3 3.5 87.8 5.0 134.3 4.2
</TABLE>
- ---------------
(1) Reserve estimates were revised downward principally as a result of
additional seismic information which indicated more highly faulted
structures in certain key properties causing reserves to be reclassified
from proved to probable.
Standardized Measure Information
The calculation of estimated future net cash flows in the following table
assumed the continuation of existing economic conditions and applied year-end
prices (except for future price changes as allowed by contract) of gas and
condensate to the expected future production of such reserves, less estimated
future expenditures (based on current costs) to be incurred in developing and
producing those proved reserves.
The standardized measure of discounted future net cash flows does not
purport, nor should it be interpreted, to present the fair market value of
TransTexas' gas and oil reserves. These estimates reflect proved reserves only
and ignore, among other things, changes in prices and costs, revenues that could
result from probable reserves which could become proved reserves in fiscal 2001
or later years and the risks inherent in reserve estimates. The standardized
measure of discounted future net cash flows relating to proved gas and oil
reserves is as follows (in thousands of dollars):
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
--------- --------------------
YEAR ENDED JANUARY 31,
---------------------------------
2000 1999 1998
--------- -------- ---------
<S> <C> <C> <C>
Future cash inflows.................................. $361,411 $296,831 $ 898,257
Future production costs.............................. (61,810) (57,453) (154,725)
Future development costs............................. (18,302) (33,180) (198,180)
Future income taxes.................................. (18,611) -- --
-------- -------- ---------
Future net cash flows...................... 262,688 206,198 545,352
Annual discount (10%) for estimated timing of cash
flows.............................................. (49,085) (44,668) (149,679)
-------- -------- ---------
Standardized measure of discounted future
net cash flows........................... $213,603 $161,530 $ 395,673
======== ======== =========
</TABLE>
45
<PAGE> 48
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Principal sources of change in the standardized measure of discounted
future net cash flows are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
PREDECESSOR
----------------------------------
YEAR ENDED JANUARY 31,
----------------------------------
2000 1999 1998
-------- --------- ----------
<S> <C> <C> <C>
Beginning of year................................... $161,530 $ 395,673 $1,057,256
Revisions:
Quantity estimates and production rates........... (18,829) (194,041)(1) (215,564)
Prices, net of lifting costs...................... 136,550 (76,157) (348,781)
Estimated future development costs................ 14,534 58,455 (33,033)
Additions, extensions, discoveries and improved
recovery.......................................... 10,467 42,184 238,403
Net sales of production............................. (93,481) (73,819) (124,498)
Development costs incurred.......................... 4,350 77,322 119,944
Accretion of discount............................... 13,615 39,566 144,909
Net changes in income taxes......................... (15,133) -- 391,812
Purchases (sales) of reserves....................... -- (107,653) (834,775)
-------- --------- ----------
End of year (SUCCESSOR IN 2000)........... $213,603 $ 161,530 $ 395,673
======== ========= ==========
</TABLE>
- ---------------
(1) Reserve estimates were revised downward principally as a result of
additional seismic information which indicated more highly faulted
structures in certain key properties causing reserves to be reclassified
from proved to probable.
Year-end wellhead prices received by TransTexas from sales of natural gas,
including margins from natural gas liquids, were $2.74, $1.79 and $1.96 per Mcf
for 2000, 1999 and 1998, respectively. Year-end condensate prices were $26.89,
$12.12 and $13.54 per barrel for 2000, 1999 and 1998, respectively.
46
<PAGE> 49
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following persons were serving as directors and executive officers of
the Company as of April 30, 2000:
<TABLE>
<CAPTION>
NAME OFFICE AGE
- ---- ------ ---
<S> <C> <C>
John R. Stanley Director and Chief Executive Officer 61
Ronald P. Nowak President and Chief Operating Officer 47
Edwin B. Donahue Vice President, Chief Financial Officer and Secretary 49
Simon Ward Vice President and Treasurer 44
George C. Wright Vice President of Accounting 57
R. Gerald Bennett Director 58
Ronald H. Benson Director 54
Walter S. Piontek Director 63
John L. Whitmire Director 59
</TABLE>
Set forth below is a description of the business experience of each of the
directors and executive officers.
John R. Stanley has been a director and Chief Executive Officer since May
1993. He has been Chairman of the Board since March 2000. Mr. Stanley is also
the founder, Chairman of the Board, Chief Executive Officer and sole stockholder
of TNGC Holdings Corporation, which is the sole stockholder of TransAmerican.
Mr. Stanley has operated TransAmerican since 1958.
Ronald P. Nowak has served as President and Chief Operating Officer since
November 1999. Prior to joining TransTexas, Mr. Nowak was with 3DX Technologies
Inc. where he served as President, Chief Executive Officer and Director from
June 1998 until September 1999. Mr. Nowak also served as Vice President of
Exploration from February 1998 through May 1998. From August 1993 to January
1998, Mr. Nowak was with YPF/Maxus Energy Corporation where he served as U.S.
Exploration Manager and U.S. Manager from 1996. Mr. Nowak was with Arco Oil &
Gas from 1987 to 1993. Prior to joining Arco, Mr. Nowak was employed by Exxon
Company, USA as an independent geologist working in the onshore U.S. Gulf Coast
region.
Edwin B. Donahue has been Vice President, Chief Financial Officer and
Secretary since May 1993. Mr. Donahue has been employed in various positions
with TransAmerican for over 20 years.
Simon Ward has been Vice President and Treasurer since June 1999. He served
as Manager of Investor Relations from 1994 until June 1999. From 1976 until
1994, he held various positions with ICO, Inc., Baker Hughes Vetco Services,
Inc. and Vetco Services, Inc.
George C. Wright has been Vice President of Accounting since March 1999. He
has been employed by the Company and its affiliates since June 1982.
R. Gerald Bennett has been a director of the Company since March 17, 2000.
He is serving in the office of Chairman of the Board of FLASHFIND Corporation.
From June 1996 to December 1998, Mr. Bennett was a Senior Vice President of
Equitable Gas Company. Prior thereto, Mr. Bennett served as President and Chief
Executive Officer of Fuel Resources, Inc., a wholly owned subsidiary of The
Brooklyn Union Gas Company. Mr. Bennett has over 35 years experience in the oil
and gas industry.
Ronald H. Benson has been a director of the Company since March 17, 2000.
He is an independent consultant for Soforgas Exploration and Production and a
private investor. From 1994 to 1998, he was Vice President of TPC Gathering and
Transmission Company. From 1991 to 1993, he was President of Phibro
47
<PAGE> 50
Energy Productions, Inc. Prior thereto, he was vice president of natural gas
trading for Phibro Energy, Inc. He also worked for Marathon Oil Company in
various capacities from 1968 to 1980.
Walter S. Piontek has been a director of the Company since March 17, 2000.
He is retired from Mobil Oil Corporation where he was employed for 39 years in
various capacities including as executive vice president of Mobil's North
American exploration and production operations.
John L. Whitmire has been a director of the Company since March 17, 2000.
He is Chairman of the Board of CONSOL Energy Inc. From January 1996 to September
1998, Mr. Whitmire was Chairman of the Board and Chief Executive Officer of
Union Texas Petroleum Holdings, Inc. Prior thereto, he worked for Phillips
Petroleum for over 30 years in various capacities including as Executive Vice
President of exploration and production and director. He is also a director of
Global Marine, Inc.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, officers and holders of more than 10% of the Company's
Common Stock ("Reporting Persons") to file with the Securities and Exchange
Commission ("SEC") initial reports of ownership and reports of changes in
ownership of the Company's stock ("Section 16 Reports"). Such Reporting Persons
are required by SEC regulations to furnish the Company with copies of all
Section 16 Reports they file with the SEC. Based solely on a review of the
Section 16 Reports furnished to the Company by the Reporting Persons, none of
the Reporting Persons, other than John R. Stanley, failed to timely file any
Section 16 Reports during the year ended January 31, 2000. During the fiscal
year ended January 31, 2000, John R. Stanley failed to timely file Form 4
reports disclosing 21 transactions. The transactions were reported on a timely
filed Form 5.
ITEM 11. EXECUTIVE COMPENSATION
The following table summarizes the compensation paid during the fiscal
years ended January 31, 2000, 1999 and 1998 to the Chief Executive Officer and
each other executive officer whose total annual salary and bonus exceeded
$100,000 in the fiscal year ended January 31, 2000 ("Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------
NAME AND PRINCIPAL POSITION FISCAL OTHER ANNUAL
IN THE COMPANY YEAR SALARY BONUS COMPENSATION(1)
- --------------------------- ------ -------- -------- ---------------
<S> <C> <C> <C> <C>
John R. Stanley........................... 2000 $396,815 $ -- $5,808
Chief Executive Officer 1999 367,309 -- 4,800
1998 400,483 -- 4,346
Ron Nowak(2).............................. 2000 $ 69,231 $ -- $ --
President and Chief Operating Officer 1999 -- -- --
1998 -- -- --
Edwin B. Donahue.......................... 2000 $317,730 $208,333 $1,467
Vice President, Chief Financial 1999 271,923 111,111 7,701
Officer and Secretary 1998 200,000 213,885 4,519
Simon Ward................................ 2000 $195,656 -- --
Vice President and Treasurer 1999 172,000 $ -- $ --
1998 144,308 15,000 --
George C. Wright.......................... 2000 $188,909 $ -- $4,800
Vice President of Accounting 1999 170,394 -- 5,019
1998 165,000 7,500 4,560
</TABLE>
- ---------------
(1) Reflects amounts contributed by the Company under the Savings Plan. Certain
of the Company's executive officers receive personal benefits in addition to
salary and cash bonuses. The aggregate amount
48
<PAGE> 51
of such personal benefits, however, does not exceed the lesser of $50,000 or
10% of the total of the annual salary and bonus reported for the named
executive officer and accordingly, such amounts have been excluded from the
table.
(2) Mr. Nowak joined the Company in November 1999.
EMPLOYMENT AGREEMENTS
On March 17, 2000, the Company and Mr. Stanley entered into a three-year
management agreement. The management agreement may be renewed for two additional
one-year terms if certain performance tests are met. Pursuant to the management
agreement, Mr. Stanley will receive an annual salary of $300,000. Each year he
will also receive warrants to purchase 37,500 shares of Class A Common Stock
exercisable at a price of $120 per share. If the management agreement is
terminated for cause, Mr. Stanley will be entitled to receive a severance
payment of $1.5 million. If the management agreement is terminated other than
for cause, the severance payment will be $3 million. "Cause" includes, among
other things, the failure of the Company to meet any two payment obligations on
the Notes or on the Preferred Stock and a bankruptcy filing by the Company.
In December 1998, the Company and Mr. Donahue entered into a two-year
employment agreement which provides for an annual salary of $300,000. The
employment agreement also provides that Mr. Donahue shall be entitled to a bonus
of $500,000 payable in two equal installments on January 31, 1999 and July 31,
1999. If the Company terminates Mr. Donahue's employment other than for cause,
or Mr. Donahue terminates his employment for cause, prior to the end of the term
of the agreement, the Company shall pay Mr. Donahue his salary for the remaining
term of the agreement plus an additional six months' salary. "Cause" includes a
sale, reorganization or merger of the Company that results in a change of
control of the Company.
In May 1998, the Company and Mr. Ward entered into a Severance Agreement
which provides that if the Company terminates Mr. Ward's employment other than
for cause, the Company shall pay Mr. Ward his salary for 12 months past the date
of termination.
DIRECTOR COMPENSATION
All directors, other than Mr. Stanley, are paid an annual fee of $60,000.
The Board meets regularly each quarter. Directors also receive $2,000 for each
meeting attended in addition to the four regular quarterly meetings.
SAVINGS PLAN
The Company maintains a long-term savings plan (the "Savings Plan") in
which eligible employees may elect to participate. Each employee becomes
eligible to participate in the Savings Plan on January 1 or July 1 following the
completion of one year of service with the Company or its participating
affiliates and attainment of age 21. The Savings Plan is intended to constitute
a qualified plan under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code") and contains a salary reduction arrangement described in
Section 401(k) of the Code.
Each participant may elect to reduce his compensation by a percentage equal
to 2% to 15% and the Company will contribute that amount to the Savings Plan on
a pre-tax basis on behalf of the participant. The Code limits the annual amount
that a participant may elect to have contributed on his behalf on a pre-tax
basis to the Savings Plan. For 2000, this limit is $10,500. The Company
presently makes a matching contribution in an amount equal to 10%, 20% or 50% of
the amount elected to be contributed by each participant on a pre-tax basis, up
to a maximum of 3% of each participant's compensation, depending on whether the
employee has been a participant in the Savings Plan for one year, two years, or
three years. Each participant also may elect to contribute up to 10% of his
compensation to the Savings Plan on an after-tax basis. The Code imposes
nondiscrimination tests on contributions made to the Savings Plan pursuant to
participant elections and on the Company's matching contributions, and limits
amounts that may be allocated
49
<PAGE> 52
to a participant's Savings Plan account each year. In order to satisfy the
nondiscrimination tests, contributions made on behalf of certain highly
compensated employees (as defined in the Code) may be limited. Contributions
made to the Savings Plan pursuant to participant elections and matching
contributions are at all times 100% vested. Contributions to the Savings Plan
are invested, according to specified investment options selected by the
participants, in investment funds maintained by the trustee of the Savings Plan.
Generally, a participant's vested benefits will be distributed from the Savings
Plan as soon as administratively practicable following a participant's
retirement, death, disability, or other termination of employment. In addition,
a participant may elect to withdraw his after-tax contributions from the Savings
Plan prior to his termination of employment, and subject to strict limitations
and exceptions, the Savings Plan provides for withdrawals of a participant's
pre-tax contributions prior to a participant's termination of employment, in the
event of the participant's severe financial hardship or attainment of age
59 1/2. The Savings Plan may be amended or terminated by the Board of Directors.
As of January 31, 2000, approximately 170 employees of the Company were eligible
to participate in the Savings Plan, including the Named Executive Officers.
EXECUTIVE REIMBURSEMENT PLAN
The Company also maintains an executive reimbursement plan in which certain
officers of the Company are entitled to participate. Pursuant to this plan,
participants are entitled to reimbursement for medical expenses not otherwise
covered by the Company's medical insurance. During the year ended January 31,
2000, John R. Stanley received approximately $1,200 in reimbursements under this
plan.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of each class of the Company's voting securities, as of
March 31, 2000, by (i) each director and director nominee, (ii) each Named
Executive Officer, (iii) each person known to the Company to beneficially own
more than five percent of each class of voting securities, and (iv) all
directors and executive officers of the Company as a group. Except as otherwise
indicated, each stockholder identified in the table has sole voting and
investment power with respect to its or his shares.
Senior Preferred Stock:
<TABLE>
<CAPTION>
SHARES OWNED
--------------------
NAME AND ADDRESS NUMBER PERCENTAGE
- ---------------- ------- ----------
<S> <C> <C>
John R. Stanley(1)....................................... -- --
Ron Nowak................................................ -- --
Edwin B. Donahue......................................... -- --
Simon Ward............................................... -- --
George Wright............................................ -- --
R. Gerald Bennett........................................ -- --
Ronald H. Benson......................................... -- --
Walter S. Piontek........................................ -- --
John L. Whitmire......................................... -- --
All directors and executive officers as a group (9
persons)............................................... -- --
</TABLE>
50
<PAGE> 53
Junior Preferred Stock:
<TABLE>
<CAPTION>
SHARES OWNED
--------------------
NAME AND ADDRESS NUMBER PERCENTAGE
- ---------------- ------- ----------
<S> <C> <C>
John R. Stanley(1)....................................... -- --
Ron Nowak................................................ -- --
Edwin B. Donahue......................................... -- --
Simon Ward............................................... -- --
George Wright............................................ -- --
R. Gerald Bennett........................................ -- --
Ronald H. Benson......................................... -- --
Walter S. Piontek........................................ -- --
John L. Whitmire......................................... -- --
All directors and executive officers as a group (9
persons)............................................... -- --
</TABLE>
Class A Common Stock:
<TABLE>
<CAPTION>
SHARES OWNED
--------------------
NAME AND ADDRESS NUMBER PERCENTAGE
- ---------------- ------- ----------
<S> <C> <C>
John R. Stanley(1)(2).................................... 518,662 34%
Ron Nowak................................................ -- --
Edwin B. Donahue(3)...................................... 75 *
Simon Ward............................................... -- --
George Wright............................................ -- --
R. Gerald Bennett........................................ -- --
Ronald H. Benson......................................... -- --
Walter S. Piontek........................................ -- --
John L. Whitmire......................................... -- --
All directors and executive officers as a group (9
persons)............................................... 518,737 34%
</TABLE>
Class B Common Stock:
<TABLE>
<CAPTION>
SHARES OWNED
--------------------
NAME AND ADDRESS NUMBER PERCENTAGE
- ---------------- ------- ----------
<S> <C> <C>
John R. Stanley(1)....................................... 247,500 100%
Ron Nowak................................................ -- --
Edwin B. Donahue......................................... -- --
George Wright............................................ -- --
Simon Ward............................................... -- --
R. Gerald Bennett........................................ -- --
Ronald H. Benson......................................... -- --
Walter S. Piontek........................................ -- --
John L. Whitmire......................................... -- --
All directors and executive officers as a group (9
persons)............................................... 247,500 100%
</TABLE>
- ---------------
* Less than 1% of the shares outstanding in the class.
(1) The address for John R. Stanley is 1300 North Sam Houston Parkway East,
Houston, Texas 77032.
(2) Mr. Stanley is deemed to beneficially own 10 shares of Class A Common Stock
held by his wife and 975 shares of Class A Common Stock held by a
corporation controlled by him. Includes 515,625 shares of Class A Common
Stock underlying currently exercisable common stock purchase warrants. Mr.
Stanley is also deemed to beneficially own 20 shares of Class A Common Stock
underlying currently exercisable common stock purchase warrants held by his
wife, and 2,032 shares of Class A Common Stock
51
<PAGE> 54
underlying currently exercisable common stock purchase warrants held by a
corporation controlled by him.
(3) Includes 51 shares of Class A Common Stock underlying currently exercisable
common stock purchase warrants.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 13, 1997, a services agreement was entered into among
TransAmerican, TEC, TARC and TransTexas. Under the services agreement,
TransTexas provided accounting, legal, administrative and other services to
TARC, TEC and TransAmerican and its affiliates. TransAmerican provided advisory
services to TransTexas, TARC and TEC. As of January 31, 1999, the receivable
from TARC and TransAmerican for service agreement fees was $0.2 million. As of
January 31, 1999, receivables of $4.6 million for other services provided to
TransAmerican and certain of its affiliates were recorded as a reduction of
additional paid-in capital.
In connection with a December 15, 1998 transaction pursuant to which TARC
transferred its refinery assets to a minority-owned subsidiary, TCR Holding
Corporation ("TCR Holding"), and TCR Holding transferred such assets to its
majority-owned subsidiary, Orion Refining Corporation ("Orion"), TransTexas
entered into an Amended and Restated Services Agreement (the "TCR Group Services
Agreement") with TCR Holding and Orion. The TCR Group Services Agreement called
for TransTexas to provide certain accounting, legal, administrative and other
services to the TCR Group through December 15, 2000 and receive payment for such
services, through February 28, 1999, in the amount of $200,000 per month.
Subsequent to February 28, 1999, the monthly fee was adjusted based on an
assessment of the cost to TransTexas of providing such services. As of January
31, 2000, the receivable from Orion for such services was $0.1 million.
In March 2000, a services agreement was entered into between TNGC and the
Company. Pursuant to the agreement, TransTexas will provide certain accounting,
legal, administrative and other services to TNGC and its affiliates in exchange
for a monthly fee of $2,000.
During the year ended January 31, 1999, TEC made advances to TransTexas
pursuant to a $50 million promissory note which was scheduled to mature on June
14, 2002. The note accrued interest at a rate of 11.375% per annum. As of
January 31, 2000, the outstanding balance of the note was $6.5 million, and the
accrued interest was $0.3 million. This note was canceled on March 17, 2000
pursuant to the Plan.
In December 1998, TransTexas executed a note payable to TransAmerican in
the original principal amount of $1.4 million plus interest at a rate of 15% per
annum. On December 31, 1998, TransTexas used the proceeds from this loan to pay
a portion of its interest payment obligations on its public debt securities.
This note was secured by a lien on the assets of Galveston Bay Processing.
During the fiscal year ended January 31, 2000, Galveston Bay Processing made
payments of principal and interest under this note to TransAmerican of
approximately $1.6 million. As of January 31, 2000 and 1999, the balance due on
the note was $0 and $1.4 million, respectively.
In April 1999, TEC made a cash contribution of $0.7 million to TransTexas.
During the fiscal year ended January 31, 1998, TransTexas sold natural gas
to TARC under an interruptible long-term sales contract. Revenues from TARC
under this contract totaled approximately $1.1 million.
52
<PAGE> 55
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements, Schedules and Exhibits
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
(1) Report of Independent Accountants........................... 20
Consolidated Balance Sheet.................................. 21
Consolidated Statement of Operations........................ 22
Consolidated Statement of Stockholders' Equity (Deficit).... 23
Consolidated Statement of Cash Flows........................ 24
Notes to Consolidated Financial Statements.................. 25
(2) Report of Independent Accountants........................... 63
Schedule II -- Valuation and Qualifying Accounts............ 64
</TABLE>
(3) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1 -- Second Amended, Modified and Restated Plan of
Reorganization dated January 25, 2000 (filed as an
exhibit to the Company's current report on Form 8-K dated
February 7, 2000, and incorporated herein by reference).
2.2 -- Order Confirming Plan of Reorganization dated February 7,
2000 (filed as an exhibit to the Company's current report
on Form 8-K dated February 7, 2000, and incorporated
herein by reference).
3.1 -- Articles of Incorporation (filed as an exhibit to the
Company's Registration Statement on Form S-1 (No.
33-75050), and incorporated herein by reference).
3.2 -- By-laws of TransTexas (filed as an exhibit to the
Company's Registration Statement on Form S-1 (No.
33-75050), and incorporated herein by reference).
3.3 -- Amended and Restated Certificate of Incorporation (filed
as an exhibit to the Company's Registration Statement on
Form 8-A (No. 0-30475), and incorporated herein by
reference).
3.4 -- Certificate of Designation, Series A Senior Preferred
Stock (filed as an exhibit to the Company's Registration
Statement on Form 8-A (No. 0-30475), and incorporated
herein by reference).
3.5 -- Certificate of Designation, Series A Junior Preferred
Stock (filed as an exhibit to the Company's Registration
Statement on Form 8-A (No. 0-30475), and incorporated
herein by reference).
3.6 -- Amended and Restated Bylaws (filed as an exhibit to the
Company's Registration Statement on Form 8-A (No.
0-30475), and incorporated herein by reference).
4.1 -- Indenture dated as of June 15, 1995, among TransTexas,
TTC and American Bank National Association, as Trustee
(the "Indenture Trustee"), with respect to the Senior
Secured Notes including the forms of Senior Secured Note
and Senior Secured Guarantee as exhibits (filed as an
exhibit to TransTexas' current report on Form 8-K dated
June 20, 1995, and incorporated herein by reference).
4.2 -- Mortgage, Deed of Trust, Assignment of Production,
Security Agreement and Financing Statement, effective as
of June 23, 1995, from TransTexas to James A. Taylor, as
trustee for the benefit of the Indenture Trustee (filed
as an exhibit to TransTexas' current report on Form 8-K
dated June 20, 1995, and incorporated herein by
reference).
</TABLE>
53
<PAGE> 56
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.3 -- Pipeline Mortgage, Deed of Trust, Assignment, Security
Agreement and Financing Statement, dated as of June 20,
1995, from TTC to James A. Taylor, as trustee for the
benefit of the Indenture Trustee (filed as an exhibit to
TransTexas' current report on Form 8-K dated on June 20,
1995, and incorporated herein by reference).
4.4 -- Security Agreement, Pledge and Financing Statement, dated
as of June 20, 1995, by TransTexas in favor of the
Indenture Trustee (filed as an exhibit to TransTexas'
current report on Form 8-K dated June 20, 1995, and
incorporated herein by reference).
4.5 -- Security Agreement, Pledge and Financing Statement, dated
as of June 20, 1995, by TTC in favor of the Indenture
Trustee (filed as an exhibit to TransTexas' current
report on Form 8-K dated June 20, 1995, and incorporated
herein by reference).
4.6 -- Cash Collateral and Disbursement Agreement, dated as of
June 20, 1995, among TransTexas, the Indenture Trustee
and the Disbursement Agent (filed as an exhibit to
TransTexas' current report on Form 8-K dated June 20,
1995, and incorporated herein by reference).
4.7 -- Pledge and Security Agreement dated as of September 19,
1996, between TransAmerican Exploration Corporation and
Fleet National Bank (previously filed as an exhibit to
TransTexas' Form 10-Q for the quarter ended October 31,
1996, and incorporated herein by reference).
4.8 -- Registration Rights Agreement dated as of September 19,
1996, by and among TransTexas, TransAmerican,
TransAmerican Exploration Corporation and Fleet National
Bank (filed as an exhibit to TransTexas' Form 10-Q for
the quarter ended October 31, 1996, and incorporated
herein by reference).
4.9 -- Pledge Agreement dated as of February 23, 1995, between
TEC and First Fidelity Bank, National Association, as
Trustee (filed as an exhibit to Post-Effective Amendment
No. 5 to TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.10 -- Pledge Agreement dated as of February 23, 1995, between
TARC and First Fidelity Bank, National Association, as
Trustee (filed as an exhibit to Post-Effective Amendment
No. 5 to TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.11 -- Registration Rights Agreement dated as of February 23,
1995, among TransTexas, TARC and TEC (filed as an exhibit
to Post-Effective Amendment No. 5 to the Company's
Registration Statement on Form S-3 (33-91494), and
incorporated herein by reference).
4.12 -- Pledge Agreement dated as of February 23, 1995, among
TransAmerican, TransTexas and Halliburton Company (filed
as an exhibit to Post-Effective Amendment No. 5 to
TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.13 -- Pledge Agreement dated as of February 23, 1995, among
TransAmerican, TransTexas and RECO Industries, Inc.
(filed as an exhibit to Post-Effective Amendment No. 5 to
TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.14 -- Pledge Agreement dated as of February 23, 1995, among
TransAmerican, TransTexas and Frito-Lay, Inc. (filed as
an exhibit to Post-Effective Amendment No. 5 to
TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
</TABLE>
54
<PAGE> 57
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.15 -- Pledge Agreement dated as of February 23, 1995, among
TransAmerican, TransTexas and EM Sector Holdings, Inc.
(filed as an exhibit to Post-Effective Amendment No. 5 to
TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.16 -- Stock Pledge Agreement dated January 27, 1995, between
TransAmerican and ITT Commercial Corp. (filed as an
exhibit to Post-Effective Amendment No. 5 to TransTexas'
Registration Statement on Form S-3 (33-91494), and
incorporated herein by reference).
4.17 -- Registration Rights Agreement dated January 27, 1995,
among TransAmerican, TransTexas and ITT Commercial
Finance Corp. (filed as an exhibit to Post-Effective
Amendment No. 5 to TransTexas' Registration Statement on
Form S-3 (33-91494), and incorporated herein by
reference).
4.18 -- Note Purchase Agreement dated December 13, 1996 between
TransTexas and the Purchasers of 13 1/4% Series A Senior
Subordinated Notes due 2003 (filed as an exhibit to
Post-Effective Amendment No. 5 to TransTexas'
Registration Statement on Form S-3 (33-91494), and
incorporated herein by reference).
4.19 -- Indenture dated December 13, 1996 between TransTexas and
Bank One, Columbus, NA, as Trustee (filed as an exhibit
to Post-Effective Amendment No. 5 to TransTexas'
Registration Statement on Form S-3 (33-91494), and
incorporated herein by reference).
4.20 -- Registration Rights Agreement dated December 13, 1996
between TransTexas and each of the Purchasers of the
Subordinated Notes (filed as an exhibit to Post-
Effective Amendment No. 5 to TransTexas' Registration
Statement on Form S-3 (33-91494), and incorporated herein
by reference).
4.21 -- First Supplemental Indenture dated May 29, 1997 by and
among TransTexas, TTC and Firstar Bank of Minnesota,
N.A., as trustee (filed as an exhibit to TransTexas'
current report on Form 8-K dated May 29, 1997, and
incorporated herein by reference).
4.22 -- Second Supplemental Indenture dated June 13, 1997 between
TransTexas, as issuer, and Firstar Bank of Minnesota,
N.A., as trustee (filed as an exhibit to TransTexas'
current report on Form 8-K dated June 13, 1997, and
incorporated herein by reference).
4.23 -- Indenture dated June 13, 1997 governing TransTexas'
Senior Subordinated Notes due 2001 between TransTexas, as
issuer, and Bank One, N.A., as trustee (filed as an
exhibit to TransTexas' Registration Statement on Form S-4
(333-33803), and incorporated herein by reference).
4.24 -- Registration Rights Agreement dated June 13, 1997 between
TransTexas and the holders of TransTexas' Senior
Subordinated Notes due 2001 (filed as an exhibit
TransTexas' Registration Statement on Form S-4
(333-33803), and incorporated herein by reference).
4.25 -- Loan Agreement dated June 13, 1997 between TransTexas and
TEC (filed as an exhibit to TransTexas' current report on
Form 8-K dated June 13, 1997, and incorporated herein by
reference).
4.26 -- Security and Pledge Agreement dated June 13, 1997 by
TransTexas in favor of TEC (filed as an exhibit to
TransTexas' current report on Form 8-K dated June 13,
1997, and incorporated herein by reference).
</TABLE>
55
<PAGE> 58
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.27 -- Disbursement Agreement dated June 13, 1997 among
TransTexas, TEC and Firstar Bank of Minnesota, as
disbursement agent and Trustee (filed as an exhibit to
TransTexas' current report on Form 8-K dated June 13,
1997, and incorporated herein by reference).
4.28 -- Forms of Mortgage dated June 13, 1997 between TransTexas
and TransAmerican Energy Corporation, (filed as an
exhibit to TransTexas' Registration Statement on Form S-4
(333-33803), and incorporated herein by reference).
4.29 -- Intercreditor and Collateral Agency Agreement dated June
13, 1997 among Firstar Bank of Minnesota, TEC and
TransTexas (filed as an exhibit to TEC's Form 10-Q for
the quarter ended July 31, 1997, and incorporated herein
by reference).
4.30 -- Registration Rights Agreement dated August 12, 1997, by
and among TransTexas, Firstar Bank of Minnesota, N.A.,
TEC and TARC (filed as an exhibit to Post-Effective
Amendment No. 6 to TransTexas' Registration Statement on
Form S-4 (33-91494) and incorporated herein by
reference).
4.31 -- First Supplemental Indenture dated as of September 2,
1997, between TransTexas, as issuer, and Bank One, N.A.,
as trustee (filed as an exhibit to TransTexas'
Registration Statement on Form S-4 (333-33803), and
incorporated herein by reference).
4.32 -- First Amendment to Loan Agreement dated December 30, 1997
between TransTexas and TEC (filed as an exhibit to
TransTexas' annual report on Form 10-K for the year ended
January 31, 1998, and incorporated herein by reference).
4.33 -- First Amendment to Disbursement Agreement dated December
30, 1997 between TransTexas, TEC and Firstar Bank of
Minnesota, as disbursement agent and Trustee (filed as an
exhibit to TransTexas' annual report on Form 10-K for the
year ended January 31, 1998, and incorporated herein by
reference).
4.34 -- Second Amendment dated December 15, 1998 to Loan
Agreement between TransTexas and TEC (filed as an exhibit
to TEC's current report on Form 8-K dated February 23,
1999, and incorporated herein by reference).
*4.35 -- Indenture dated March 15, 2000 between the Company and
Firstar Bank, N.A., Indenture Trustee, governing the
Company's 15% Senior Secured Notes due 2005 (the "Notes")
*4.36 -- Form of Mortgage dated March 15, 2000 between the Company
and Firstar Bank, N.A.
*4.37 -- Security and Pledge Agreement dated March 15, 2000
between the Company and Firstar Bank, N.A.
*4.38 -- Oil and Gas Revolving Credit and Term Loan Agreement
dated March 15, 2000 among GMAC Commercial Credit LLC, as
Lender and Agent, the Company, as Borrower, and Galveston
Bay Processing Corporation and Galveston Bay Pipeline
Company, as Guarantors.
*4.39 -- Form of Mortgage dated March 15, 2000 between the Company
and GMAC Commercial Credit LLC.
*4.40 -- Security and Pledge Agreement dated March 15, 2000
between the Company and GMAC Commercial Credit LLC.
*4.41 -- Intercreditor Agreement dated March 15, 2000 between
Firstar Bank, N.A. and GMAC Commercial Credit LLC.
</TABLE>
56
<PAGE> 59
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*4.42 -- Warrant Agreement, including form of Warrant Certificate,
dated March 15, 2000 between the Company and ChaseMellon
Shareholder Services, LLC, Warrant Agent.
*4.43 -- Registration Rights Agreement dated March 15, 2000
between the Company and the holders of the Notes named
therein.
*4.44 -- Registration Rights Agreement dated March 15, 2000
between the Company and the holders of the Class A Common
Stock named therein.
*4.45 -- Registration Rights Agreement dated March 15, 2000
between the Company and the holders of the Senior
Preferred Stock named therein.
*4.46 -- Registration Rights Agreement dated March 15, 2000
between the Company and the holders of the Junior
Preferred Stock named therein.
10.1 -- Services Agreement dated August 24, 1993, by and among
TransTexas and TransAmerican (filed as an exhibit to
TransTexas' current report on Form 8-K dated August 24,
1993, and incorporated herein by reference).
10.2 -- Tax Allocation Agreement dated August 24, 1993, by and
among TransAmerican, TransTexas, and the other
subsidiaries of TransAmerican, as amended (filed as an
exhibit to TransTexas' Registration Statement on Form S-1
(No. 33-75050), and incorporated herein by reference).
10.3 -- Interruptible Gas Sales Terms and Conditions, between
TransTexas and TARC, as amended (filed as an exhibit to
TARC's Registration Statement on Form S-1 (No. 33-82200),
and incorporated herein by reference).
10.4 -- Bank Group Agreement dated August 24, 1993, by and among
TransAmerican, TransTexas, and the Bank Group (filed as
an exhibit to TransTexas' current report on Form 8-K
dated August 24, 1993, and incorporated herein by
reference).
10.5 -- Gas Purchase Agreement dated June 8, 1987, by and between
TransAmerican and The Coastal Corporation, as amended by
the Amendment to Gas Purchase Agreement dated February
13, 1990, by and between TransAmerican and Texcol Gas
Services, Inc., as successor to The Coastal Corporation
(filed as an exhibit to TransTexas' Registration
Statement on Form S-1 (No. 33-62740), and incorporated
herein by reference).
10.6 -- Gas Purchase Agreement dated October 29, 1987, by and
between TransAmerican and The Coastal Corporation as
amended by the Amendment to Gas Purchase Agreement dated
February 13, 1990, by and between TransAmerican and
Texcol Gas Services, Inc., successor to The Coastal
Corporation (filed as an exhibit to TransTexas'
Registration Statement on Form S-1 (No. 33-62740), and
incorporated herein by reference).
10.7 -- Gas Transportation Agreement dated the Effective Date (as
therein defined), by and between TransAmerican and The
Coastal Corporation, as amended by the Amendment to Gas
Transportation Agreement dated February 13, 1990, by and
between TransAmerican and Texcol Gas Services, Inc.,
successor to The Coastal Corporation (filed as an exhibit
to TransTexas' Registration Statement on Form S-1 (No.
33-62740), and incorporated herein by reference).
10.8 -- Firm Natural Gas Sales Agreement dated September 30,
1993, by and between TransTexas and Associated Natural
Gas, Inc. (filed as an exhibit to TransTexas' Form 10-Q
for the quarter ended October 31, 1993, and incorporated
herein by reference).
</TABLE>
57
<PAGE> 60
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.9 -- Form of Indemnification Agreement by and between
TransTexas and each of its directors (filed as an exhibit
to TransTexas' current report on Form 8-K dated August
24, 1993 and incorporated herein by reference).
10.10 -- Gas Purchase Agreement dated November 1, 1985, between
TransAmerican and Washington Gas and Light Company,
Frederick Gas Company, Inc., and Shenandoah Gas Company
(filed as an exhibit to TransTexas' Registration
Statement on Form S-1 (No. 33-75050), and incorporated
herein by reference).
10.11 -- Natural Gas Sales Agreement between TransTexas and
Associated Natural Gas, Inc. dated September 30, 1993
(filed as an exhibit to TransTexas' Form 10-Q for the
quarter ended October 31, 1993, and incorporated herein
by reference).
10.12 -- Amendment Extending Gas Purchase Agreement between
TransTexas and Washington Gas Light Company, Inc., and
Shenandoah Gas Company, as amended, dated November 1,
1993 (filed as an exhibit to TransTexas' Form 10-Q for
the quarter ended January 31, 1994, and incorporated
herein by reference).
10.13 -- Agreement for Purchase of Production Payment between
TransTexas and Southern States Exploration, Inc. dated
April 1, 1994 (filed as an exhibit to TransTexas' Form
10-Q for the quarter ended April 30, 1994, and
incorporated herein by reference).
10.14 -- Assignment of Proceeds Production Payment between
TransTexas and Southern States Exploration, Inc. dated
April 1, 1994 (filed as an exhibit to TransTexas' Form
10-Q for the quarter ended April 30, 1994, and
incorporated herein by reference).
10.15 -- Transfer Agreement dated August 24, 1993, by and among
TransAmerican, TransTexas, TTC, and John R. Stanley
(filed as an exhibit to TransTexas' current report on
Form 8-K dated August 24, 1993, and incorporated herein
by reference).
10.16 -- Amended and Restated Accounts Receivable Management and
Security Agreement between TransTexas and BNY Financial
Corporation (filed as an exhibit to TransTexas' Form 10-Q
for the quarter ended October 31, 1995, and incorporated
herein by reference).
10.17 -- Note Purchase Agreement, dated as of May 10, 1996, among
TransTexas, TCW Shared Opportunity Fund II, L.P. and
Jefferies & Company, Inc. (filed as an exhibit to the
Company's Form 10-Q for the quarter ended April 30, 1996,
and incorporated herein by reference).
10.18 -- Master Swap Agreement, dated June 6, 1996, between
TransTexas and AIG Trading Corporation (filed as an
exhibit to TransTexas' Form 10-Q for the quarter ended
April 30, 1996, and incorporated herein by reference).
10.19 -- Purchase Agreement, dated January 30, 1996, between
TransTexas and Sunflower Energy Finance Company (filed as
an exhibit to TransTexas' Form 10-Q for the quarter ended
April 30, 1996, and incorporated herein by reference).
10.20 -- Production Payment Conveyance, executed on January 30,
1996, from TransTexas to Sunflower Energy Finance Company
(filed as an exhibit to TransTexas' Form 10-Q for the
quarter ended April 30, 1996, and incorporated herein by
reference).
10.21 -- First Supplement to Purchase Agreement, dated as of
February 12, 1996, among TransTexas, Sunflower Energy
Finance Company and TCW Portfolio No. 1555 DR V
Sub-Custody Partnership, L.P. (filed as an exhibit to
TransTexas' Form 10-Q for the quarter ended April 30,
1996, and incorporated herein by reference).
</TABLE>
58
<PAGE> 61
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.22 -- First Supplement to Production Payment Conveyance,
executed February 12, 1996, among TransTexas, Sunflower
Energy Finance Company and TCW Portfolio No. 1555 DR V
Sub-Custody Partnership, L.P. (filed as an exhibit to
TransTexas' Form 10-Q for the quarter ended April 30,
1996, and incorporated herein by reference).
10.23 -- Purchase Agreement, dated May 14, 1996, among TransTexas,
TCW Portfolio No. 1555 DR V Sub-Custody Partnership, L.P.
and Sunflower Energy Finance Company (filed as an exhibit
to TransTexas' Form 10-Q for the quarter ended April 30,
1996, and incorporated herein by reference).
10.24 -- Production Payment Conveyance, executed May 14, 1996,
from TransTexas to TCW Portfolio No. 1555 Dr V
Sub-Custody Partnership, L.P. and Sunflower Energy
Finance Company (filed as an exhibit to TransTexas' Form
10-Q for the quarter ended April 30, 1996, and
incorporated herein by reference).
10.25 -- Employment Agreement between TransTexas and Richard
Bianchi dated August 12, 1996 (filed as an exhibit to
TransTexas' Form 10-Q for the quarter ended October 31,
1996, and incorporated herein by reference).
10.26 -- Employment Agreement between TransTexas and Arnold
Brackenridge dated August 12, 1996 (filed as an exhibit
to TransTexas' Form 10-Q for the quarter ended October
31, 1996, and incorporated herein by reference).
10.27 -- Stock Purchase Agreement dated as of May 29, 1997 by and
between TransTexas and First Union Bank of Connecticut,
as trustee (filed as an exhibit to TransTexas' current
report on Form 8-K dated May 29, 1997, and incorporated
herein by reference).
10.28 -- Interruptible Gas Transportation Agreement dated
Effective March 1, 1997 between TransTexas, as shipper,
and Lobo Pipeline Company, as transporter (filed as an
exhibit to TransTexas' Form 10-Q for the quarter ended
July 31, 1997, and incorporated herein by reference).
10.29 -- Intrastate Firm Gas Transportation Agreement dated
effective March 1, 1997 between TransTexas, as shipper,
and Lobo Pipeline Company, as transporter (filed as an
exhibit to TransTexas' Form 10-Q for the quarter ended
July 31, 1997, and incorporated herein by reference).
10.30 -- Master Services Contract dated May 30, 1997 between
Conoco Inc. and TransTexas (filed as an exhibit to
TransTexas' Form 10-Q for the quarter ended July 31,
1997, and incorporated herein by reference).
10.31 -- Agreement for Services dated effective March 1, 1997
between Conoco Inc. and TransTexas (filed as an exhibit
to TransTexas' Form 10-Q for the quarter ended July 31,
1997, and incorporated herein by reference).
10.32 -- Services Agreement dated June 13, 1997 among TNGC
Holdings Corporation, TransAmerican, TEC, TARC,
TransTexas and TTXD (filed as an exhibit to TransTexas'
Form 10-Q for the quarter ended July 31, 1997, and
incorporated herein by reference).
10.33 -- Amendment No. 3 to Tax Allocation Agreement dated May 29,
1997 (filed as an exhibit to TransTexas' Form 10-Q for
the quarter ended July 31, 1997, and incorporated herein
by reference).
10.34 -- Amendment No. 4 to Tax Allocation Agreement dated June
13, 1997 (filed as an exhibit to TransTexas' Form 10-Q
for the quarter ended July 31, 1997, and incorporated
herein by reference).
</TABLE>
59
<PAGE> 62
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.35 -- Amendment No. 2 to Transfer Agreement dated May 29, 1997
(filed as an exhibit to TransTexas' Form 10-Q for the
quarter ended July 31, 1997, and incorporated herein by
reference).
10.36 -- Amendment No. 3 to Transfer Agreement dated June 13, 1997
(filed as an exhibit to TransTexas' Form 10-Q for the
quarter ended July 31, 1997, and incorporated herein by
reference).
10.37 -- Second Amended and Restated Accounts Receivable
Management Agreement dated October 14, 1997 between
TransTexas and BNY Financial Corporation (filed as an
exhibit to TransTexas' Form 10-Q for the quarter ended
October 31, 1997, and incorporated herein by reference).
10.38 -- Employment Agreement dated December 1, 1997 between
TransTexas and Arnold Brackenridge (filed as an exhibit
to TransTexas' annual report on Form 10-K for the year
ended January 31, 1998, and incorporated herein by
reference).
10.39 -- Employment Agreement Settlement dated April 28, 1998
between TransTexas and Richard Bianchi (filed as an
exhibit to TransTexas' annual report on Form 10-K for the
year ended January 31, 1998, and incorporated herein by
reference).
10.40 -- Severance Agreement dated November 21, 1997 between
TransTexas and Lee Muncy (filed as an exhibit to
TransTexas' annual report on Form 10-K for the year ended
January 31, 1998, and incorporated herein by reference).
10.41 -- Purchase Agreement dated February 23, 1998 between
TransTexas and TCW (filed as an exhibit to TransTexas'
annual report on Form 10-K for the year ended January 31,
1998, and incorporated herein by reference).
10.42 -- Production Payment Conveyance dated February 23, 1998
between TransTexas and TCW (filed as an exhibit to
TransTexas' annual report on Form 10-K for the year ended
January 31, 1998, and incorporated herein by reference).
10.43 -- Asset Purchase Agreement dated May 26, 1998 by and among
TransTexas, Bayard Drilling, L.P. and Bayard Drilling
Technologies, Inc. (filed as an exhibit to TransTexas'
current report on Form 8-K dated June 26, 1998, and
incorporated herein by reference).
10.44 -- Employment Agreement between the Company and John R.
Stanley dated November 1, 1998 (filed as an exhibit to
the Company's annual report on Form 10-K for the year
ended January 31, 1999, and incorporated herein by
reference).
10.45 -- Employment Agreement between the Company and Ed Donahue
dated December 1, 1998 (filed as an exhibit to the
Company's annual report on Form 10-K for the year ended
January 31, 1999, and incorporated herein by reference).
10.46 -- Credit Agreement dated April 27, 1999 among TransTexas,
Credit Suisse First Boston Management Corporation, the
Lenders named therein and TEC and TARC, as guarantors
(filed as an exhibit to the Company's annual report on
Form 10-K for the year ended January 31, 1999, and
incorporated herein by reference).
10.47 -- Post-Petition Amendment No. 1 to Financing Agreement
dated as of April 19, 1999 between the Company and GMAC
Commercial Credit LLC (filed as an exhibit to the
Company's quarterly report on Form 10-Q for the quarter
ended April 30, 1999, and incorporated herein by
reference).
</TABLE>
60
<PAGE> 63
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.48 -- Amendment No. 1 dated June 28, 1999 to Credit Agreement
dated April 27, 1999 among TransTexas, Credit Suisse
First Boston Management Corporation, the Lenders named
therein, and TEC and TARC, as guarantors (filed as an
exhibit to the Company's quarterly report on Form 10-Q
for the quarter ended July 31, 1999, and incorporated
herein by reference).
10.49 -- Employment Agreement dated November 8, 1999 between the
Company and Ronald P. Nowak (filed as an exhibit to the
Company's quarterly report on Form 10-Q for the quarter
ended October 31, 1999, and incorporated herein by
reference).
*10.50 -- Employment Agreement dated March 17, 2000 between the
Company and John R. Stanley.
*10.51 -- Severance Agreement dated May 27, 1998 between the
Company and Simon J. Ward.
*10.52 -- Purchase Agreement dated March 14, 2000 between the
Company, Southern Producer Services, L.P.("SPS"), and TCW
Portfolio No. 1555 DR V Sub-Custody Partnership, L.P.,
TCW DR VI Investment Partnership, L.P. and TCW Asset
Management Company ("TCW").
*10.53 -- Production Payment Conveyance dated March 14, 2000
between the Company, SPS and TCW.
*10.54 -- Gas and Natural Gas Liquids Purchase Agreement dated
March 14, 2000 between SPS and TTG.
*10.55 -- Crude Oil Purchase Agreement dated March 14, 2000 between
SPS and TTG.
*10.56 -- Natural Gas Treating and Condensate Handling Agreement
dated March 14, 2000 between Galveston Bay Processing
Corporation and SPS.
*10.57 -- Third Amended and Restated Accounts Receivable Management
and Security Agreement dated March 15, 2000 between the
Company and GMAC Commercial Credit LLC.
*10.58 -- Services Agreement dated March 17, 2000 between TNGC
Holdings Corporation and the Company.
21.1 -- Schedule of Subsidiaries of TransTexas (filed as an
exhibit to the Company's annual report on Form 10-K for
the year ended January 31, 1999, and incorporated herein
by reference).
*23.1 -- Consent of Netherland, Sewell & Associates, Inc.
*27.1 -- Financial Data Schedule.
</TABLE>
- ---------------
* filed herewith
(b) There were no reports on Form 8-K filed during the three months ended
January 31, 2000.
61
<PAGE> 64
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on May 1, 2000.
TRANSTEXAS GAS CORPORATION
By: /s/ JOHN R. STANLEY
----------------------------------
John R. Stanley,
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities indicated on May 1, 2000.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<C> <S>
/s/ JOHN R. STANLEY Director and Chief Executive Officer
- ----------------------------------------------------- (Principal Executive Officer)
John R. Stanley
Director
- -----------------------------------------------------
John Whitmire
/s/ WALTER S. PIONTEK Director
- -----------------------------------------------------
Walter S. Piontek
/s/ R. GERALD BENNETT Director
- -----------------------------------------------------
R. Gerald Bennett
/s/ RONALD BENSON Director
- -----------------------------------------------------
Ronald Benson
/s/ ED DONAHUE Vice President and Chief Financial Officer
- ----------------------------------------------------- (Principal Financial and Accounting
Ed Donahue Officer)
</TABLE>
62
<PAGE> 65
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
TransTexas Gas Corporation:
Our report on the consolidated financial statements of TransTexas Gas
Corporation is included on page 20 of this Form 10-K. In connection with our
audits of such financial statements, we have also audited the related financial
statement schedule listed in the index on page 53 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
PricewaterhouseCoopers LLP
Houston, Texas
May 1, 2000
63
<PAGE> 66
SCHEDULE II
TRANSTEXAS GAS CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING ADDITIONS OTHER END
DESCRIPTION OF PERIOD AT COSTS RETIREMENTS CHANGES OF PERIOD
- ----------- ---------- --------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C>
PREDECESSOR:
Year Ended January 31, 1998:
Valuation allowance -- accounts
receivable....................... $ -- $ -- $ -- $ -- $ --
======== ======== ======== ======== ========
Year Ended January 31, 1999:
Valuation allowance -- accounts
receivable....................... $ -- $ 191 $ -- $ -- $ 191
======== ======== ======== ======== ========
Year Ended January 31, 2000:
Valuation allowance -- accounts
receivable....................... $ 191 $ 2,898 $ -- $ (3,089)(1) $ --(2)
======== ======== ======== ======== ========
</TABLE>
- ---------------
(1) Adjustment for fresh-starting reporting.
(2) Successor balance at January 31, 2000.
64
<PAGE> 67
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1 -- Second Amended, Modified and Restated Plan of
Reorganization dated January 25, 2000 (filed as an
exhibit to the Company's current report on Form 8-K dated
February 7, 2000, and incorporated herein by reference).
2.2 -- Order Confirming Plan of Reorganization dated February 7,
2000 (filed as an exhibit to the Company's current report
on Form 8-K dated February 7, 2000, and incorporated
herein by reference).
3.1 -- Articles of Incorporation (filed as an exhibit to the
Company's Registration Statement on Form S-1 (No.
33-75050), and incorporated herein by reference).
3.2 -- By-laws of TransTexas (filed as an exhibit to the
Company's Registration Statement on Form S-1 (No.
33-75050), and incorporated herein by reference).
3.3 -- Amended and Restated Certificate of Incorporation (filed
as an exhibit to the Company's Registration Statement on
Form 8-A (No. 0-30475), and incorporated herein by
reference).
3.4 -- Certificate of Designation, Series A Senior Preferred
Stock (filed as an exhibit to the Company's Registration
Statement on Form 8-A (No. 0-30475), and incorporated
herein by reference).
3.5 -- Certificate of Designation, Series A Junior Preferred
Stock (filed as an exhibit to the Company's Registration
Statement on Form 8-A (No. 0-30475), and incorporated
herein by reference).
3.6 -- Amended and Restated Bylaws (filed as an exhibit to the
Company's Registration Statement on Form 8-A (No.
0-30475), and incorporated herein by reference).
4.1 -- Indenture dated as of June 15, 1995, among TransTexas,
TTC and American Bank National Association, as Trustee
(the "Indenture Trustee"), with respect to the Senior
Secured Notes including the forms of Senior Secured Note
and Senior Secured Guarantee as exhibits (filed as an
exhibit to TransTexas' current report on Form 8-K dated
June 20, 1995, and incorporated herein by reference).
4.2 -- Mortgage, Deed of Trust, Assignment of Production,
Security Agreement and Financing Statement, effective as
of June 23, 1995, from TransTexas to James A. Taylor, as
trustee for the benefit of the Indenture Trustee (filed
as an exhibit to TransTexas' current report on Form 8-K
dated June 20, 1995, and incorporated herein by
reference).
4.3 -- Pipeline Mortgage, Deed of Trust, Assignment, Security
Agreement and Financing Statement, dated as of June 20,
1995, from TTC to James A. Taylor, as trustee for the
benefit of the Indenture Trustee (filed as an exhibit to
TransTexas' current report on Form 8-K dated on June 20,
1995, and incorporated herein by reference).
4.4 -- Security Agreement, Pledge and Financing Statement, dated
as of June 20, 1995, by TransTexas in favor of the
Indenture Trustee (filed as an exhibit to TransTexas'
current report on Form 8-K dated June 20, 1995, and
incorporated herein by reference).
4.5 -- Security Agreement, Pledge and Financing Statement, dated
as of June 20, 1995, by TTC in favor of the Indenture
Trustee (filed as an exhibit to TransTexas' current
report on Form 8-K dated June 20, 1995, and incorporated
herein by reference).
4.6 -- Cash Collateral and Disbursement Agreement, dated as of
June 20, 1995, among TransTexas, the Indenture Trustee
and the Disbursement Agent (filed as an exhibit to
TransTexas' current report on Form 8-K dated June 20,
1995, and incorporated herein by reference).
</TABLE>
<PAGE> 68
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.7 -- Pledge and Security Agreement dated as of September 19,
1996, between TransAmerican Exploration Corporation and
Fleet National Bank (previously filed as an exhibit to
TransTexas' Form 10-Q for the quarter ended October 31,
1996, and incorporated herein by reference).
4.8 -- Registration Rights Agreement dated as of September 19,
1996, by and among TransTexas, TransAmerican,
TransAmerican Exploration Corporation and Fleet National
Bank (filed as an exhibit to TransTexas' Form 10-Q for
the quarter ended October 31, 1996, and incorporated
herein by reference).
4.9 -- Pledge Agreement dated as of February 23, 1995, between
TEC and First Fidelity Bank, National Association, as
Trustee (filed as an exhibit to Post-Effective Amendment
No. 5 to TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.10 -- Pledge Agreement dated as of February 23, 1995, between
TARC and First Fidelity Bank, National Association, as
Trustee (filed as an exhibit to Post-Effective Amendment
No. 5 to TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.11 -- Registration Rights Agreement dated as of February 23,
1995, among TransTexas, TARC and TEC (filed as an exhibit
to Post-Effective Amendment No. 5 to the Company's
Registration Statement on Form S-3 (33-91494), and
incorporated herein by reference).
4.12 -- Pledge Agreement dated as of February 23, 1995, among
TransAmerican, TransTexas and Halliburton Company (filed
as an exhibit to Post-Effective Amendment No. 5 to
TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.13 -- Pledge Agreement dated as of February 23, 1995, among
TransAmerican, TransTexas and RECO Industries, Inc.
(filed as an exhibit to Post-Effective Amendment No. 5 to
TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.14 -- Pledge Agreement dated as of February 23, 1995, among
TransAmerican, TransTexas and Frito-Lay, Inc. (filed as
an exhibit to Post-Effective Amendment No. 5 to
TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.15 -- Pledge Agreement dated as of February 23, 1995, among
TransAmerican, TransTexas and EM Sector Holdings, Inc.
(filed as an exhibit to Post-Effective Amendment No. 5 to
TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.16 -- Stock Pledge Agreement dated January 27, 1995, between
TransAmerican and ITT Commercial Corp. (filed as an
exhibit to Post-Effective Amendment No. 5 to TransTexas'
Registration Statement on Form S-3 (33-91494), and
incorporated herein by reference).
4.17 -- Registration Rights Agreement dated January 27, 1995,
among TransAmerican, TransTexas and ITT Commercial
Finance Corp. (filed as an exhibit to Post-Effective
Amendment No. 5 to TransTexas' Registration Statement on
Form S-3 (33-91494), and incorporated herein by
reference).
4.18 -- Note Purchase Agreement dated December 13, 1996 between
TransTexas and the Purchasers of 13 1/4% Series A Senior
Subordinated Notes due 2003 (filed as an exhibit to
Post-Effective Amendment No. 5 to TransTexas'
Registration Statement on Form S-3 (33-91494), and
incorporated herein by reference).
</TABLE>
<PAGE> 69
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.19 -- Indenture dated December 13, 1996 between TransTexas and
Bank One, Columbus, NA, as Trustee (filed as an exhibit
to Post-Effective Amendment No. 5 to TransTexas'
Registration Statement on Form S-3 (33-91494), and
incorporated herein by reference).
4.20 -- Registration Rights Agreement dated December 13, 1996
between TransTexas and each of the Purchasers of the
Subordinated Notes (filed as an exhibit to Post-
Effective Amendment No. 5 to TransTexas' Registration
Statement on Form S-3 (33-91494), and incorporated herein
by reference).
4.21 -- First Supplemental Indenture dated May 29, 1997 by and
among TransTexas, TTC and Firstar Bank of Minnesota,
N.A., as trustee (filed as an exhibit to TransTexas'
current report on Form 8-K dated May 29, 1997, and
incorporated herein by reference).
4.22 -- Second Supplemental Indenture dated June 13, 1997 between
TransTexas, as issuer, and Firstar Bank of Minnesota,
N.A., as trustee (filed as an exhibit to TransTexas'
current report on Form 8-K dated June 13, 1997, and
incorporated herein by reference).
4.23 -- Indenture dated June 13, 1997 governing TransTexas'
Senior Subordinated Notes due 2001 between TransTexas, as
issuer, and Bank One, N.A., as trustee (filed as an
exhibit to TransTexas' Registration Statement on Form S-4
(333-33803), and incorporated herein by reference).
4.24 -- Registration Rights Agreement dated June 13, 1997 between
TransTexas and the holders of TransTexas' Senior
Subordinated Notes due 2001 (filed as an exhibit
TransTexas' Registration Statement on Form S-4
(333-33803), and incorporated herein by reference).
4.25 -- Loan Agreement dated June 13, 1997 between TransTexas and
TEC (filed as an exhibit to TransTexas' current report on
Form 8-K dated June 13, 1997, and incorporated herein by
reference).
4.26 -- Security and Pledge Agreement dated June 13, 1997 by
TransTexas in favor of TEC (filed as an exhibit to
TransTexas' current report on Form 8-K dated June 13,
1997, and incorporated herein by reference).
4.27 -- Disbursement Agreement dated June 13, 1997 among
TransTexas, TEC and Firstar Bank of Minnesota, as
disbursement agent and Trustee (filed as an exhibit to
TransTexas' current report on Form 8-K dated June 13,
1997, and incorporated herein by reference).
4.28 -- Forms of Mortgage dated June 13, 1997 between TransTexas
and TransAmerican Energy Corporation, (filed as an
exhibit to TransTexas' Registration Statement on Form S-4
(333-33803), and incorporated herein by reference).
4.29 -- Intercreditor and Collateral Agency Agreement dated June
13, 1997 among Firstar Bank of Minnesota, TEC and
TransTexas (filed as an exhibit to TEC's Form 10-Q for
the quarter ended July 31, 1997, and incorporated herein
by reference).
4.30 -- Registration Rights Agreement dated August 12, 1997, by
and among TransTexas, Firstar Bank of Minnesota, N.A.,
TEC and TARC (filed as an exhibit to Post-Effective
Amendment No. 6 to TransTexas' Registration Statement on
Form S-4 (33-91494) and incorporated herein by
reference).
4.31 -- First Supplemental Indenture dated as of September 2,
1997, between TransTexas, as issuer, and Bank One, N.A.,
as trustee (filed as an exhibit to TransTexas'
Registration Statement on Form S-4 (333-33803), and
incorporated herein by reference).
</TABLE>
<PAGE> 70
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.32 -- First Amendment to Loan Agreement dated December 30, 1997
between TransTexas and TEC (filed as an exhibit to
TransTexas' annual report on Form 10-K for the year ended
January 31, 1998, and incorporated herein by reference).
4.33 -- First Amendment to Disbursement Agreement dated December
30, 1997 between TransTexas, TEC and Firstar Bank of
Minnesota, as disbursement agent and Trustee (filed as an
exhibit to TransTexas' annual report on Form 10-K for the
year ended January 31, 1998, and incorporated herein by
reference).
4.34 -- Second Amendment dated December 15, 1998 to Loan
Agreement between TransTexas and TEC (filed as an exhibit
to TEC's current report on Form 8-K dated February 23,
1999, and incorporated herein by reference).
*4.35 -- Indenture dated March 15, 2000 between the Company and
Firstar Bank, N.A., Indenture Trustee, governing the
Company's 15% Senior Secured Notes due 2005 (the
"Notes").
*4.36 -- Form of Mortgage dated March 15, 2000 between the Company
and Firstar Bank, N.A.
*4.37 -- Security and Pledge Agreement dated March 15, 2000
between the Company and Firstar Bank, N.A.
*4.38 -- Oil and Gas Revolving Credit and Term Loan Agreement
dated March 15, 2000 among GMAC Commercial Credit LLC, as
Lender and Agent, the Company, as Borrower, and Galveston
Bay Processing Corporation and Galveston Bay Pipeline
Company, as Guarantors.
*4.39 -- Form of Mortgage dated March 15, 2000 between the Company
and GMAC Commercial Credit LLC.
*4.40 -- Security and Pledge Agreement dated March 15, 2000
between the Company and GMAC Commercial Credit LLC.
*4.41 -- Intercreditor Agreement dated March 15, 2000 between
Firstar Bank, N.A. and GMAC Commercial Credit LLC.
*4.42 -- Warrant Agreement, including form of Warrant Certificate,
dated March 15, 2000 between the Company and ChaseMellon
Shareholder Services, LLC, Warrant Agent.
*4.43 -- Registration Rights Agreement dated March 15, 2000
between the Company and the holders of the Notes named
therein.
*4.44 -- Registration Rights Agreement dated March 15, 2000
between the Company and the holders of the Class A Common
Stock named therein.
*4.45 -- Registration Rights Agreement dated March 15, 2000
between the Company and the holders of the Senior
Preferred Stock named therein.
*4.46 -- Registration Rights Agreement dated March 15, 2000
between the Company and the holders of the Junior
Preferred Stock named therein.
10.1 -- Services Agreement dated August 24, 1993, by and among
TransTexas and TransAmerican (filed as an exhibit to
TransTexas' current report on Form 8-K dated August 24,
1993, and incorporated herein by reference).
10.2 -- Tax Allocation Agreement dated August 24, 1993, by and
among TransAmerican, TransTexas, and the other
subsidiaries of TransAmerican, as amended (filed as an
exhibit to TransTexas' Registration Statement on Form S-1
(No. 33-75050), and incorporated herein by reference).
</TABLE>
<PAGE> 71
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.3 -- Interruptible Gas Sales Terms and Conditions, between
TransTexas and TARC, as amended (filed as an exhibit to
TARC's Registration Statement on Form S-1 (No. 33-82200),
and incorporated herein by reference).
10.4 -- Bank Group Agreement dated August 24, 1993, by and among
TransAmerican, TransTexas, and the Bank Group (filed as
an exhibit to TransTexas' current report on Form 8-K
dated August 24, 1993, and incorporated herein by
reference).
10.5 -- Gas Purchase Agreement dated June 8, 1987, by and between
TransAmerican and The Coastal Corporation, as amended by
the Amendment to Gas Purchase Agreement dated February
13, 1990, by and between TransAmerican and Texcol Gas
Services, Inc., as successor to The Coastal Corporation
(filed as an exhibit to TransTexas' Registration
Statement on Form S-1 (No. 33-62740), and incorporated
herein by reference).
10.6 -- Gas Purchase Agreement dated October 29, 1987, by and
between TransAmerican and The Coastal Corporation as
amended by the Amendment to Gas Purchase Agreement dated
February 13, 1990, by and between TransAmerican and
Texcol Gas Services, Inc., successor to The Coastal
Corporation (filed as an exhibit to TransTexas'
Registration Statement on Form S-1 (No. 33-62740), and
incorporated herein by reference).
10.7 -- Gas Transportation Agreement dated the Effective Date (as
therein defined), by and between TransAmerican and The
Coastal Corporation, as amended by the Amendment to Gas
Transportation Agreement dated February 13, 1990, by and
between TransAmerican and Texcol Gas Services, Inc.,
successor to The Coastal Corporation (filed as an exhibit
to TransTexas' Registration Statement on Form S-1 (No.
33-62740), and incorporated herein by reference).
10.8 -- Firm Natural Gas Sales Agreement dated September 30,
1993, by and between TransTexas and Associated Natural
Gas, Inc. (filed as an exhibit to TransTexas' Form 10-Q
for the quarter ended October 31, 1993, and incorporated
herein by reference).
10.9 -- Form of Indemnification Agreement by and between
TransTexas and each of its directors (filed as an exhibit
to TransTexas' current report on Form 8-K dated August
24, 1993 and incorporated herein by reference).
10.10 -- Gas Purchase Agreement dated November 1, 1985, between
TransAmerican and Washington Gas and Light Company,
Frederick Gas Company, Inc., and Shenandoah Gas Company
(filed as an exhibit to TransTexas' Registration
Statement on Form S-1 (No. 33-75050), and incorporated
herein by reference).
10.11 -- Natural Gas Sales Agreement between TransTexas and
Associated Natural Gas, Inc. dated September 30, 1993
(filed as an exhibit to TransTexas' Form 10-Q for the
quarter ended October 31, 1993, and incorporated herein
by reference).
10.12 -- Amendment Extending Gas Purchase Agreement between
TransTexas and Washington Gas Light Company, Inc., and
Shenandoah Gas Company, as amended, dated November 1,
1993 (filed as an exhibit to TransTexas' Form 10-Q for
the quarter ended January 31, 1994, and incorporated
herein by reference).
10.13 -- Agreement for Purchase of Production Payment between
TransTexas and Southern States Exploration, Inc. dated
April 1, 1994 (filed as an exhibit to TransTexas' Form
10-Q for the quarter ended April 30, 1994, and
incorporated herein by reference).
</TABLE>
<PAGE> 72
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.14 -- Assignment of Proceeds Production Payment between
TransTexas and Southern States Exploration, Inc. dated
April 1, 1994 (filed as an exhibit to TransTexas' Form
10-Q for the quarter ended April 30, 1994, and
incorporated herein by reference).
10.15 -- Transfer Agreement dated August 24, 1993, by and among
TransAmerican, TransTexas, TTC, and John R. Stanley
(filed as an exhibit to TransTexas' current report on
Form 8-K dated August 24, 1993, and incorporated herein
by reference).
10.16 -- Amended and Restated Accounts Receivable Management and
Security Agreement between TransTexas and BNY Financial
Corporation (filed as an exhibit to TransTexas' Form 10-Q
for the quarter ended October 31, 1995, and incorporated
herein by reference).
10.17 -- Note Purchase Agreement, dated as of May 10, 1996, among
TransTexas, TCW Shared Opportunity Fund II, L.P. and
Jefferies & Company, Inc. (filed as an exhibit to the
Company's Form 10-Q for the quarter ended April 30, 1996,
and incorporated herein by reference).
10.18 -- Master Swap Agreement, dated June 6, 1996, between
TransTexas and AIG Trading Corporation (filed as an
exhibit to TransTexas' Form 10-Q for the quarter ended
April 30, 1996, and incorporated herein by reference).
10.19 -- Purchase Agreement, dated January 30, 1996, between
TransTexas and Sunflower Energy Finance Company (filed as
an exhibit to TransTexas' Form 10-Q for the quarter ended
April 30, 1996, and incorporated herein by reference).
10.20 -- Production Payment Conveyance, executed on January 30,
1996, from TransTexas to Sunflower Energy Finance Company
(filed as an exhibit to TransTexas' Form 10-Q for the
quarter ended April 30, 1996, and incorporated herein by
reference).
10.21 -- First Supplement to Purchase Agreement, dated as of
February 12, 1996, among TransTexas, Sunflower Energy
Finance Company and TCW Portfolio No. 1555 DR V
Sub-Custody Partnership, L.P. (filed as an exhibit to
TransTexas' Form 10-Q for the quarter ended April 30,
1996, and incorporated herein by reference).
10.22 -- First Supplement to Production Payment Conveyance,
executed February 12, 1996, among TransTexas, Sunflower
Energy Finance Company and TCW Portfolio No. 1555 DR V
Sub-Custody Partnership, L.P. (filed as an exhibit to
TransTexas' Form 10-Q for the quarter ended April 30,
1996, and incorporated herein by reference).
10.23 -- Purchase Agreement, dated May 14, 1996, among TransTexas,
TCW Portfolio No. 1555 DR V Sub-Custody Partnership, L.P.
and Sunflower Energy Finance Company (filed as an exhibit
to TransTexas' Form 10-Q for the quarter ended April 30,
1996, and incorporated herein by reference).
10.24 -- Production Payment Conveyance, executed May 14, 1996,
from TransTexas to TCW Portfolio No. 1555 Dr V
Sub-Custody Partnership, L.P. and Sunflower Energy
Finance Company (filed as an exhibit to TransTexas' Form
10-Q for the quarter ended April 30, 1996, and
incorporated herein by reference).
10.25 -- Employment Agreement between TransTexas and Richard
Bianchi dated August 12, 1996 (filed as an exhibit to
TransTexas' Form 10-Q for the quarter ended October 31,
1996, and incorporated herein by reference).
10.26 -- Employment Agreement between TransTexas and Arnold
Brackenridge dated August 12, 1996 (filed as an exhibit
to TransTexas' Form 10-Q for the quarter ended October
31, 1996, and incorporated herein by reference).
</TABLE>
<PAGE> 73
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.27 -- Stock Purchase Agreement dated as of May 29, 1997 by and
between TransTexas and First Union Bank of Connecticut,
as trustee (filed as an exhibit to TransTexas' current
report on Form 8-K dated May 29, 1997, and incorporated
herein by reference).
10.28 -- Interruptible Gas Transportation Agreement dated
Effective March 1, 1997 between TransTexas, as shipper,
and Lobo Pipeline Company, as transporter (filed as an
exhibit to TransTexas' Form 10-Q for the quarter ended
July 31, 1997, and incorporated herein by reference).
10.29 -- Intrastate Firm Gas Transportation Agreement dated
effective March 1, 1997 between TransTexas, as shipper,
and Lobo Pipeline Company, as transporter (filed as an
exhibit to TransTexas' Form 10-Q for the quarter ended
July 31, 1997, and incorporated herein by reference).
10.30 -- Master Services Contract dated May 30, 1997 between
Conoco Inc. and TransTexas (filed as an exhibit to
TransTexas' Form 10-Q for the quarter ended July 31,
1997, and incorporated herein by reference).
10.31 -- Agreement for Services dated effective March 1, 1997
between Conoco Inc. and TransTexas (filed as an exhibit
to TransTexas' Form 10-Q for the quarter ended July 31,
1997, and incorporated herein by reference).
10.32 -- Services Agreement dated June 13, 1997 among TNGC
Holdings Corporation, TransAmerican, TEC, TARC,
TransTexas and TTXD (filed as an exhibit to TransTexas'
Form 10-Q for the quarter ended July 31, 1997, and
incorporated herein by reference).
10.33 -- Amendment No. 3 to Tax Allocation Agreement dated May 29,
1997 (filed as an exhibit to TransTexas' Form 10-Q for
the quarter ended July 31, 1997, and incorporated herein
by reference).
10.34 -- Amendment No. 4 to Tax Allocation Agreement dated June
13, 1997 (filed as an exhibit to TransTexas' Form 10-Q
for the quarter ended July 31, 1997, and incorporated
herein by reference).
10.35 -- Amendment No. 2 to Transfer Agreement dated May 29, 1997
(filed as an exhibit to TransTexas' Form 10-Q for the
quarter ended July 31, 1997, and incorporated herein by
reference).
10.36 -- Amendment No. 3 to Transfer Agreement dated June 13, 1997
(filed as an exhibit to TransTexas' Form 10-Q for the
quarter ended July 31, 1997, and incorporated herein by
reference).
10.37 -- Second Amended and Restated Accounts Receivable
Management Agreement dated October 14, 1997 between
TransTexas and BNY Financial Corporation (filed as an
exhibit to TransTexas' Form 10-Q for the quarter ended
October 31, 1997, and incorporated herein by reference).
10.38 -- Employment Agreement dated December 1, 1997 between
TransTexas and Arnold Brackenridge (filed as an exhibit
to TransTexas' annual report on Form 10-K for the year
ended January 31, 1998, and incorporated herein by
reference).
10.39 -- Employment Agreement Settlement dated April 28, 1998
between TransTexas and Richard Bianchi (filed as an
exhibit to TransTexas' annual report on Form 10-K for the
year ended January 31, 1998, and incorporated herein by
reference).
10.40 -- Severance Agreement dated November 21, 1997 between
TransTexas and Lee Muncy (filed as an exhibit to
TransTexas' annual report on Form 10-K for the year ended
January 31, 1998, and incorporated herein by reference).
</TABLE>
<PAGE> 74
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.41 -- Purchase Agreement dated February 23, 1998 between
TransTexas and TCW (filed as an exhibit to TransTexas'
annual report on Form 10-K for the year ended January 31,
1998, and incorporated herein by reference).
10.42 -- Production Payment Conveyance dated February 23, 1998
between TransTexas and TCW (filed as an exhibit to
TransTexas' annual report on Form 10-K for the year ended
January 31, 1998, and incorporated herein by reference).
10.43 -- Asset Purchase Agreement dated May 26, 1998 by and among
TransTexas, Bayard Drilling, L.P. and Bayard Drilling
Technologies, Inc. (filed as an exhibit to TransTexas'
current report on Form 8-K dated June 26, 1998, and
incorporated herein by reference).
10.44 -- Employment Agreement between the Company and John R.
Stanley dated November 1, 1998 (filed as an exhibit to
the Company's annual report on Form 10-K for the year
ended January 31, 1999, and incorporated herein by
reference).
10.45 -- Employment Agreement between the Company and Ed Donahue
dated December 1, 1998 (filed as an exhibit to the
Company's annual report on Form 10-K for the year ended
January 31, 1999, and incorporated herein by reference).
10.46 -- Credit Agreement dated April 27, 1999 among TransTexas,
Credit Suisse First Boston Management Corporation, the
Lenders named therein and TEC and TARC, as guarantors
(filed as an exhibit to the Company's annual report on
Form 10-K for the year ended January 31, 1999, and
incorporated herein by reference).
10.47 -- Post-Petition Amendment No. 1 to Financing Agreement
dated as of April 19, 1999 between the Company and GMAC
Commercial Credit LLC (filed as an exhibit to the
Company's quarterly report on Form 10-Q for the quarter
ended April 30, 1999, and incorporated herein by
reference).
10.48 -- Amendment No. 1 dated June 28, 1999 to Credit Agreement
dated April 27, 1999 among TransTexas, Credit Suisse
First Boston Management Corporation, the Lenders named
therein, and TEC and TARC, as guarantors (filed as an
exhibit to the Company's quarterly report on Form 10-Q
for the quarter ended July 31, 1999, and incorporated
herein by reference).
10.49 -- Employment Agreement dated November 8, 1999 between the
Company and Ronald P. Nowak (filed as an exhibit to the
Company's quarterly report on Form 10-Q for the quarter
ended October 31, 1999, and incorporated herein by
reference).
*10.50 -- Employment Agreement dated March 17, 2000 between the
Company and John R. Stanley.
*10.51 -- Severance Agreement dated May 27, 1998 between the
Company and Simon J. Ward.
*10.52 -- Purchase Agreement dated March 14, 2000 between the
Company, Southern Producer Services, L.P.("SPS"), and TCW
Portfolio No. 1555 DR V Sub-Custody Partnership, L.P.,
TCW DR VI Investment Partnership, L.P. and TCW Asset
Management Company ("TCW").
*10.53 -- Production Payment Conveyance dated March 14, 2000
between the Company, SPS and TCW.
*10.54 -- Gas and Natural Gas Liquids Purchase Agreement dated
March 14, 2000 between SPS and TTG.
</TABLE>
<PAGE> 75
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*10.55 -- Crude Oil Purchase Agreement dated March 14, 2000 between
SPS and TTG.
*10.56 -- Natural Gas Treating and Condensate Handling Agreement
dated March 14, 2000 between Galveston Bay Processing
Corporation and SPS.
*10.57 -- Third Amended and Restated Accounts Receivable Management
and Security Agreement dated March 15, 2000 between the
Company and GMAC Commercial Credit LLC.
*10.58 -- Services Agreement dated March 17, 2000 between TNGC
Holdings Corporation and the Company.
21.1 -- Schedule of Subsidiaries of TransTexas (filed as an
exhibit to the Company's annual report on Form 10-K for
the year ended January 31, 1999, and incorporated herein
by reference).
*23.1 -- Consent of Netherland, Sewell & Associates, Inc.
*27.1 -- Financial Data Schedule.
</TABLE>
- ---------------
* filed herewith
<PAGE> 1
EXHIBIT 4.35
================================================================================
$200,000,000 15% Senior Secured Notes due 2005
INDENTURE
between
TRANSTEXAS GAS CORPORATION,
as Issuer,
GALVESTON BAY PIPELINE COMPANY
and
GALVESTON BAY PROCESSING CORPORATION,
as Guarantors,
and
FIRSTAR BANK, N.A.,
as Trustee
Dated as of March 15, 2000
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA INDENTURE
SECTION SECTION
------- -------
<S> <C>
310(a)(1)................................................................. 7.10
(a)(2).............................................................. 7.10
(a)(3).............................................................. N.A.
(a)(4).............................................................. N.A.
(a)(5).............................................................. 7.10
(b)................................................................. 7.8; 7.10
(c)................................................................. N.A.
311(a).................................................................... 7.11
(b)................................................................. 7.11
(c)................................................................. N.A.
312(a).................................................................... 2.5
(b)................................................................. 14.3
(c)................................................................. 14.3
313(a).................................................................... 7.6
(b)(1).............................................................. 7.6
(b)(2).............................................................. 7.6
(c)................................................................. 7.6; 14.2
(d)................................................................. 7.6
314(a).................................................................... 4.8; 14.2
(b)................................................................. 11.3(b)
(c)(1).............................................................. 2.2; 7.2; 14.4
(c)(2).............................................................. 7.2; 14.4
(c)(3).............................................................. N.A.
(d)................................................................. 11.3(b); 11.4(b); 11.5(b)
(e)................................................................. 14.5
(f)................................................................. N.A.
315(a).................................................................... 7.1(b)
(b)................................................................. 7.5; 14.2
(c)................................................................. 7.1(a)
(d)................................................................. 6.11; 7.1(c)
(e)................................................................. 6.13
316(a)(last sentence)..................................................... 2.9
(a)(1)(A)........................................................... 6.11
(a)(1)(B)........................................................... 6.12
(a)(2).............................................................. N.A.
(b)................................................................. 6.12; 6.8
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
(c)................................................................. 10.5
317(a)(1)................................................................. 6.3
(a)(2).............................................................. 6.4
(b)................................................................. 2.4
318(a).................................................................... 14.1
</TABLE>
- --------------
N.A. means Not Applicable
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
ii
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE.............................................................1
Section 1.1 Definitions.................................................................1
Section 1.2 Incorporation by Reference of TIA..........................................28
Section 1.3 Rules of Construction......................................................28
ARTICLE II
THE NOTES.............................................................................................29
Section 2.1 Form and Dating.................................................................29
Section 2.2 Execution and Authentication....................................................29
Section 2.3 Registrar and Paying Agent......................................................30
Section 2.4 Paying Agent to Hold Assets in Trust............................................30
Section 2.5 Noteholder Lists................................................................31
Section 2.6 Transfer and Exchange...........................................................31
Section 2.7 Replacement Notes...............................................................33
Section 2.8 Outstanding Notes...............................................................33
Section 2.9 Treasury Notes..................................................................33
Section 2.10 Temporary Notes................................................................33
Section 2.11 Cancellation...................................................................34
Section 2.12 Defaulted Interest.............................................................34
Section 2.13 Computation of Interest........................................................35
ARTICLE III
REDEMPTION............................................................................................35
Section 3.1 Right of Redemption.............................................................35
Section 3.2 Notices to Trustee..............................................................35
Section 3.3 Selection of Notes to Be Redeemed...............................................35
Section 3.4 Notice of Redemption............................................................35
Section 3.5 Effect of Notice of Redemption..................................................36
Section 3.6 Deposit of Redemption Price.....................................................37
Section 3.7 Notes Redeemed in Part..........................................................37
ARTICLE IV
COVENANTS.............................................................................................37
Section 4.1 Payment of Notes................................................................37
Section 4.2 Maintenance of Office or Agency.................................................37
Section 4.3 Limitation on Restricted Payments...............................................38
</TABLE>
i
<PAGE> 5
<TABLE>
<S> <C>
Section 4.4 Corporate Existence.............................................................38
Section 4.5 Payment of Taxes and Other Claims...............................................38
Section 4.6 Maintenance of Properties and Insurance.........................................38
Section 4.7 Compliance Certificate; Notice of Default.......................................39
Section 4.8 SEC Reports and TIA Compliance..................................................40
Section 4.9 Limitation on Status as Investment Company or Public Utility Company............40
Section 4.10 Limitation on Transactions with Affiliates.....................................40
Section 4.11 Limitation on Incurrences of Additional Debt and Issuances of Disqualified
Capital Stock..............................................................41
Section 4.12 Limitations on Restricting Subsidiary Dividends................................43
Section 4.13 Limitation on Liens............................................................43
Section 4.14 Limitation on Asset Sales......................................................44
Section 4.15 Waiver of Stay, Extension or Usury Laws........................................47
Section 4.16 Guarantee by Subsidiaries......................................................48
Section 4.17 Limitations on Line of Business................................................48
Section 4.18 Separate Existence and Formalities.............................................48
Section 4.19 Limitation on Assets Held by Nominees..........................................49
ARTICLE V
SUCCESSOR CORPORATION.................................................................................49
Section 5.1 When the Company May Merge, Etc.................................................49
Section 5.2 Successor Corporation Substituted...............................................50
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES........................................................................51
Section 6.1 Events of Default...............................................................51
Section 6.2 Acceleration of Maturity Date; Rescission and Annulment.........................52
Section 6.3 Collection of Indebtedness and Suits for Enforcement by Trustee.................53
Section 6.4 Trustee May File Proofs of Claim................................................54
Section 6.5 Trustee May Enforce Claims Without Possession of Notes..........................54
Section 6.6 Priorities......................................................................55
Section 6.7 Limitation on Suits.............................................................55
Section 6.8 Unconditional Right of Holders to Receive Principal, Premium and Interest.......55
Section 6.9 Rights and Remedies Cumulative..................................................56
Section 6.10 Delay or Omission Not Waiver...................................................56
Section 6.11 Control by Holders.............................................................56
Section 6.12 Waiver of Past Default.........................................................56
Section 6.13 Undertaking for Costs..........................................................57
Section 6.14 Restoration of Rights and Remedies.............................................57
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ARTICLE VII
TRUSTEE...............................................................................................57
Section 7.1 Duties of Trustee...............................................................57
Section 7.2 Rights of Trustee...............................................................58
Section 7.3 Individual Rights of Trustee....................................................59
Section 7.4 Trustee's Disclaimer............................................................59
Section 7.5 Notice of Default...............................................................59
Section 7.6 Reports by Trustee to Holders...................................................59
Section 7.7 Compensation and Indemnity......................................................59
Section 7.8 Replacement of Trustee..........................................................60
Section 7.9 Successor Trustee by Merger, Etc................................................61
Section 7.10 Eligibility; Disqualification..................................................61
Section 7.11 Preferential Collection of Claims against Company..............................61
Section 7.12 No Bond........................................................................61
Section 7.13 Condition to Action............................................................61
Section 7.14 Investment.....................................................................61
ARTICLE VIII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE..............................................................61
Section 8.1 Option to Effect Legal Defeasance or Covenant Defeasance........................61
Section 8.2 Legal Defeasance and Discharge..................................................62
Section 8.3 Covenant Defeasance.............................................................62
Section 8.4 Conditions to Legal or Covenant Defeasance......................................62
Section 8.5 Deposited U.S. Legal Tender and U.S. Government Obligations to be Held in Trust;
Other Miscellaneous Provisions.............................................63
Section 8.6 Repayment to Issuers............................................................64
Section 8.7 Reinstatement...................................................................64
Section 8.8 Termination of Obligations Upon Cancellation of the Notes........................64
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS...................................................................65
Section 9.1 Supplemental Indentures Without Consent of Holders..............................65
Section 9.2 Amendments, Supplemental Indentures and Waivers with Consent of Holders.........65
Section 9.3 Compliance with TIA.............................................................67
Section 9.4 Revocation and Effect of Consents...............................................67
Section 9.5 Notation on or Exchange of Notes................................................67
Section 9.6 Trustee to Sign Amendments, Etc.................................................68
ARTICLE X
MEETINGS OF NOTEHOLDERS...............................................................................68
Section 10.1 Purposes for Which Meetings May Be Called......................................68
Section 10.2 Manner of Calling Meetings.....................................................68
Section 10.3 Call of Meetings by Company or Holders.........................................68
Section 10.4 Who May Attend and Vote at Meetings............................................69
Section 10.5 Regulations May Be Made by Trustee; Conduct of the Meeting; Voting Rights;
Adjournment................................................................69
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Section 10.6 Voting at the Meeting and Record to Be Kept....................................69
Section 10.7 Exercise of Rights of Trustee or Noteholders May Not Be Hindered or Delayed by
Call of Meeting............................................................70
ARTICLE XI
SECURITY..............................................................................................70
Section 11.1 Grant of Security Interest.....................................................70
Section 11.2 Trustee's Execution of Intercreditor Agreement and Subordination Agreements....70
Section 11.3 Recording; Opinions of Counsel.................................................72
Section 11.4 Disposition of Certain Collateral Without Requesting Release...................72
Section 11.5 Requesting Release of Collateral...............................................73
Section 11.6 Release Upon Defeasance or Satisfaction and Discharge of this Indenture 74
Section 11.7 Reliance on Opinion of Counsel.................................................74
Section 11.8 Purchaser May Rely.............................................................74
Section 11.9 Payment of Expenses............................................................75
Section 11.10 Trustee's Duties..............................................................75
Section 11.11 Authorization of Actions to be Taken by the Trustee Under the Security
Documents..................................................................75
ARTICLE XII
GUARANTEE.............................................................................................76
Section 12.1 Guarantee......................................................................76
Section 12.2 Execution and Delivery to Evidence and Confirm Guarantee.......................77
Section 12.3 Limitation of Guarantor's Liability............................................77
Section 12.4 Contribution...................................................................77
Section 12.5 Rights Under the Guarantee.....................................................78
Section 12.6 Severability...................................................................78
Section 12.7 Release of Galveston Bay Pipeline..............................................78
Section 12.8 Release of Galveston Bay Processing............................................79
Section 12.9 Release pursuant to Section 4.16...............................................79
ARTICLE XIII
RIGHT TO REQUIRE REPURCHASE...........................................................................80
Section 13.1 Repurchase of Notes at Option of the Holder Upon Change of Control.............80
ARTICLE XIV
MISCELLANEOUS.........................................................................................82
Section 14.1 TIA Controls...................................................................82
Section 14.2 Notices........................................................................82
Section 14.3 Communications by Holders with Other Holders...................................82
Section 14.4 Certificate and Opinion as to Conditions Precedent.............................82
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Section 14.5 Statements Required in Certificate or Opinion..................................83
Section 14.6 Rules by Trustee, Paying Agent, Registrar......................................83
Section 14.7 Legal Holidays.................................................................83
Section 14.8 Governing Law..................................................................83
Section 14.9 No Adverse Interpretation of Other Agreements..................................84
Section 14.10 No Recourse against Others....................................................84
Section 14.11 Successors....................................................................84
Section 14.12 Duplicate Originals...........................................................84
Section 14.13 Severability..................................................................84
Section 14.14 Table of Contents, Headings, Etc..............................................94
SIGNATURES............................................................................................
EXHIBITS
Exhibit A - Form of Note
Exhibit B - Form of Intercreditor Agreement
</TABLE>
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Note: This Table of Contents shall not, for any purpose, be deemed to be part
of this Indenture.
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INDENTURE, dated as of March 15, 2000, between TRANSTEXAS GAS
CORPORATION, a Delaware corporation (the "Company"), and FIRSTAR BANK, N.A., as
Trustee.
Each party hereto agrees as follows for the benefit of each other party
and for the equal and ratable benefit of the Holders of the Company's 15% Senior
Secured Notes due 2005:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1 Definitions.
"Acceleration Notice" shall have the meaning specified in Section 6.2.
"Accounts" means "accounts," as that term is defined in Article 9 of
the Uniform Commercial Code, together with the proceeds and products thereof.
"Adjusted Consolidated Net Income"of any Person for any period means
the net income (loss) of such Person and its consolidated Subsidiaries for such
period, determined in accordance with GAAP, excluding (without duplication) (i)
all extraordinary gains (but not losses), (ii) the net income, if positive, of
any other Person, other than a consolidated Subsidiary, in which such Person or
any of its consolidated Subsidiaries has an interest, except to the extent of
the amount of any dividends or distributions actually paid in cash to such
Person or a consolidated Subsidiary of such Person during such period, (iii) the
net income, if positive, of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition, and (iv) the
net income, if positive, of any Subsidiary of such Person to the extent that the
declaration or payment of dividends or similar distributions is not at the time
permitted by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule, or governmental regulation applicable to
such Subsidiary.
"Adjusted Consolidated Tangible Assets" means (without duplication), as
of the date of determination, (A) the sum of (i) discounted future net cash
flows from proved oil and gas reserves of the Company Entities, calculated in
accordance with SEC guidelines (before any state or federal income tax), as
estimated in a Reserve Report as of a date no earlier than the Company's most
recent fiscal year end (or, if such Reserve Report is unavailable, or if the
date of determination is after the end of the first fiscal quarter of the most
recent fiscal year of the Company, as estimated by the Company engineers on the
same basis as of a date no earlier than the end of the most recent fiscal
quarter, which estimates shall be confirmed in writing by a report by nationally
recognized independent petroleum engineers in accordance with SEC guidelines in
the event of a Material Change), (ii) the Net Working Capital of the Company on
a date no earlier than the date of the Company's latest consolidated annual or
quarterly financial statements, and (iii) with respect to all other tangible
assets (which are deemed to include mineral lease-hold interests) of the Company
Entities, the net book value of such other tangible assets on a date no earlier
than the date of the Company's latest consolidated annual or quarterly financial
statements, minus (B) minority interests and, to the extent not otherwise taken
into account in determining Adjusted Consolidated Tangible Assets, any gas
balancing liabilities of the Company Entities. In addition to, but without
duplication of the foregoing, for purposes of this definition, "Adjusted
Consolidated Tangible Assets" shall be calculated after giving effect, on a pro
forma basis, to (1) any Permitted Investment, on or before the date of the
transaction giving rise to the need to calculate Adjusted Consolidated Tangible
Assets (the "Assets Transaction Date"), in any other Person that,
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as a result of such investment, becomes a Subsidiary of the Company, (2) the
acquisition, on or before the Assets Transaction Date (by merger, consolidation,
or purchase of stock or assets), of any business or assets, including, without
limitation, Permitted Investments, and (3) any sales or other dispositions of
assets (other than sales of Hydrocarbons or other mineral products in the
ordinary course of business) occurring on or prior to the Assets Transaction
Date. For purposes of calculating the ratio of the Company's Adjusted
Consolidated Tangible Assets to total consolidated Debt of the Company Entities,
Debt of a Subsidiary that is not a wholly owned Subsidiary of the Company (which
Debt is non- recourse to the Company or any of its other Subsidiaries or any of
their assets) shall be included only to the extent of the Company's pro rata
ownership interest in such Subsidiary.
"Adjusted Net Assets" of a Guarantor means the lesser of (a) the amount
by which the Guarantor's property, at a fair valuation, exceeds the sum of its
debts (including unliquidated or contingent debts), (b) the amount by which the
present fair salable value of the Guarantor's assets exceeds the amount that
will be required to pay its probable liability on its existing debts as they
become absolute and matured, (c) the amount by which the Guarantor's assets
exceed the maximum amount that would constitute unreasonably small capital for
its business, or (d) the amount by which the Guarantor's assets exceed the
amount that such Guarantor should reasonably retain to pay its debts (including
unliquidated or contingent debts) as they mature.
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by, or under direct or
indirect common control with, such specified Person, (ii) any director or
controlling shareholder of such other Person, or (iii) any officer of such
specified Person or such other Person. For purposes of this definition, the term
"control" means (a) the power to direct the management and policies of a Person,
directly or through one or more intermediaries, whether through the ownership of
voting securities, by contract, or otherwise, or (b) without limiting the
foregoing, the beneficial ownership of 10% or more of the voting power of the
voting common equity of such Person (on a fully diluted basis) or of warrants or
other rights to acquire such equity (regardless of whether presently
exercisable).
"Affiliate Transaction" means, with respect to any Person, any
transaction or series of related transactions with any Affiliate of such Person
(including, without limitation: (i) the sale, lease, transfer or other
disposition of properties, assets or securities to such Affiliate, (ii) the
purchase or lease of any property, assets or securities from such Affiliate
(iii) an Investment in such Affiliate and (iv) entering into or amending any
contract or agreement with or for the benefit of any such Affiliate.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Allowed" shall have the meaning specified in the Plan.
"Allowed Claim" shall have the meaning specified in the Plan.
"Appraisal" means, when used with respect to the valuation of any
property, an appraisal prepared by an Appraiser as to the Appraised Value of
such property.
"Appraised Value" means, with respect to any property at any date, the
then current fair market value of such property as set forth in the most recent
Appraisal.
"Appraiser" means an independent appraiser of national recognition
qualified to appraise the property appraised.
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<PAGE> 11
"Asset Sale" means any direct or indirect conveyance, sale, transfer or
other disposition (including through damage or destruction for which Insurance
Proceeds are paid or by condemnation), in one transaction or a series of related
transactions, of any of the properties, businesses or assets of the Company or
any Subsidiary of the Company, whether owned on the Issue Date or thereafter
acquired; provided, however, that "Asset Sale" shall not include (i) any
disposition of Inventory or Receivables, (ii) any pledge or disposition of
assets (if such pledge or disposition would otherwise constitute an Asset Sale)
to the extent and only to the extent that it results in the creation of a
Permitted Lien (other than the creation of a Permitted Lien in connection with a
Drilling Production Payment or a Drilling Program, which in either case shall be
treated as an Asset Sale hereunder), (iii) any issuance or disposition of
securities that is made pursuant to and in accordance with the Plan or a Plan
Order, or (iv) the Davis Transactions.
"Attributable Debt" in respect of a Sale and Leaseback Transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP,
or, in the event that such rate of interest is not reasonably determinable,
discounted at the rate of interest borne by the Notes) of the Capitalized Lease
Obligation during the remaining term of the Capital Lease included in such Sale
and Leaseback Transaction (including any period for which such Capital Lease has
been extended or may, at the option of the lessor, be extended).
"Bankruptcy Code" means Title 11, United States Code, as amended from
time to time.
"Bankruptcy Law" means the Bankruptcy Code, or any similar Federal,
state or foreign law for the relief of debtors generally.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person or any committee of the Board of Directors of such
Person authorized, with respect to any particular matter, to exercise the power
of the Board of Directors of such Person.
"Board Resolution" means, with respect to any Person, a duly adopted
resolution of the Board of Directors of such Person.
"Borrowing Base" means, as of any date, an amount equal to the sum of
(a) 85% of the book value of all Accounts owned by the Company and its
Subsidiaries (excluding any Accounts that are more than 90 days past due, less
(without duplication) the allowance for doubtful accounts attributable to such
current Accounts) calculated on a consolidated basis and in accordance with
GAAP, and (b) 70% of the current market value of all Inventory owned by the
Company and its Subsidiaries as of such date. To the extent that information is
not available as to the amount of Accounts as of a specific date, the Company
may utilize, to the extent reasonable, the most recent available information for
purposes of calculating the Borrowing Base.
"Business Day" means a day that is not a Legal Holiday.
"Capital Expenditures" of a Person means expenditures (whether paid in
cash or accrued as a liability) by such Person or any of its Subsidiaries that,
in conformity with GAAP, are or would be included in "capital expenditures,"
"additions to property, plant, or equipment" or comparable items in the
consolidated financial statements of such Person consistent with prior
accounting practices.
"Capital Lease" as applied to any Person, means any lease of any
property (whether real, personal, or mixed) by that Person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
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"Capital Stock" means, with respect to any Person, any capital stock of
such Person and shares, interests, participations, or other ownership interests
(however designated) of such Person and any rights (other than debt securities
convertible into corporate stock), warrants or options to purchase any of the
foregoing, including without limitation, each class of common stock and
preferred stock of such Person, if such Person is a corporation, and each
general or limited partnership interest or other equity interest of such Person,
if such Person is a partnership.
"Capitalized Lease Obligation" means obligations under a lease that are
required to be capitalized for financial reporting purposes in accordance with
GAAP, and the amount of Debt represented by such obligations shall be the
capitalized amount of such obligations, as determined in accordance with GAAP.
"cash" means U.S. Legal Tender.
"Cash Equivalents" means (a) United States dollars, (b) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than one year from the date of acquisition, (c) certificates of deposit
with maturities of one year or less from the date of acquisition, bankers'
acceptances with maturities not exceeding one year, and overnight bank deposits,
in each case, with any Eligible Institution, (d) repurchase obligations with a
term of not more than seven days for underlying securities of the types
described in clauses (b) and (c) entered into with any Eligible Institution, (e)
commercial paper rated "P-1," "A-1" or the equivalent thereof by Moody's or S&P,
respectively, and in each case maturing within one year after the date of
acquisition, (f) shares of money market funds, including those of the Trustee,
that invest solely in United States dollars and securities of the types
described in clauses (a) through (e), (g) demand and time deposits and
certificates of deposit with any commercial bank organized in the United States
not meeting the qualifications specified in clause (c) above or an Eligible
Institution, provided, however, that such deposits and certificates support
bonds, letters of credit and other similar types of obligations incurred are in
the ordinary course of business, (h) deposits, including deposits denominated in
foreign currency, with any Eligible Institution; provided, however, that all
such deposits do not exceed $10 million in the aggregate at any one time, and
(i) demand or fully insured time deposits used in the ordinary course of
business with commercial banks insured by the Federal Deposit Insurance
Corporation.
"Change of Control" means the occurrence of the following event: during
any period of three consecutive years or less beginning at or after 11:59 p.m.,
New York, New York time on the Issue Date, individuals who at the beginning of
such period constituted the board of directors of the Company (together with any
new directors (a) whose election by such board of directors during such period
or whose nomination by such board of directors, for election by the stockholders
of the Company during such period, was made or approved by a vote of not less
than 60% of the directors of the Company then still in office who were either
directors at the beginning of such period or whose election or nomination for
election during such period was previously so approved, or (b) in the case of
the Class B Director, elected during such period by the holders of the Class B
Common Stock voting separately as a class in such election) cease for any reason
to constitute a majority of the board of directors of the Company then in
office.
"Change of Control Offer" shall have the meaning specified in Section
13.1(b).
"Change of Control Payment Date" shall have the meaning specified in
Section 13.1(a).
"Change of Control Purchase Price" shall have the meaning specified in
Section 13.1(a).
"Claim" shall have the meaning specified in the Plan.
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"Class B Common Stock" means the Class B Common Stock, par value $0.01
per share, of the Company.
"Class B Director" means the Person elected to the board of directors
of the Company by the holders of the Class B Common Stock voting separately as a
class in such election.
"Collateral" means (a) the assets of the Company which are mortgaged or
pledged for the benefit of the Holders pursuant to the terms of the Security
Documents, and (b) the assets of any Person that are mortgaged or pledged for
the benefit of the Holders pursuant to the terms of the Security Documents, but
does not include the Guarantee.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or if at any time after the
execution of this Indenture such Commission is not existing and performing the
duties now assigned to it under the TIA, then the body performing such duties at
such time.
"Common Stock" means the Company's common stock, $0.01 par value per
share.
"Company" means TransTexas Gas Corporation, a Delaware corporation,
being the party named as such in this Indenture, until a successor replaces it
pursuant to this Indenture, and thereafter means such successor.
"Company Entities" means the Company and each of its Subsidiaries.
"Confirmation Hearing" means the hearing held in the TransTexas Case
regarding confirmation of the Plan pursuant to Section 1129 of the Bankruptcy
Code.
"Confirmation Order" means the Order Confirming Debtor's Second
Amended, Modified and Restated Plan of Reorganization entered by the court in
the TransTexas case on February 7, 2000, as the same may be amended or modified.
"Consolidated EBITDA" of any Person for any period, unless otherwise
defined herein, means (a) the Consolidated Net Income of such Person for such
period, plus (b) the sum, without duplication (and only to the extent such
amounts are deducted from net revenues in determining such Consolidated Net
Income), of (i) the provision for income taxes for such period for such Person
and its consolidated Subsidiaries, (ii) depreciation, depletion, and
amortization of such Person and its consolidated Subsidiaries for such period,
and (iii) Consolidated Fixed Charges of such Person for such period, determined,
in each case, on a consolidated basis for such Person and its consolidated
Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" on any date (the
"Transaction Date") means, with respect to any Person, the ratio, on a pro forma
basis, of (i) the aggregate amount of Consolidated EBITDA of such Person
(attributable to continuing operations and businesses and exclusive of the
amounts attributable to operations and businesses discontinued or disposed of,
on a pro forma basis as if such operations and businesses were discontinued or
disposed of on the first day of the Reference Period) for the Reference Period
to (ii) the aggregate Consolidated Fixed Charges of such Person (exclusive of
amounts attributable to discontinued operations and businesses on a pro forma
basis as if such operations and businesses were discontinued or disposed of on
the first day of the Reference Period, but only to the extent that the
obligations giving rise to such Consolidated Fixed Charges would no longer be
obligations contributing to such Person's Consolidated Fixed Charges subsequent
to the Transaction Date) during the Reference Period; provided,
5
<PAGE> 14
however, that for purposes of such computation, in calculating Consolidated
EBITDA and Consolidated Fixed Charges, (a) the transaction giving rise to the
need to calculate the Consolidated Fixed Charge Coverage Ratio shall be assumed
to have occurred on the first day of the Reference Period, (b) the incurrence of
any Debt or issuance of Disqualified Capital Stock during the Reference Period
or subsequent thereto and on or prior to the Transaction Date shall be assumed
to have occurred on the first day of such Reference Period, (c) Consolidated
Interest Expense attributable to any Debt (whether existing or being incurred)
bearing a floating interest rate shall be computed as if the rate in effect on
the Transaction Date had been the applicable rate for the entire period, unless
such Person or any of its Subsidiaries is a party to a Swap Obligation (that
remains in effect for the 12-month period after the Transaction Date) that has
the effect of fixing the interest rate on the date of computation, in which case
such rate (whether higher or lower) shall be used, and (d) if the Company or any
Subsidiary of the Company has repaid, repurchased, defeased or otherwise
discharged any Debt or Disqualified Capital Stock since the beginning of the
period measured by the four full fiscal quarters ended immediately before the
Transaction Date or if any Debt is to be repaid, repurchased, defeased or
otherwise discharged (in each case other than Debt incurred under any revolving
credit facility unless such Debt has been permanently repaid and has not been
replaced) on the Transaction Date, EBITDA and Consolidated Fixed Charges for
such period shall be calculated on a pro forma basis as if such discharge had
occurred on the first day of such period and as if the Company or such
Subsidiary has not earned the interest income which has actually accrued during
such period in respect of cash or Cash Equivalents used to repay, repurchase,
defease or otherwise discharge such Debt.
"Consolidated Fixed Charges" of any Person for any period means
(without duplication) the sum of (i) Consolidated Interest Expense of such
Person for such period, (ii) dividend requirements of such Person and its
consolidated Subsidiaries (whether in cash or otherwise (except dividends
payable solely in shares of Qualified Capital Stock)) with respect to Preferred
Stock paid, accrued, or scheduled to be paid or accrued during such period, in
each case to the extent attributable to such period and excluding items
eliminated in consolidation, (iii) one-third of the Consolidated Operating Lease
Obligations for such period, and (iv) fees paid, accrued, or scheduled to be
paid or accrued during such period by such Person and its Subsidiaries in
respect of performance bonds or other guarantees of payment. For purposes of
clause (ii) above, dividend requirements shall be increased to an amount
representing the pre-tax earnings that would be required to cover such dividend
requirements; accordingly, the increased amount shall be equal to a fraction,
the numerator of which is such dividend requirements and the denominator of
which is 1 minus the applicable actual combined effective Federal, state, local,
and foreign income tax rate of such Person and its Subsidiaries (expressed as a
decimal), on a consolidated basis, for the fiscal year immediately preceding the
date of the transaction giving rise to the need to calculate Consolidated Fixed
Charges.
"Consolidated Interest Expense" of any Person means, for any period,
the aggregate interest (without duplication), whether expensed or capitalized,
paid, accrued, or scheduled to be paid or accrued during such period in respect
of all Debt of such Person and its consolidated Subsidiaries (including (i)
amortization of deferred financing costs and original issue discount and
non-cash interest payments or accruals, (ii) the interest portion of all
deferred payment obligations, calculated in accordance with the effective
interest method, and (iii) all commissions, discounts, other fees, and charges
owed with respect to letters of credit and banker's acceptance financing and
costs associated with Swap Obligations, in each case to the extent attributable
to such period determined on a consolidated basis in accordance with GAAP. For
purposes of this definition, (x) interest on a Capitalized Lease Obligation
shall be deemed to accrue at an interest rate reasonably determined to be the
rate of interest implicit in such Capitalized Lease Obligation in accordance
with GAAP (including Statement of Financial Accounting Standards No. 13 of the
Financial Accounting Standards Board), and (y) Consolidated Interest Expense
attributable to any Debt represented by the guarantee by such Person or a
Subsidiary of such Person other than with respect to Debt of such Person or a
Subsidiary of such Person shall be deemed to be the interest expense
attributable to the item guaranteed.
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"Consolidated Net Income" of any Person for any period means the net
income (loss) of such Person and its consolidated Subsidiaries for such period,
determined in accordance with GAAP, excluding (without duplication) (i) all
extraordinary, unusual and nonrecurring gains (but not losses), (ii) the net
income, if positive, of any other Person, other than a consolidated Subsidiary,
in which such Person or any of its consolidated Subsidiaries has an interest,
except to the extent of the amount of any dividends or distributions actually
paid in cash to such Person or a consolidated Subsidiary of such Person during
such period, but not in excess of such Person's pro rata share of such other
Person's aggregate net income earned during such period or earned during the
immediately preceding period and not distributed during such period, (iii) the
net income, if positive, of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition, and (iv) the
net income, if positive, of any Subsidiary of such Person to the extent that the
declaration or payment of dividends or similar distributions is not at the time
permitted by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule, or governmental regulation applicable to
such Subsidiary.
"Consolidated Operating Lease Obligations" means, for any period, the
aggregate amount of all obligations for rental paid or accrued under all
Operating Leases of the Company and its Subsidiaries as lessee (net of sublease
income), all as determined on a consolidated basis in conformity with GAAP.
"Covenant Defeasance" shall have the meaning specified in Section 8.3.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Davis Transactions" shall mean the transfer and conveyance by the
Company of certain properties to Davis Petroleum Corp. and any related
transactions, all as approved by the Order of the Bankruptcy Court dated
November 30, 1999, in case No. 99-21550-C-11, in the United States Bankruptcy
Court for the Southern District of Texas, Corpus Christi Division, as amended.
"Debt" means, with respect to any Person, without duplication (i) all
liabilities, contingent or otherwise, of such Person (a) for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (b) evidenced by bonds, notes, debentures,
or similar instruments or letters of credit or representing the balance deferred
and unpaid of the purchase price of any property acquired by such Person or
services received by such Person (other than long-term service or supply
contracts which require minimum periodic payments), (c) evidenced by bankers'
acceptances or similar instruments issued or accepted by banks or Swap
Obligations, (d) for the payment of money relating to a Capitalized Lease
Obligation, and (e) the Attributable Debt associated with any Sale and Leaseback
Transaction; (ii) reimbursement obligations of such Person with respect to
letters of credit; (iii) all liabilities of others of the kind described in the
preceding clause (i) or (ii) that such Person has guaranteed or that is
otherwise its legal liability (to the extent of such guaranty or other legal
liability) other than for endorsements, with recourse, of negotiable instruments
in the ordinary course of business; (iv) all obligations secured by a Lien
(other than Permitted Liens, except to the extent the obligations secured by
such Permitted Liens are otherwise included in clause (i), (ii) or (iii) of this
definition and are obligations of such Person) to which the property or assets
(including, without limitation, leasehold interests and any other tangible or
intangible property rights) of such Person are subject, regardless of whether
the obligations secured thereby shall have been assumed by or shall otherwise be
such Person's legal liability (but, if such obligations are not assumed by such
Person or are not otherwise such Person's legal liability, the amount of such
Debt shall be deemed to be limited to the fair market value of such property or
assets determined as of the end of the preceding fiscal quarter); and (v) any
and all deferrals, renewals, extensions, refinancings, and refundings (whether
direct or indirect) of, or amendments, modifications, or supplements to, any
liability of the kind described in
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any of the preceding clauses (i) through (iv) regardless of whether between or
among the same parties; provided, however, that, notwithstanding the foregoing,
"Debt" shall include obligations related to Drilling Production Payments,
whether denominated as Dollar- Denominated Production Payments or Volumetric
Production Payments, but shall not include Dollar- Denominated Production
Payments or Volumetric Production Payments related to Drilling Programs.
"Default" means an event or condition, the occurrence of which is, or
with the lapse of time or giving of notice or both would be, an Event of
Default.
"Defaulted Interest" shall have the meaning specified in Section 2.12.
"Definitive Notes" means Notes that are in the form of the Note
attached hereto as Exhibit A, and that do not include the information called for
by footnotes 1 and 2 thereof.
"Depository" means the Person specified in Section 2.3 hereof as the
Depository with respect to the Notes issuable in global form, until a successor
shall have been appointed and become such pursuant to the applicable provision
of this Indenture, and, thereafter, "Depository" shall mean or include such
successor.
"Disqualified Capital Stock" means, with respect to any Person, any
Capital Stock of such Person or its Subsidiaries that, by its terms or by the
terms of any security into which it is convertible or exchangeable, is, or upon
the happening of an event or the passage of time would be, required to be
redeemed or repurchased by such Person or its Subsidiaries, including at the
option of the holder, in whole or in part, or has, or upon the happening of an
event or passage of time would have, a redemption or similar payment due, on or
prior to the maturity date of the Notes.
"Dollar-Denominated Production Payments" means production payment
obligations recorded as liabilities in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"Drilling Production Payment" means the TCW/Southern Production Payment
or a Production Payment conveyed to a third party in accordance with the
provisions of Sections 4.11 and 4.14, but excludes any Production Payment
related to a Drilling Program.
"Drilling Program" means any current or future arrangement between the
Company or any Subsidiary of the Company and another Person pursuant to which
(i) such Person agrees, or has, prior to the Issue Date, agreed, to drill,
complete or perform operations to enhance recovery from, a well or wells on
mineral interests owned by the Company or such Subsidiary and (ii) the Company
or such Subsidiary agrees, or has, prior to the Issue Date, agreed, to convey or
assign to such Person an interest in such well or wells in accordance with
clause (l) of the definition of "Permitted Liens."
"DTC" means The Depository Trust Company.
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500 million and that is rated "A"
(or higher) according to Moody's or S&P at the time as of which any investment
or rollover therein is made.
"Equipment" means and includes, as to any Person, all of such Person's
now owned or hereafter acquired equipment (as such term is defined in the
Uniform Commercial Code), including, without limitation, Vehicles, drilling
rigs, workover rigs, fracture stimulation equipment, compressors, rolling stock
and related equipment and other assets accounted for as equipment by such Person
on its financial statements, all
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<PAGE> 17
proceeds thereof (from insurance or otherwise), and all documents of title,
books, records, ledger cards, files, correspondence, and computer files, tapes,
disks and related data processing software that at any time evidence or contain
information relating to the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"Event of Default" shall have the meaning specified in Section 6.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"Exchange Assets" means assets acquired by the Company or any
Subsidiary of the Company in exchange for assets of the Company or such
Subsidiary, respectively, in connection with an Asset Sale, which acquired
assets include proved reserves with a value that, together with the cash or Cash
Equivalents received therefor by the Company or any of its Subsidiaries, is
equal to or greater than the value of the proved reserves included in the assets
disposed of by the Company or such Subsidiary in connection with such Asset
Sale; provided, however, that during any fiscal year the Company or any of its
Subsidiaries can collectively acquire assets (other than proved reserves, cash
or Cash Equivalents) with a fair market value of up to $20 million in exchange
for assets of the Company or such Subsidiaries that include proved reserves, and
such assets acquired by the Company or such Subsidiaries shall constitute
"Exchange Assets" hereunder.
"Final Change of Control Put Date" shall have the meaning specified in
Section 13.1(c)(7).
"First Lien Debt" means any Debt or other obligation secured by a Lien
described in one or more of clauses (a) through (o) of this definition,
including, in each case, any refinancings thereof:
(a) pledges of assets or deposits of cash or Cash Equivalents
to secure (1) the performance of bids, trade contracts (other than
borrowed money), leases, statutory obligations, surety bonds,
performance bonds and other obligations of a like nature incurred in
the ordinary course of business (or to secure reimbursement obligations
or letters of credit in support of such bonds) in an aggregate amount
not in excess of 5% of the SEC PV10 indicated on the Company's most
recent Reserve Report at the time such pledges or deposits are made,
(2) appeal or supercedeas bonds (or to secure reimbursement obligations
or letters of credit in support of such bonds) in an amount not to
exceed $10 million at any one time outstanding, or (3) pledges or
deposits made in the ordinary course of business in connection with
worker's compensation, unemployment insurance, and other types of
social security legislation, property insurance and liability
insurance;
(b) Liens encumbering customary initial deposits and margin
deposits securing Swap Obligations or Permitted Hedging Transactions
and Liens encumbering contract rights under Permitted Hedging
Transactions;
(c) pledges of assets to secure margin obligations, settlement
obligations, reimbursement obligations or letters of credit in
connection with Permitted Hedging Transactions; provided, however,
that, at the time such pledge is made (or, if such pledge secures
future Permitted Hedging Transactions, at the time any such Permitted
Hedging Transaction is entered into), the maximum aggregate exposure
under such Permitted Hedging Transactions does not exceed the greater
of (1) $10 million or (2) 5% of the SEC PV10 indicated on the Company's
then most recent Reserve Report;
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(d) easements, rights-of-way, zoning, similar restrictions and
other similar encumbrances or title defects incurred in the ordinary
course of business which, in the aggregate, are not material in amount,
and which do not in any case materially detract from the value of the
property subject thereto (as such property is used by any of the
Company Entities) or materially interfere with the ordinary conduct of
the business of any of the Company Entities;
(e) Liens (including extensions and renewals thereof)
encumbering assets owned by Galveston Bay Processing or by Galveston
Bay Pipeline (i) that are existing on the date of this Indenture, or
(ii) that are created or granted, or, as to Liens described in the
preceding clause (i), are extended or renewed, after the date of this
Indenture in connection with a GB Facility Financing;
(f) Liens securing Allowed Priority Tax Claims, Liens securing
Allowed Claims of prepetition secured creditors in class 2 under the
Plan, and Liens securing Allowed Claims of prepetition secured
creditors in class 6B under the Plan;
(g) Liens granted on (1) Equipment to the extent granted to
secure Debt incurred pursuant to Section 4.11, (2) Inventory or (3)
Receivables;
(h) Liens constituting or granted in connection with a Presale
of Gas, provided, however, that all of the proceeds from such Presale
of Gas shall be applied to a Note Repurchase or to a Note Redemption;
(i) Liens created on, or Production Payments granted with
respect to undivided interests in, acreage drilled or to be drilled
pursuant to Drilling Programs, Hydrocarbons produced therefrom and the
proceeds of such Hydrocarbons to secure or to provide provision for
payment of the Company's obligations under such Drilling Programs,
provided, however, that (1) the number of wells included in such
program commenced in any fiscal year does not exceed 30 per fiscal year
(plus the number of wells included in programs commenced in prior years
but not yet completed), (2) such obligations are limited to a
percentage of production from such wells, (3) such Liens survive only
until the Person to whom such Lien was granted has received production
with a value equal to the costs, expenses and fees related to property
and services provided or paid for by such Person plus an agreed-upon
interest component, and (4) such Liens secure obligations that are
nonrecourse to each of the Company or its Subsidiaries;
(j) any extension, renewal, or replacement of Liens created or
existing pursuant to any of clauses (a) through (i) or (k) through (o)
of this definition, provided, however, that such Liens would have
otherwise been permitted under such clauses, and provided further, that
the Liens permitted by this clause (j) do not secure any additional
Debt or encumber any additional property;
(k) Liens constituting or securing (1) Royalty Payment
Obligations and (2) Drilling Production Payments;
(l) Liens on the proceeds of any property subject to a
Permitted Lien or on deposit accounts containing any such proceeds;
(m) Liens on the proceeds of any property that is not
Collateral;
(n) Liens (including extensions and renewals thereof) on real
or personal property, acquired after the Issue Date ("New Property");
provided, however, that (1) such Lien is created solely for
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<PAGE> 19
the purpose of securing Debt incurred to finance the cost (including
the cost of improvements or construction) of New Property subject
thereto and such Lien is created prior to or within six months after
the later of the acquisition, the completion of construction, or the
commencement of full operation of such New Property, (2) the principal
amount of the Debt secured by such Lien does not exceed 100% of such
cost including costs and fees related to the financing thereof, and (3)
any such Lien shall not extend to or cover any property or assets other
than such item of New Property, any improvements on such New Property
and any throughput, capacity or similar agreements related to the
operation of such New Property;
(n) Liens securing the Post Confirmation Credit Facility.
"Funding Guarantor" shall have the meaning specified in Section 12.4.
"GAAP" means generally accepted accounting principles as in effect in
the United States on the Issue Date applied on a basis consistent with that used
in the preparation of the most recent audited financial statements of the
Company.
"Galveston Bay Pipeline" means Galveston Bay Pipeline Company, a
subsidiary of the Company.
"Galveston Bay Processing" means Galveston Bay Processing Corporation,
a subsidiary of the Company.
"GB Facility Asset Sale" means:
(a) With respect to Galveston Bay Pipeline, the sale of all or
substantially all of the assets (but which assets may be exclusive of
Inventory and Receivables) of Galveston Bay Pipeline other than a Sale
and Leaseback Transaction resulting in a Capital Lease which
constitutes, as to Galveston Bay Pipeline, a GB Financing Document; and
(b) With respect to Galveston Bay Processing, the sale of all
or substantially all of the assets (but which assets may be exclusive
of Inventory and Receivables) of Galveston Bay Processing other than a
Sale and Leaseback Transaction resulting in a Capital Lease which
constitutes, as to Galveston Bay Processing, a GB Financing Document.
"GB Facility Financing" means:
(a) With respect to Galveston Bay Pipeline, (i) the Incurrence
of Debt by, including the renewal or extension of Debt previously
Incurred by, the Company or Galveston Bay Pipeline that is secured by a
mortgage or deed of trust constituting, with respect to Galveston Bay
Pipeline, a GB Financing Document, (ii) a Sale and Leaseback
Transaction resulting in a Capital Lease which constitutes, as to
Galveston Bay Pipeline, a GB Financing Document; and
(b) With respect to Galveston Bay Processing, (i) the
Incurrence of Debt by, including the renewal or extension of Debt
previously Incurred by, the Company or Galveston Bay Processing that is
secured by a mortgage or deed of trust constituting, with respect to
Galveston Bay Processing, a GB Financing Document, (ii) a Sale and
Leaseback Transaction resulting in a Capital Lease which constitutes,
as to Galveston Bay Pipeline, a GB Financing Document.
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"GB Financing Beneficiary" means, with respect to a GB Financing
Document, the mortgagee, beneficiary, secured party or lessor thereunder, as the
case may be.
"GB Financing Document" means:
(a) With respect to Galveston Bay Pipeline, (i) a mortgage or
deed of trust pursuant to which Galveston Bay Pipeline encumbers all or
substantially all of its rights, titles and interests in and to all or
substantially all of the GB Pipeline Facility for the purpose of
securing Debt of Galveston Bay Processing, or (ii) a Capital Lease to
which Galveston Bay Pipeline is party as lessee executed by Galveston
Bay Pipeline in connection with the closing of a Sale and Leaseback
transaction pursuant to which all or substantially all of Galveston Bay
Pipeline's rights, titles and interests in and to all or substantially
all of the GB Pipeline Facility are conveyed and concurrently leased
back by Galveston Bay Pipeline; and
(b) With respect to Galveston Bay Processing, (i) a mortgage
or deed of trust pursuant to which Galveston Bay Processing encumbers
all or substantially all of its rights, titles and interests in and to
all or substantially all of the GB Processing Facility for the purpose
of securing Debt of Galveston Bay Processing, or (ii) a Capital Lease
to which Galveston Bay Processing is party as lessee executed by
Galveston Bay Processing in connection with the closing of a Sale and
Leaseback transaction pursuant to which all or substantially all of
Galveston Bay Processing's rights, titles and interests in and to all
or substantially all of the GB Processing Facility are conveyed and
concurrently leased back by Galveston Bay Processing.
"GB Nondisturbance and Attornment Agreement" means a nondisturbance and
attornment agreement, in recordable form, duly executed and acknowledged by the
appropriate GB Financing Beneficiary for the benefit of the Company and of the
Trustee for the benefit of itself and the Noteholders, relative to a
GB/TransTexas Pipeline Agreement or a GB/TransTexas Processing Agreement, as the
case may be, and to such appropriate GB Financing Beneficiary's GB Financing
Document, and containing provisions, with respect to each GB/TransTexas Pipeline
Agreement or a GB/TransTexas Processing Agreement in question, comparable in
substance to the provisions contained in the Jefferies Nondisturbance and
Attornment Agreement.
"GB Pipeline Facility" means the dual 16 inch O.D. (gas) and 85/8 inch
O.D. (oil) transmission pipelines, co-owned, as of the date of this Indenture,
by Galveston Bay Pipeline and Davis Petroleum Pipeline L.L.C., that extend from
Lot 12, Block 139 of the San Leon Townsite, Amos Edwards League Survey, Abstract
10, Galveston County, Texas, to the Eagle Point Platform (co-owned, as of the
date of this Indenture, by the Company and Davis Petroleum Corp.) in State Tract
331, Galveston Bay, Texas, including the real property, interests in real
property, and the personal property, plant and equipment associated with such
pipelines.
"GB Processing Facility" means the property, plant and equipment
comprising the hydrocarbon processing facility owned and operated by Galveston
Bay Processing at Winnie, Texas (including the real property and interests in
real property, situated in Winnie, Jefferson County, Texas, associated with such
facility).
"GB/TransTexas Processing Agreement" means each of (a) the Amended
Natural Gas Treating and Condensate Handling Agreement dated March 16, 2000,
between the Company and Galveston Bay Processing, and (b) each other agreement
in effect at the time in question between the Company and Galveston Bay
Processing relating to the processing of Hydrocarbons by Galveston Bay
Processing at the GB Processing Facility.
"GB/TransTexas Pipeline Agreement" means each of (a) the Amended
Transportation Agreement dated March 16, 2000, between the Company and Galveston
Bay Pipeline, and (b) each other agreement in effect at the time in question
between the Company and
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<PAGE> 21
Galveston Bay Pipeline relating to the transportation of Hydrocarbons by
Galveston Bay Pipeline through the GB Pipeline Facility.
"Global Note" means a Note that contains the paragraph referred to in
footnote 1 and the additional schedule referred to in footnote 2 in the form of
the Note attached hereto as Exhibit A.
"Guarantee" shall have the meaning provided in Section 12.1.
"Guarantor" means (i) subject to the provisions of Section 12.7, each
of Galveston Bay Pipeline and Galveston Bay Processing, each of which is joining
in the execution of this Indenture for the purposes of evidencing its Guarantee
and of agreeing to be bound by the terms of this Indenture, (ii) each Subsidiary
of the Company that becomes (or is required to become) a guarantor of the
obligations of the Company under the Notes and this Indenture in accordance with
Section 4.16, and (iii) each Subsidiary of the Company executing a supplemental
indenture in which such Subsidiary agrees to become and be a guarantor of the
obligations of the Company under the Notes and this Indenture and to be bound by
the terms of this Indenture.
"Headquarters Facility" means the real property (including the
improvements thereon, the fixtures, other than trade fixtures, affixed or
attached thereto, and the personal property used in connection with the
operation thereof) owned by the Company and located at 1300 North Sam Houston
Parkway East, Houston, Texas.
"Hedging Subsidiary" means a Subsidiary of the Company engaged solely
in the business of facilitating Permitted Hedging Transactions with the Company
or any of its Subsidiaries.
"Holder" means the Person in whose name a Note is registered on the
Registrar's books.
"Hydrocarbons" means oil, natural gas, condensate, and natural gas
liquids.
"Incur" and "Incurrence"shall have the meaning specified in Section
4.11.
"Indenture" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof.
"Initial Holders" means the TEC Bondholders, as defined in the Plan.
"Insurance Proceeds" means the interest in and to all proceeds (net of
costs of collection, including attorney's fees) which now or hereafter may be
paid under any insurance policies now or hereafter obtained by or on behalf of
the Company or any Guarantor in connection with any assets thereof, together
with interest payable thereon and the right to collect and receive the same,
including, without limitation, proceeds of casualty insurance, title insurance,
business interruption insurance and any other insurance now or hereafter
maintained with respect to such assets.
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<PAGE> 22
"Intercreditor Agreement" means the Intercreditor Agreement of even
date with this Indenture among the RCA Lender, the Post Confirmation Credit
Facility Agent, and the Trustee, substantially in the form of Exhibit B.
"Interest Payment Date" means the stated due date of an installment of
interest on the Notes.
"Interest Rate or Currency Agreement" of any Person means any forward
contract, futures contract, swap, option or other financial agreement or
arrangement (including, without limitation, caps, floors, collars, puts and
similar agreements) relating to, or the value of which is dependent upon,
interest rates or currency exchange rates.
"Inventory" means and includes, as to any Person, such Person's now
owned or hereafter acquired inventory (as such term is defined in the Uniform
Commercial Code), including, without limitation, casing, drill pipe and other
supplies accounted for as inventory by the Company on its consolidated financial
statements (excluding any Hydrocarbons), all proceeds thereof (from insurance or
otherwise), and all documents of title, books, records, ledger cards, files,
correspondence, and computer files, tapes, disks and related data processing
software that at any time evidence or contain information relating to the
foregoing.
"Investment" by any Person in or with respect to any other Person means
(without duplication) (a) the acquisition (whether for cash, property, services,
securities or otherwise) of Capital Stock, bonds, notes, debentures, partnership
or other ownership interests or other securities issued by such other Person or
any agreement to make any such acquisition; (b) the making by such Person of any
deposit with, or advance, loan or other extension of credit to, such other
Person (including the purchase of property from another Person subject to an
understanding or agreement, contingent or otherwise, to resell such property to
such other Person) and (without duplication) any amount committed to be
advanced, loaned or extended to such other Person; (c) other than as permitted
under Section 4.16 or Article XII the entering into of any guarantee of, or
other credit support or contingent obligation with respect to, Debt or other
liability of such other Person; (d) the entering into of any Swap Obligation
with such other Person; or (e) the making of any capital contribution by such
Person to such other Person.
"Investment Grade Rating" means, with respect to any Person or issue of
debt securities or preferred stock, a rating in one of the four highest letter
rating categories (without regard to "+" or "-" or other modifiers) by any
rating agency or if any such rating agency has ceased using letter rating
categories or the four highest of such letter rating categories are not
considered to represent "investment grade" ratings, then the comparable
"investment grade" ratings (as designated by any such rating agency).
"Issue Date" means the date of first issuance of the Notes under this
Indenture.
"Jefferies" means Jefferies Analytical Trading Group, Inc.
"Jefferies Nondisturbance and Attornment Agreement" means the
Nondisturbance and Attornment Agreement dated as of March 15, 2000, among
Jefferies, the Company, Galveston Bay Processing, the Post Confirmation Credit
Facility Agent and the Trustee, as amended.
"Junior Preferred Stock" means the Company's junior preferred stock,
$1.00 par value.
"Legal Defeasance" shall have the meaning specified in Section 8.3.
"Legal Holiday" shall have the meaning provided in Section 14.7.
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<PAGE> 23
"Lien" means any mortgage, lien, pledge, charge, security interest, or
other encumbrance of any kind, regardless of whether filed, recorded, or
otherwise perfected under applicable law (including any conditional sale or
other title retention agreement, any lease deemed to constitute a security
interest under the applicable Uniform Commercial Code, the lessor's interest
under a Capital Lease, and any option or other agreement to give any security
interest).
"Material Change" means an increase or decrease of more than 10% since
the then most recent Reserve Report in the discounted future net cash flows
(excluding changes that result from changes in prices) from proved oil and gas
reserves of the Company and its consolidated Subsidiaries (before any state or
federal income tax); provided, however, that the following will be excluded from
the Material Change calculation: (i) any acquisitions since the then most recent
Reserve Report of oil and gas reserves that have been estimated by independent
petroleum engineers and on which a report or reports have been prepared by such
independent petroleum engineers within 12 months of the acquisition, (ii) any
reserves added since the then most recent Reserve Report attributable to the
drilling or recompletion of wells not included in previous reserve estimates,
and (iii) any disposition of properties existing on the date of then most recent
Reserve Report that have been disposed of.
"Material Subsidiary" means any Subsidiary of the Company that is or
becomes (or is required to become) a Guarantor, whether or not such Subsidiary
is thereafter released from the Guarantee.
"Maturity Date," when used with respect to any Note, means the date on
which the principal of such Note becomes due and payable as therein or herein
provided, whether at the Stated Maturity, on a Change of Control Payment Date,
or by declaration of acceleration, call for redemption or otherwise.
"Moody's" means Moody's Investors Service, Inc.
"Mortgage" means each mortgage, deed of trust, trust deed, deed to
secure debt, assignment, assignment of production, security agreement, financing
statement or similar document, however styled, executed by the Company and/or
any one or more of the Guarantors, or any other Person, for the benefit of the
Holders primarily for the purpose of creating or granting a Lien on real
property and/or Hydrocarbons, or any interests therein (but excluding Inventory
and Receivables, which shall be excepted from the Lien thereof), to secure all
or any part of (a) the obligations of the Company pursuant to this Indenture,
any one or more of the Security Documents, and/or the Notes, and/or (b) the
obligations of such Guarantor under its Guarantee.
"Net Cash Proceeds" means an amount equal to the aggregate amount of
cash received by the Company and its Subsidiaries in respect of an Asset Sale,
less the sum of (i) all reasonable out-of-pocket fees, commissions, and other
expenses incurred in connection with such Asset Sale, including the amount
(estimated in good faith by the Company) of income, franchise, sales and other
applicable taxes to be paid, payable or accrued by the Company or any Subsidiary
of the Company (in each case as estimated in good faith by the Company or such
Subsidiary without giving effect to tax attributes unrelated to such Asset Sale)
in connection with such Asset Sale, (ii) the aggregate amount of cash so
received which is used to retire any then existing Debt of the Company or its
Subsidiaries (other than the Notes), as the case may be, which is required by
the terms of such Debt to be repaid in connection with such Asset Sale, and
(iii) in the case of a GB Facility Asset Sale, the aggregate amount of cash so
received that is used to retire any then-existing Debt secured by such assets as
are so conveyed, sold, transferred or otherwise disposed of.
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<PAGE> 24
"Net GB Financing Proceeds" means an amount equal to the aggregate
amount of cash received by the Company and by Galveston Bay Pipeline or
Galveston Bay Processing, as the case may be, in respect of a GB Facility
Financing to which Galveston Bay Pipeline or Galveston Bay Processing, as the
case may be, is a party as borrower or mortgagor, less the sum of (i) all
reasonable out-of-pocket fees, commissions, and other expenses incurred in
connection with such GB Facility Financing, including the amount (estimated in
good faith by the Company) of income, franchise, sales and other applicable
taxes to be paid, payable or accrued by the Company or by Galveston Bay Pipeline
or Galveston Bay Processing, as the case may be (in each case as estimated in
good faith by the Company or by Galveston Bay Pipeline or Galveston Bay
Processing, as the case may be, without giving effect to tax attributes
unrelated to such GB Facility Financing), in connection with such GB Facility
Financing, (ii) the aggregate amount of cash so received which is used to retire
any then existing Debt of the Company or its Subsidiaries (other than the
Notes), as the case may be, which is required by the terms of such Debt to be
repaid in connection with such GB Facility Financing, (iii) the aggregate amount
of cash so received which is used to retire any then existing Debt (other than
the Notes) that is secured by assets of Galveston Bay Pipeline or Galveston Bay
Processing, as the case may be, and (iv) the aggregate amount of cash so
received which is used to retire indebtedness of the Company in respect of
Allowed Priority Tax Claims under the Plan, Allowed Claims of prepetition
secured creditors in class 2 under the Plan, and Allowed Claims of prepetition
secured creditors in classes 5 and 6B under the Plan.
"Net Proceeds" means (a) in the case of any sale by a Person of
Qualified Capital Stock, the aggregate net cash proceeds received by such Person
from the sale of Qualified Capital Stock (other than to a Subsidiary) after
payment of reasonable out-of-pocket expenses, commissions and discounts incurred
in connection therewith, and (b) in the case of any exchange, exercise,
conversion or surrender of any outstanding securities or Debt of such Person for
or into shares of Qualified Capital Stock of such Person, the net book value of
such outstanding securities as adjusted on the books of such Person or Debt of
such Person to the extent recorded in accordance with GAAP, in each case, on the
date of such exchange, exercise, conversion or surrender (plus any additional
amount required to be paid by the holder of such Debt or securities to such
Person upon such exchange, exercise, conversion or surrender and less (i) any
and all payments made to the holders of such Debt or securities and (ii) all
other expenses incurred by such Person in connection therewith, in each case, in
so far as such payments or expenses are incident to such exchange, exercise,
conversion, or surrender).
"Net Working Capital" of any Person means (i) all current assets of
such Person and its consolidated Subsidiaries, minus (ii) all current
liabilities of such Person and its consolidated Subsidiaries other than the
current portion of long term debt, each item to be determined in conformity with
GAAP.
"Net Worth" of any Person means, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly or
annual consolidated balance sheet of such Person and its Subsidiaries (which
shall be as of a date not more than 90 days prior to the date of such
computation), less any amounts included therein attributable to Disqualified
Capital Stock or any equity security convertible into or exchangeable for Debt,
the cost of treasury stock (not otherwise deducted from stockholder's equity),
and the principal amount of any promissory notes receivable from the sale of the
Capital Stock of such Person or any of its Subsidiaries, each item to be
determined in conformity with GAAP.
"New Property" shall have the meaning specified in clause (s) in the
definition of the term "Permitted Liens" set forth in Section 1.1.
"Nominee" means any Person who has or holds any right, title or
interest in any oil and gas or mineral lease as a nominee for the Company or any
of its Subsidiaries.
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"Nominee Property" means any property, lease, interest or other asset
with respect to which any Person has or holds any right, title or interest as a
Nominee.
"Non-Officer Affiliate" means, as to any specified Person, any
Affiliate of such Person that is not an Officer Affiliate of such Person.
"Noteholder" means the Person in whose name a Note is registered on the
Registrar's book.
"Note Redemption" means a redemption of Notes by the Company pursuant
to Article III.
"Note Repurchase" means a purchase of Notes by the Company pursuant to
the provisions of Section 4.14(b) et seq.
"Notes" means the 15% Senior Secured Notes due 2005, as supplemented
from time to time in accordance with the terms hereof, issued under this
Indenture.
"NYSE" means the New York Stock Exchange.
"Officer" means, with respect to the Company, the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, the Treasurer, the Controller, or the Secretary of the
Company.
"Officer Affiliate" means, as to any specified Person, any other Person
who is an Affiliate of such specified Person by reason of such other Person's
inclusion within the class of Persons described in clause (iii) of the
definition of the term "Affiliate" set forth in this Section 1.1, whether or not
such other Person is included within either or both of the classes of Persons
described in clauses (i) and (ii) of the definition of the term "Affiliate" set
forth in this Section 1.1, and any Affiliate of such other Person (other than
the Company and the Company's Subsidiaries).
"Officers' Certificate" means, with respect to the Company, a
certificate signed by two Officers of the Company, or signed by one Officer of
the Company if such Officer's signature is attested by an Assistant Secretary of
the Company, and otherwise complying with the requirements of Sections 14.4 and
14.5.
"Operating Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) by that Person as lessee which is not
a Capital Lease or a lease of a mineral interest.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee complying with the requirements of Sections
14.4 and 14.5. Unless otherwise required by the Trustee, the counsel may be
outside counsel to the Company.
"Paying Agent" shall have the meaning specified in Section 2.3.
"Permitted Hedging Transactions" means non-speculative transactions in
futures, forwards, swaps or option contracts (including both physical and
financial settlement transactions) engaged in by the Company or its Subsidiaries
as part of their normal business operations as a risk-management strategy or
hedge against adverse changes in the prices of natural gas, condensate, or oil;
provided, however, that such transactions do not, on a monthly basis, relate to
more than 90% of the Company Entities' average net hydrocarbon production (mcfe)
per month for the most recent 3-month period measured at the time of such
incurrence; and, provided further, that, at the time of such transaction (i) the
counterparty to any such transaction is an Eligible
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Institution or a Person that has an Investment Grade Rating, or (ii) such
counterparty's obligation pursuant to such transaction is unconditionally
guaranteed in full by, or secured by a letter of credit issued by, an Eligible
Institution or a Person that has an Investment Grade Rating.
"Permitted Investment" means, when used with reference to the Company
and its Subsidiaries:
(i) trade credit extended to Persons in the ordinary course of
business;
(ii) purchases of Cash Equivalents;
(iii) Investments by the Company or its wholly owned
Subsidiaries in wholly owned Subsidiaries of the Company;
(iv) Swap Obligations;
(v) the receipt of Capital Stock in lieu of cash in connection
with the settlement of litigation;
(vi) advances to officers and employees in connection with the
performance of their duties in the ordinary course of business in an
amount not to exceed $500,000 in the aggregate outstanding at any time;
(vii) margin deposits in connection with Permitted Hedging
Transactions;
(viii) Investments and expenditures made in the ordinary
course of business by the Company and its Subsidiaries, and of a nature
that, at the time of expenditure, is customary in the oil and gas
business as a means of actively exploiting, exploring for, acquiring,
developing, processing, gathering, marketing or transporting oil or gas
through agreements, transactions, interests or arrangements which
permit a Person to share risks or costs, comply with regulatory
requirements regarding local ownership or satisfy other objectives
customarily achieved through the conduct of the oil and gas business
jointly with third parties, including, without limitation, (a)
ownership interests in oil and gas properties or gathering systems and
(b) Investments and expenditures in the form of or pursuant to
operating agreements, processing agreements, farm-in agreements,
farm-out agreements, development agreements, area of mutual interest
agreements, unitization agreements, pooling arrangements, joint bidding
agreements, service contracts, joint venture agreements, partnership
agreements (whether general or limited), subscription agreements, stock
purchase agreements and other similar agreements with third parties
(including Unrestricted Subsidiaries); provided, however, that in the
case of any joint venture engaged in processing, gathering, marketing
or transporting oil or gas, (1) all Debt of such joint venture that
would not otherwise constitute Debt of one of the Company Entities
shall be deemed Debt of the Company in proportion to its direct or
indirect ownership interest in such joint venture, and (2) such joint
venture shall be reasonably anticipated, at the time of Investment, to
enhance the value of the reserves of the Company Entities or
marketability of production from such reserves;
(ix) the Guarantee and any guaranty by the Company or by any
Subsidiary of the Company that is permitted under Section 4.11(f);
(x) deposits permitted by the definition of Permitted Liens or
any extension, renewal, or replacement of any of them;
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(xi) an Investment in Capital Stock resulting from an Asset
Sale pursuant to Section 4.14; and
(xiii) other Investments, provided, however, that such
Investments do not exceed $1 million in the aggregate at any time.
"Permitted Liens" means:
(a) Liens imposed by governmental authorities for taxes,
assessments, or other charges not yet due or which are being contested
in good faith and by appropriate proceedings, if adequate reserves with
respect thereto are maintained on the books of any of the Company
Entities in accordance with GAAP;
(b) statutory Liens of landlords, carriers, warehousemen,
mechanics, materialmen, repairmen, mineral interest owners, or other
like Liens arising by operation of law in the ordinary course of
business, provided, however, that (1) the underlying obligations are
not overdue for a period of more than 45 days, or (2) such Liens are
being contested in good faith and by appropriate proceedings and
adequate reserves with respect thereto are maintained on the books of
any of the Company Entities in accordance with GAAP;
(c) pledges of assets or deposits of cash or Cash Equivalents
to secure (1) the performance of bids, trade contracts (other than
borrowed money), leases, statutory obligations, surety bonds,
performance bonds and other obligations of a like nature incurred in
the ordinary course of business (or to secure reimbursement obligations
or letters of credit in support of such bonds) in an aggregate amount
not in excess of 5% of the SEC PV10 indicated on the Company's most
recent Reserve Report at the time such pledges or deposits are made,
(2) appeal or supercedeas bonds (or to secure reimbursement obligations
or letters of credit in support of such bonds) in an amount not to
exceed $10 million at any one time outstanding, or (3) pledges or
deposits made in the ordinary course of business in connection with
worker's compensation, unemployment insurance, and other types of
social security legislation, property insurance and liability
insurance;
(d) Liens encumbering customary initial deposits and margin
deposits securing Swap Obligations or Permitted Hedging Transactions
and Liens encumbering contract rights under Permitted Hedging
Transactions;
(e) pledges of assets to secure margin obligations, settlement
obligations, reimbursement obligations or letters of credit in
connection with Permitted Hedging Transactions; provided, however,
that, at the time such pledge is made (or, if such pledge secures
future Permitted Hedging Transactions, at the time any such Permitted
Hedging Transaction is entered into), the maximum aggregate exposure
under such Permitted Hedging Transactions does not exceed the greater
of (1) $10 million or (2) 5% of the SEC PV10 indicated on the Company's
then most recent Reserve Report;
(f) easements, rights-of-way, zoning, similar restrictions and
other similar encumbrances or title defects incurred in the ordinary
course of business which, in the aggregate, are not material in amount,
and which do not in any case materially detract from the value of the
property subject thereto (as such property is used by any of the
Company Entities) or materially interfere with the ordinary conduct of
the business of any of the Company Entities;
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(g) Liens arising by operation of law in connection with
judgments, only to the extent, for an amount and for a period not
resulting in an Event of Default with respect thereto;
(h) (1) Liens securing Debt or other obligations not in excess
of $3 million, (2) Liens existing on the date of this Indenture, and
(3) Liens (including extensions and renewals thereof) encumbering
assets owned by Galveston Bay Processing or Galveston Bay Pipeline to
secure a GB Facility Financing;
(i) Liens securing (1) Allowed Priority Tax Claims under the
Plan, (2) Allowed Claims in classes 2, 5, 6A or 6B under the Plan, (3)
Debt incurred pursuant to Section 4.11(j), or (4) Refinancing Debt
incurred pursuant to Section 4.11(g) with respect to Liens described in
subsection (1), (2) or (3) of this clause (i);
(j) Liens granted on (1) Equipment to the extent granted to
secure Debt incurred pursuant to Section 4.11, (2) Inventory, or (3)
Receivables;
(k) Liens constituting or granted in connection with a Presale
of Gas, provided, however, that all of the proceeds from such Presale
of Gas shall be applied to a Note Repurchase or to a Note Redemption;
(l) Liens created on, or Production Payments granted with
respect to undivided interests in, acreage drilled or to be drilled
pursuant to Drilling Programs, Hydrocarbons produced therefrom and the
proceeds of such Hydrocarbons to secure or to provide provision for
payment of the Company's obligations under such Drilling Programs,
provided, however, that (1) the number of wells included in such
program commenced in any fiscal year does not exceed 30 per fiscal year
(plus the number of wells included in programs commenced in prior years
but not yet completed), (2) such obligations are limited to a
percentage of production from such wells, (3) such Liens survive only
until the Person to whom such Lien was granted has received production
with a value equal to the costs, expenses and fees related to property
and services provided or paid for by such Person plus an agreed-upon
interest component, and (4) such Liens secure obligations that are
nonrecourse to each of the Company or its Subsidiaries;
(m) Liens on the assets of any entity existing at the time
such assets are acquired by any of the Company Entities, whether by
merger, consolidation, purchase of assets or otherwise so long as such
Liens (1) are not created, incurred or assumed in contemplation of such
assets being acquired by any of the Company Entities and (2) do not
extend to any other assets of any of the Company or its Subsidiaries;
(n) any extension, renewal, or replacement of Liens created
pursuant to any of clauses (a) through (g), (k) through (m), or (q)
through (s) of this definition, provided, however, that such Liens
would have otherwise been permitted under such clauses, and provided
further, that the Liens permitted by this clause (n) do not secure any
additional Debt or encumber any additional property;
(o) Liens constituting or securing (1) Royalty Payment
Obligations and (2) Drilling Production Payments;
(p) Liens on the assets of any of the Company Entities in
favor of another Company Entity;
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(q) Liens on the proceeds of any property subject to a
Permitted Lien (other than Net GB Financing Proceeds that are received
directly by the Company or that are distributed to the Company by
Galveston Bay Pipeline or Galveston Bay Processing, as the case may be)
or on deposit accounts containing any such proceeds;
(r) Liens on the proceeds of any property that is not
Collateral;
(s) Liens (including extensions and renewals thereof) on real
or personal property, acquired after the Issue Date ("New Property");
provided, however, that (1) such Lien is created solely for the purpose
of securing Debt incurred to finance the cost (including the cost of
improvements or construction) of New Property subject thereto and such
Lien is created prior to or within six months after the later of the
acquisition, the completion of construction, or the commencement of
full operation of such New Property, (2) the principal amount of the
Debt secured by such Lien does not exceed 100% of such cost including
costs and fees related to the financing thereof, and (3) any such Lien
shall not extend to or cover any property or assets other than such
item of New Property, any improvements on such New Property and any
throughput, capacity or similar agreements related to the operation of
such New Property;
(t) Liens of the Trustee under this Indenture;
(u) Liens under the Security Documents;
(v) Liens securing the Post Confirmation Credit Facility; and
(w) Liens (including extensions and renewals thereof) on the
Headquarters Facility, provided, however, that (1) such Liens are
created solely for the purpose of securing Debt Incurred by the Company
concurrently with the creation of such Liens, (2) the principal amount
of the Debt secured by such Liens at the time of Incurrence does not
exceed 100% of the Appraised Value of the Headquarters Facility as
determined by an Appraisal dated not more than six (6) months prior to
the date on which such Liens are created, and (3) any such Lien shall
not extend to or cover any property or assets other than the
Headquarters Facility and any leases and rents derived from the
ownership and operation of the Headquarters Facility.
"Person" means any corporation, individual, joint stock company, joint
venture, partnership, unincorporated association, governmental regulatory
entity, country, state, or political subdivision thereof, trust, municipality,
or other entity.
"Plan" means the Company's Second Amended Plan of Reorganization, dated
September 29, 1999, filed in the TransTexas Case, together with any amendments
made at the Confirmation Hearing and incorporated therein, including, without
limitation, the modifications set forth in the Company's Second Amended,
Modified and Restated Plan of Reorganization, dated January 25, 2000, filed in
the TransTexas Case and to which reference is made in the Confirmation Order,
and together with any amendments or modifications made after the entry of the
Confirmation Order in accordance with the provisions of Section 12.04 of the
Plan or of any Plan Order.
"Plan Order" means the Confirmation Order or any other order entered in
the TransTexas Case in accordance with the provisions of Section 12.04 of the
Plan.
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"Pledged Stock" means the Capital Stock of the Subsidiaries of the
Company pledged pursuant to any of the Security Documents.
"Post Confirmation Credit Facility" means the $52,500,000 credit
facility between the Company and the Post Confirmation Credit Facility Lenders,
which credit facility is or will be secured by (a) Liens on the Shared
Collateral ranking prior to the Liens securing the Notes, (b) Liens on Inventory
and Receivables, and includes any extension, renewal, replacement or refunding
of such credit facility.
"Post Confirmation Credit Facility Lenders" shall have the meaning
specified in the Plan.
"Post Confirmation Credit Facility Agent" means GMAC Commercial Credit
LLC, as agent under the Post Confirmation Credit Facility Agreement, and any
successor at the time serving in such capacity.
"Post Confirmation Credit Facility Agreement" means the Oil & Gas
Revolving Credit and Term Loan Agreement dated as of March 15, 2000, among GMAC
Commercial Credit LLC, as a lender and as agent, the Company, as borrower,
Galveston Bay Pipeline and Galveston Bay Processing, as guarantors, and the Post
Confirmation Credit Facility Lenders party thereto, as lenders, as amended and
in effect from time to time.
"Preferred Stock" means, with respect to any Person, any class or
classes (however designated) of Capital Stock of such Person that is preferred
as to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person over shares
of Capital Stock of any other class of such corporation.
"Presale of Gas" means any advance payment agreement or other
arrangement pursuant to which the Company or any Guarantor, having received full
payment of the purchase price for a specified quantity of Hydrocarbons prior to
the first scheduled date of delivery, is required to deliver, in one or more
installments subsequent to the date of such agreement or arrangement, such
quantity of Hydrocarbons to the purchaser of such Hydrocarbons pursuant to and
during the term of such agreement or arrangement; provided, however, that the
term "Presale of Gas" shall not include (i) any such agreement or other
arrangement covering deliveries of Hydrocarbons for a period not exceeding three
calendar months and pursuant to which the Company or such Guarantor has received
full payment of the purchase price within 120 days of the last scheduled date of
delivery, (ii) a transaction to the extent and only to the extent that it
results in the creation of any Permitted Lien under clauses (l) or (o) of the
definition of "Permitted Liens," (iii) Permitted Hedging Transactions, or (iv)
an Asset Sale involving Hydrocarbon reserves.
"Priority Tax Claim" shall have the meaning specified in the Plan.
"principal amount" when used with respect to the Notes means the
principal amount of such Debt as indicated on the face of such Debt instrument.
"Production Payment" means a Dollar-Denominated Production Payment or a
Volumetric Production Payment.
"Property" means any right or interest in or to property or assets of
any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
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"RCA" means the Third Amended and Restated Accounts Receivable
Management and Security Agreement dated as of March 15, 2000, between the
Company, as borrower, and GMAC Commercial Credit LLC, as lender, as amended and
in effect from time to time.
"RCA Lender" means GMAC Commercial Credit LLC, in its capacity as
lender under the RCA.
"Receivables" means and includes, as to any Person, any and all of such
Person's now owned or hereafter acquired Accounts, all products and proceeds
thereof, and all books, records, ledger cards, files, correspondence, and
computer files, tapes, disks or software that at any time evidence or contain
information relating to such Person's Accounts.
"Record Date" means a Record Date specified in the Notes regardless of
whether such Record Date is a Business Day.
"Redemption Date" means, when used with respect to any Note to be
redeemed, the date fixed for such redemption pursuant to this Indenture and
Paragraph 5 in the form of Note attached hereto as Exhibit A.
"Redemption Price" when used with respect to any Note to be redeemed,
means the redemption price for such redemption pursuant to Paragraph 5 in the
form of Note attached hereto as Exhibit A, which shall include, without
duplication, accrued and unpaid interest to the Redemption Date.
"Reference Period" with regard to any Person means the four full fiscal
quarters of such Person ended on or immediately preceding any date upon which
any determination is to be made pursuant to the terms of the Notes or this
Indenture.
"Refinancing Debt" shall have the meaning specified in Section 4.11(g).
"Refinancing Fees" shall have the meaning specified in Section 4.11(g).
"Registrar" shall have the meaning specified in Section 2.3.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of March 15, 2000, by and among the Company and the Initial Holders.
"Related Business" means (i) the exploration for, acquisition of,
development of, production, transportation, gathering, and processing (in
connection with natural gas and natural gas liquids only) of, crude oil, natural
gas, condensate, and natural gas liquids; provided, however, that the Related
Business shall not include any refining or distilling of Hydrocarbons other than
processing and fractionating natural gas and natural gas liquids, (ii) the
drilling and energy services business and pipeline services business, (iii)
owning and operating a Hedging Subsidiary, or (iv) owning or operating
facilities designed for separation, dehydration, treatment, stabilization,
processing or storage of Hydrocarbons and related operations.
"Release Request" means a written request of the Company (or with
respect to the Security Documents, the grantor of the Security Interest
thereunder) in the form of an Officers' Certificate delivered pursuant to
Article XI.
"Repurchase Date" shall have the meaning specified in Section
4.14(d)(1).
"Repurchase Offer" shall have the meaning specified in Section 4.14(c).
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"Repurchase Offer Amount" shall have the meaning specified in Section
4.14(d)(2).
"Repurchase Offer Period" shall have the meaning specified in Section
4.14(d)(2).
"Reserve Report" means a report prepared by independent petroleum
engineers with respect to Hydrocarbon reserves in accordance with guidelines
published by the SEC.
"Restricted Investment" means any direct or indirect Investment by the
Company or any Subsidiary of the Company other than a Permitted Investment.
"Restricted Payment" means, with respect to any Person, (i) any
Restricted Investment, (ii) any dividend or other distribution on shares of
Capital Stock of such Person or any Subsidiary of such Person, (iii) any payment
on account of the purchase, redemption, or other acquisition or retirement for
value of any shares of Capital Stock of such Person, and (iv) any defeasance,
redemption, repurchase, or other acquisition or retirement for value, or any
payment in respect of any amendment in anticipation of or in connection with any
such retirement, acquisition, or defeasance, in whole or in part, of any
Subordinated Debt, directly or indirectly, of such Person or a Subsidiary of
such Person prior to the scheduled maturity or prior to any scheduled repayment
of principal in respect of such Subordinated Debt; provided, however, that the
term "Restricted Payment" does not include (i) any dividend, distribution, or
other payment on shares of Capital Stock of a Person solely in shares of
Qualified Capital Stock of such Person that is at least as junior in ranking as
the Capital Stock on which such dividend, distribution, or other payment is to
be made, (ii) any defeasance, redemption, repurchase or other acquisition or
retirement for value of Capital Stock of a Person payable in or from any
combination of (A) shares of Qualified Capital Stock of such Person and (B) the
Net Proceeds of a concurrent sale of Qualified Capital Stock of such Person, in
each case to the extent such Qualified Capital Stock is at least as junior in
ranking as the Capital Stock retired, (iii) any dividends made pursuant to the
certificates of designation of the Senior Preferred Stock and the Junior
Preferred Stock, (iv) any dividend, distribution, or other payment to the
Company from any of its Subsidiaries, (v) any defeasance, redemption,
repurchase, or other acquisition or retirement for value, in whole or in part,
of any Subordinated Debt of such Person payable in or from any combination of
(A) shares of Qualified Capital Stock of such Person and (B) the Net Proceeds of
a concurrent sale of Qualified Capital Stock, or both, (vi) any deposits,
payments or distributions made pursuant to and in accordance with the Plan or a
Plan Order, or (vii) the redemption, purchase, retirement or other acquisition
of any Debt, including any premium paid thereon, with the proceeds of any
refinancing Debt permitted to be incurred pursuant to Section 4.11(g).
"Revolving Credit Facility" means any revolving credit facility, other
than the Post Confirmation Credit Facility, between the Company, on the one
hand, and any one or more banks or other lenders, on the other hand, and
includes any revolving credit facility effected by the Company in extension,
renewal, replacement or refunding of an existing revolving credit facility.
"Royalty Payment Obligations" means (i) royalties, overriding royalties
(including those granted in connection with Drilling Programs), revenue
interests, net revenue interests, net profit interests, and reversionary
interests, (ii) the interests of others in pooling or unitization agreements,
production sales contracts and operating agreements, (iii) Liens arising under,
in connection with or related to farm-out, farm-in, joint operating, pooling,
unitization or area of mutual interest agreements or other similar or customary
arrangements, agreements or interests, and (iv) similar burdens on the property
of the Company or any Subsidiary of the Company; each as incurred in the
ordinary course of business and to the extent such burdens are limited in
recourse to (x) the properties subject to such interests or agreements, (y) the
Hydrocarbons produced from such properties, and (z) the proceeds of such
Hydrocarbons.
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"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
"Sale and Leaseback Transaction" means an arrangement relating to
property owned on the Issue Date or thereafter acquired whereby the Company or a
Subsidiary of the Company transfers such property to a Person and leases it back
from such Person pursuant to a Capital Lease.
"SEC" means the Securities and Exchange Commission.
"SEC PV10" means the standardized measure of future net cash flows
discounted at 10%, determined in all material respects in accordance with the
rules and regulations of the SEC, including the assumption of the continuation
of existing economic conditions and estimated by applying period-end gas and
condensate prices, adjusted for future price changes as allowed by contract, to
estimated future production of period-end proved reserves.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Security Agreement" means each security agreement, pledge agreement,
assignment, financing statement or similar document, however styled, executed by
the Company or any other Person for the benefit of the Holders primarily for the
purpose of creating or granting a Lien on personal property (other than
Inventory and Receivables, which shall be excepted from the Lien thereof) to
secure all or any part of the obligations of the Company pursuant to this
Indenture, any one or more of the Security Documents, and/or the Notes.
"Security Documents" means (a) each Mortgage, each Security Agreement,
and each other agreement relating to the mortgage, pledge or assignment of
assets to secure all or any part of the obligations of the Company pursuant to
this Indenture, any one or more of the Security Documents, and/or the Notes,
whether executed before, on or after the Issue Date, and (b) each Intercreditor
Agreement.
"Security Interests" means the Liens on the Collateral created by the
Security Documents in favor of the Trustee for the benefit of the Holders.
"Senior Debt" means, with respect to any Person, any Debt that is not
Subordinated Debt.
"Senior Preferred Stock" means the Company's senior preferred stock,
$1.00 par value.
"Services Agreement" means the Services Agreement among TNGC Holdings
and its Subsidiaries, as in effect on the Issue Date.
"Shared Collateral" means the Collateral securing the Notes and the
Post Confirmation Credit Facility.
"Southern" means Southern Producer Services, L.P.
"Special Record Date" for payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 2.12.
"Stated Maturity," when used with respect to any Note, means March 15,
2005.
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"Subordinated Debt" means Debt that (i) requires no payment of
principal prior to or on the date on which all principal of and interest on the
Notes is paid in full, and (ii) is subordinate and junior in right of payment to
the Notes in the event of a liquidation.
"Subordination Agreement" means each instrument of subordination
executed and delivered or to be executed and delivered by the Trustee (and any
trustee or collateral agent under or with respect to any of the Security
Documents) pursuant to Section 11.2(b).
"Subordination Request" means a written request of the Company (or with
respect to the Security Documents, the grantor of the Security Interest
thereunder) in the form of an Officers' Certificate delivered pursuant to
Section 11.2(b).
"Subsidiary" with respect to any Person, means (i) a corporation with
respect to which such Person or its Subsidiaries owns, directly or indirectly,
at least fifty percent of such corporation's Capital Stock with voting power,
under ordinary circumstances, to elect directors, or (ii) a partnership in which
such Person or a subsidiary of such Person is, at the time, a general partner of
such partnership and has more than 50% of the total voting power of partnership
interests entitled (without regard to the occurrence of any contingency) to vote
in the election of managers thereof, or (iii) any other Person (other than a
corporation or a partnership) in which such Person, one or more Subsidiaries of
such Person, or such Person and one or more Subsidiaries of such Person,
directly or indirectly, at the date of determination thereof has the power to
elect or direct the election of a majority of the directors or other governing
body of such other Person; provided, however, that a joint venture an investment
in which would constitute a Permitted Investment under clause (viii) of the
definition thereof shall not be deemed a Subsidiary.
"Surviving Person" shall have the meaning specified in Section 5.1(a).
"Swap Obligation" of any Person means any Interest Rate or Currency
Agreement entered into with one or more financial institutions or one or more
futures exchanges in the ordinary course of business and not for purposes of
speculation that is designed to protect such Person against fluctuations in (x)
interest rates with respect to Debt incurred and which shall have a notional
amount no greater than 105% of the principal amount of the Debt being hedged
thereby, or (y) currency exchange rate fluctuations.
"TCW" means, collectively, TCW Portfolio No. 1555 DR V Sub-Custody
Partnership, L.P., and TCW DR VI Investment Partnership, L.P.
"TCW/Southern" means Southern and TCW, together with their successors
and assigns as owners of the TCW/Southern Production Payment.
"TCW/Southern Mandatory Offered Wells" means all of the following wells
that are drilled during the period beginning one day prior to the date hereof
and ending on and including March 31, 2001:
(a) each well not already subject to the TCW/Southern
Production Payment that either (i) has a bottom hole location that is
within 1500 feet of any lands and depths that are at such time subject
to the TCW/Southern Production Payment, or (ii) penetrates a geological
reservoir in communication with a zone either produced or able to be
produced from any well that is at such time subject to the TCW/Southern
Production Payment, provided that with respect to the Obenhaus No. 1
Gas Unit in Wharton County, Texas, any TCW/Southern Mandatory Offered
Wells shall be limited to wells located on such unit, and
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(b) each other well with its bottom hole location in State
Tracts 308, 329, 330, 331, 332, 351, 352 and 353 in Galveston County,
Texas, the adjacent acreage in the City of San Leon, Texas, that was
originally made subject to the TCW/Southern Production Payment, and any
other acreage that is now or hereafter included in any production unit
with any of the foregoing acreage.
References in this Indenture to each well described in the foregoing paragraph
(a) shall include the associated drilling unit of at least 80 acres, and
references in this Indenture to each well described in the foregoing paragraph
(b) shall include the associated drilling unit of at least 160 acres.
"TCW/Southern Order" means the Order of the Bankruptcy Court dated
February 2, 2000, in case No. 99-21550-C-11, in the United States Bankruptcy
Court for the Southern District of Texas, Corpus Christi Division, approving
TCW/Southern Production Payment Transaction.
"TCW/Southern Production Payment" means the Drilling Production Payment
conveyed, as contemplated by the TCW/Southern Order and as part of the
TCW/Southern Production Payment Transaction, by Borrower to TCW/Southern
pursuant to that certain Production Payment Conveyance dated as of March 14,
2000, as from time to time supplemented and amended.
"TCW/Southern Production Payment Transaction" means the "Production
Payment Transaction" defined and described in, and approved by, the TCW/Southern
Order.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date of the execution of this Indenture.
"TNGC Holdings" means TNGC Holdings Corporation, a Delaware
corporation.
"TransTexas Case" means the Company's voluntary case pending as of the
date of this Indenture in the United States Bankruptcy Court for the Southern
District of Texas, Corpus Christi Division, under Chapter 11 of the Bankruptcy
Code as case number 99-21550-C-11.
"Trust Officer" means any officer within the corporate trust department
(or any successor group) of the Trustee including any vice president, assistant
vice president, secretary, assistant secretary or any other officer or assistant
officer of the Trustee customarily performing functions similar to those
performed by the Persons who at that time shall be such officers, and also
means, with respect to a particular corporate trust matter, any other officer of
the corporate trust department (or any successor group) of the Trustee to whom
such trust matter is referred because of his knowledge of and familiarity with
the particular subject.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Twelve-Month Period" shall have the meaning specified in Section
11.4(b).
"U.S.C." means the United States Code, as amended.
"U.S. Government Obligations" means direct non-callable obligations of,
or non-callable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the United
States of America is pledged.
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"U.S. Legal Tender" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Uniform Commercial Code" means the Uniform Commercial Code as in
effect in the State of New York.
"Vehicles" means all trucks, automobiles, trailers and other vehicles
covered by a certificate of title.
"Volumetric Production Payments" means production payment obligations
recorded as deferred revenue in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"Voting Stock" means Capital Stock of a Person having generally the
right to vote in the election of directors of such Person.
"Weighted Average Life" means, as of the date of determination, with
respect to any debt instrument, the quotient obtained by dividing (i) the sum of
the products of the numbers of years from the date of determination to the dates
of each successive scheduled principal payment of such debt instrument
multiplied by the amount of such principal payment by (ii) the sum of all such
principal payments.
Section 1.2 Incorporation by Reference of TIA. Whenever this Indenture
refers to a provision of the TIA, such provision is incorporated by reference in
and made a part of this Indenture. The following TIA terms used in this
Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Notes.
"indenture securityholder" means a Holder or a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the Notes means the Company and any other obligor on the
Notes.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them thereby.
Section 1.3 Rules of Construction. Unless the context otherwise
requires:
(l) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
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(4) words in the singular include the plural, and words
in the plural include the singular;
(5) provisions apply to successive events and
transactions;
(6) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision; and
(7) references to Sections or Articles means reference to
such Section or Article in this Indenture, unless
stated otherwise.
ARTICLE II
THE NOTES
Section 2.1 Form and Dating. The Notes and the Trustee's certificate of
authentication, in respect thereof, shall be substantially in the form of
Exhibit A, the terms of which are incorporated in and made a part of this
Indenture. The Notes may have notations, legends or endorsements required by
law, stock exchange rule or usage. The Company and the Trustee shall approve the
form of the Notes and any notation, legend or endorsement on them. Any such
notations, legends or endorsements not contained in the form of Note attached as
Exhibit A hereto shall be delivered in writing to the Trustee. Each Note shall
be dated the date of its authentication.
The terms and provisions contained in the form of Note shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby. In the event of any inconsistency between the Notes and this Indenture,
this Indenture controls.
The Notes will be issued (i) in global form (the "Global Note"),
substantially in the form of Exhibit A attached hereto (including the text
referred to in footnotes 1 and 2 thereto) and (ii) in definitive form (the
"Definitive Notes"), substantially in the form of Exhibit A attached hereto
(excluding the text referred to in footnotes 1 and 2 thereto). The Global Note
shall represent the aggregate principal amount of outstanding Notes from time to
time endorsed thereon; provided, that the aggregate principal amount of
outstanding Notes represented thereby may from time to time be reduced or
increased, as appropriate, to reflect exchanges and redemptions. Any endorsement
of the Global Note to reflect the amount of any increase or decrease in the
principal amount of outstanding Notes represented thereby shall be made by the
Trustee, in accordance with instructions given by the Holder thereof as required
by Section 2.6 hereof.
Section 2.2 Execution and Authentication. Two Officers shall sign, or
one Officer shall sign and one Officer or any Assistant Secretary shall attest
to, the Notes for the Company by manual or facsimile signature. The Company's
seal shall be impressed, affixed, imprinted or reproduced on the Notes and may
be in facsimile form.
If an Officer whose signature is on a Note was an Officer at the time
of such execution but no longer holds that office at the time the Trustee
authenticates the Note, the Note shall be valid nevertheless and the Company
shall nevertheless be bound by the terms of the Notes and this Indenture.
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A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note but such signature
shall be conclusive evidence that the Note has been authenticated pursuant to
the terms of this Indenture.
The Trustee shall authenticate Notes for original issue in the
aggregate principal amount of up to $200,000,000 upon a written order of the
Company in the form of an Officers' Certificate. The Officers' Certificate shall
specify the amount of Notes to be authenticated and the date on which the Notes
are to be authenticated. The aggregate principal amount of Notes outstanding at
any time may not exceed $200,000,000, except as provided in Section 2.7. Upon
the written order of the Company in the form of an Officers' Certificate, the
Trustee shall authenticate Notes in substitution of Notes originally issued to
reflect any name change of the Company.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. Unless otherwise provided in the appointment, an
authenticating agent may authenticate Notes whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with the Company, any Guarantor, or any of their respective
Subsidiaries.
Notes shall be issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof, provided, however,
that the Company reserves the right to issue Notes from time to time in
denominations other than $1,000 or an integral multiple thereof, and the Trustee
is expressly authorized and directed to authenticate any such Notes so issued by
the Company upon written order of the Company in the form of an Officers'
Certificate as provided in this Section 2.2.
Section 2.3 Registrar and Paying Agent. The Company shall maintain an
office or agency in the Borough of Manhattan in the City of New York, New York,
where Notes may be presented for registration of transfer or for exchange
("Registrar") and an office or agency in the Borough of Manhattan in the City of
New York, New York, where Notes may be presented for payment ("Paying Agent").
Notices and demands to or upon the Company in respect of the Notes may be served
as is provided in Section 14.2. The Company or any Affiliate of the Company may
act as Registrar or Paying Agent, except that, for the purposes of Articles III,
VIII and XIII and of Sections 4.14 and 4.16, neither the Company, any Guarantor,
nor any Affiliate of the Company shall act as Paying Agent. The Registrar shall
keep a register of the Notes and of their transfer and exchange. The Company may
have one or more co-Registrars and one or more additional Paying Agents. The
term "Paying Agent" includes any additional Paying Agent. The Company hereby
initially appoints the Trustee as Registrar and Paying Agent, and the Trustee
hereby initially agrees so to act.
The Company shall enter into an appropriate written agency agreement
with any Agent not a party to this Indenture, which agreement shall implement
the provisions of this Indenture that relate to such Agent. The Company shall
notify the Trustee in writing in advance of the name and address of any such
Agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee
shall act as such.
The Company initially appoints DTC to act as Depository with respect to
the Global Notes. The Trustee shall act as custodian for the Depository with
respect to the Global Note.
Section 2.4 Paying Agent to Hold Assets in Trust. The Company shall
require each Paying Agent other than the Trustee to agree in writing that each
Paying Agent shall hold in trust for the benefit of Holders or the Trustee all
assets held by the Paying Agent for the payment of principal of, or interest on,
the Notes (whether such assets have been distributed to it by the Company or any
other obligor on the Notes), and shall notify the Trustee in writing of any
Default in making any such payment. If the Company or any Affiliate of
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the Company acts as Paying Agent, it shall segregate such assets and hold them
as a separate trust fund for the benefit of the Holders or the Trustee. The
Company at any time may require a Paying Agent to distribute all assets held by
it to the Trustee and account for any assets disbursed and the Trustee may at
any time during the continuance of any payment Default, upon written request to
a Paying Agent, require such Paying Agent to distribute all assets held by it to
the Trustee and to account for any assets distributed. Upon distribution to the
Trustee of all assets that shall have been delivered by the Company to the
Paying Agent, the Paying Agent (if other than the Company, or any Affiliate of
the Company) shall have no further liability for such assets.
Section 2.5 Noteholder Lists. The Trustee shall preserve in as current
a form as is reasonably practicable the most recent list available to it of the
names and addresses of Holders. If the Trustee is not the Registrar, the Company
shall furnish to the Trustee on or before the third Business Day preceding each
Interest Payment Date and at such other times as the Trustee may request in
writing a list in such form and as of such date as the Trustee reasonably may
require of the names and addresses of Holders.
Section 2.6 Transfer and Exchange.
(a) Transfer and Exchange of Definitive Notes. When Definitive Notes
are presented by a Holder to the Registrar with a request (i) to register the
transfer of such Definitive Notes or (ii) to exchange such Definitive Notes for
an equal principal amount of Definitive Notes of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such trans actions are met; provided, however, that the
Notes so presented have been duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar duly executed by
such Holder or by his attorney, duly authorized in writing.
(b) Transfer of a Definitive Note for a Beneficial Interest in a Global
Note. A Definitive Note may be exchanged for a beneficial interest in a Global
Note only upon receipt by the Trustee of a Definitive Note, duly endorsed or
accompanied by appropriate instruments of transfer, in form satisfactory to the
Trustee, together with written instructions directing the Trustee to make an
endorsement on the Global Note to reflect an increase in the aggregate principal
amount of the Notes represented by the Global Note, in which case the Trustee
shall cancel such Definitive Note and cause the aggregate principal amount of
Notes represented by the Global Note to be increased accordingly. If no Global
Note is then outstanding, the Company shall issue and the Trustee shall
authenticate a new Global Note in the appropriate principal amount.
(c) Transfer and Exchange of Global Note. The transfer and exchange of
the Global Note or beneficial interests therein shall be effected through the
Depository in accordance with this Indenture and the procedures of the
Depository therefor, which shall include restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act.
(d) Transfer of a Beneficial Interest in a Global Note for a Definitive
Note. Upon receipt by the Trustee of written transfer instructions (or such
other form of instructions as is customary for the Deposi tory), from the
Depository (or its nominee) on behalf of any Person having a beneficial interest
in the Global Note, the Trustee shall, in accordance with the standing
instructions and procedures existing be tween the Depository and the Trustee,
cause the aggregate principal amount of the Global Note to be reduced
accordingly and, following such reduction, the Company shall execute and the
Trustee shall authenticate and make available for delivery to the transferee a
Definitive Note in the appropriate principal amount.
Definitive Notes issued in exchange for a beneficial interest in the
Global Note shall be registered in such names and in such authorized
denominations as the Depository shall instruct the Trustee.
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(e) Transfer and Exchange of Global Note. Notwithstanding any other
provision of this Indenture, the Global Note may not be transferred as a whole
except by the Depository to a nominee of the Depository or by a nominee of the
Depository to the Depository or another nominee of the Depository or by the
Depository or any such nominee to a successor Depository or a nominee of such
successor Depository; provided, that if:
(i) the Depository notifies the Company that the Depository
is unwilling or unable to continue as Depository and a successor
Depository is not appointed by the Company within 90 days after
delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Trustee
in writing that it elects to cause the issuance of Definitive Notes
under this Indenture,
then the Company shall execute and the Trustee shall authenticate and make
available for delivery, Definitive Notes in an aggregate principal amount equal
to the aggregate principal amount of the Global Note in exchange for the Global
Note.
(f) Cancellation and/or Adjustment of Global Note. At such time as all
beneficial interests in the Global Note have either been exchanged for
Definitive Notes, redeemed, repurchased or canceled, the Global Note shall be
returned to or retained and canceled by the Trustee. At any time prior to such
cancellation, if any beneficial interest in the Global Note is exchanged for
Definitive Notes, redeemed, repurchased or canceled, the aggregate principal
amount of Notes represented by such Global Note shall be reduced accordingly and
an endorsement shall be made on such Global Note by the Trustee to reflect such
reduction.
(g) General Provisions Relating to Transfers and Exchanges of Notes. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Definitive Notes and the Global Note at the
Registrar's request. All Definitive Notes and the Global Note issued upon any
registration of transfer or exchange of Definitive Notes or the Global Note
shall be legal, valid and binding obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the
Definitive Notes or the Global Note surrendered upon such registration of
transfer or exchange.
In connection with the transfer or exchange of a Definitive Note, the
signature of the Holder thereof or his duly authorized attorney must be
guaranteed by a participant in the Securities Transfer Agents Medallion Program,
the Stock Exchanges Medallion Program or the New York Stock Exchange Inc.
Medallion Signature Program.
No service charge shall be made to a Holder for any registration of
transfer or exchange, but the Company or the Trustee may require payment of a
sum sufficient to cover any transfer tax or similar governmental charge payable
in connection therewith (other than any such transfer taxes or similar
governmental charge payable upon exchange (without transfer to another Person)
pursuant to Sections 2.10, 3.7, 4.14 and 9.5, or Article XIII, of this
Indenture).
The Company shall not be required (i) to issue, register the transfer
of or exchange Notes during a period beginning at the opening of business 15
days before the day of any selection of Notes for redemption under Section 3.2
hereof and ending at the close of business on the day of selection, (ii) to
register the transfer of or exchange any Note so selected for redemption in
whole or in part, except the unredeemed portion of any
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Note being redeemed in part, or (iii) to register the transfer of or exchange a
Note between a record date and the next succeeding interest payment date.
Prior to due presentment for the registration of a transfer of any
Note, the Trustee, any Agent and the Company may deem and treat the Person in
whose name any Note is registered as the absolute owner of such Note for all
purposes, and neither the Trustee, any Agent nor the Company shall be affected
by notice to the contrary.
Section 2.7 Replacement Notes. If a mutilated Note is surrendered to
the Trustee or if the Holder of a Note claims and submits an affidavit or other
evidence, satisfactory to the Company and the Trustee, to the Trustee to the
effect that the Note has been lost, destroyed or wrongfully taken, the Company
shall issue and the Trustee shall authenticate a replacement Note if the
Trustee's requirements are met. If required by the Trustee or the Company, such
Holder must provide an indemnity bond or other indemnity, sufficient in the
judgment of both the Company and the Trustee, to protect the Company, the
Trustee or any Agent from any loss which any of them may suffer if a Note is
replaced. The Company and the Trustee may charge such Holder for its reasonable,
out-of-pocket expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company.
Section 2.8 Outstanding Notes. Notes outstanding at any time are all
the Notes that have been authenticated by the Trustee except those canceled by
it, those delivered to it for cancellation, those reductions in the interest in
the Global Note effected by the Trustee in accordance with the provisions
hereof, and those described in this Section 2.8 as not outstanding. A Note does
not cease to be outstanding because the Company or an Affiliate of the Company
holds the Note, except as provided in Section 2.9.
If a Note is replaced pursuant to Section 2.7 (other than a mutilated
Note surrendered for replace ment), it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Note is held by a
bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender of
such Note and replacement thereof pursuant to Section 2.7.
If on a Redemption Date or the Maturity Date the Paying Agent (other
than the Company or an Affiliate of the Company) holds U.S. Legal Tender or U.S.
Government Obligations sufficient to pay all of the principal and interest due
on the Notes payable on that date, then on and after that date such Notes cease
to be outstanding and interest on them ceases to accrue.
Section 2.9 Treasury Notes. In determining whether the Holders of the
required principal amount of Notes have concurred in any direction, amendment,
supplement, waiver or consent, Notes owned by the Company and Affiliates of the
Company shall be disregarded, except that, for the purposes of determining
whether the Trustee shall be protected in relying on any such direction,
amendment, supplement, waiver or consent, only Notes that the Trustee knows or
has reason to know are so owned shall be disregarded.
Section 2.10 Temporary Notes. Until definitive Notes are ready for
delivery, the Company may prepare and the Trustee shall authenticate temporary
Notes. Temporary Notes shall be substantially in the form of definitive Notes
but may have variations that the Company reasonably and in good faith considers
appropriate for temporary Notes. Without unreasonable delay, the Company shall
prepare and the Trustee shall authenticate definitive Notes in exchange for
temporary Notes. Until so exchanged, the temporary Notes shall in all respects
be entitled to the same benefits under this Indenture as permanent Notes
authenticated and delivered hereunder.
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Section 2.11 Cancellation. The Company at any time may deliver Notes to
the Trustee for cancellation. The Registrar and the Paying Agent shall forward
to the Trustee any Notes surrendered to them for transfer, exchange or payment.
The Trustee, or at the direction of the Trustee, the Registrar or the Paying
Agent (other than the Company or any Affiliate of the Company), and no one else,
shall cancel and, at the written direction of the Company, shall dispose of all
Notes surrendered for transfer, exchange, payment or cancellation. Subject to
Section 2.7, the Company may not issue new Notes to replace Notes it has paid or
delivered to the Trustee for cancellation. No Notes shall be authenticated in
lieu of or in exchange for any Notes canceled as provided in this Section 2.11,
except as expressly permitted in the form of Note and as permitted by this
Indenture.
Section 2.12 Defaulted Interest. Interest on any outstanding Note which
is payable, and is punctually paid or duly provided for, on any Interest Payment
Date shall be paid to the Person in whose name that Note (or one or more
predecessor Notes) is registered at the close of business on the Record Date for
such interest.
Any interest on any outstanding Note which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date plus, to the
extent lawful, any interest payable on the defaulted interest (herein called
"Defaulted Interest") shall forthwith cease to be payable to the registered
Holder on the relevant Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Notes (or their respective
predecessor Notes) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Note and the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for
such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled
to such Defaulted Interest as provided in this clause (1). Thereupon
the Trustee shall fix a Special Record Date for the payment of such
Defaulted Interest which shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment and not less
than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor to be mailed, first-class postage
prepaid, to each Holder at his address set forth upon the registry
books of the Company on the 10th day prior to such Special Record Date.
The Trustee may, in its discretion, in the name and at the expense of
the Company, cause a similar notice to be published at least once in a
newspaper, customarily published in the English language on each
Business Day and of general circulation in the Borough of Manhattan,
the City of New York, but such publication shall not be a condition
precedent to the establishment of such Special Record Date. Notice of
the proposed payment of such Defaulted Interest and the Special Record
Date therefor having been mailed as aforesaid, such Defaulted Interest
shall be paid to the Persons in whose names the Notes (or their
respective predecessor Notes) are registered on such Special Record
Date and shall no longer be payable pursuant to the following clause
(2).
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(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such
notice as may be required by such exchange, if, after notice given by
the Company to the Trustee of the proposed payment pursuant to this
clause accompanied by an Opinion of Counsel stating that the manner of
payment complies with this clause, such manner shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Note shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Note.
Section 2.13 Computation of Interest. Interest on the Notes will be
computed on the basis of a 360-day year consisting of twelve 30-day months.
ARTICLE III
REDEMPTION
Section 3.1 Right of Redemption. Redemption of Notes, as permitted or
required by any provision of this Indenture, shall be made in accordance with
such provision and this Article III. The Notes may be redeemed at the election
of the Company, as a whole or from time to time in part, at any time on or after
the Issue Date, at the applicable Redemption Prices specified in Paragraph 5 of
the form of Note attached as Exhibit A hereto, set forth therein under the
caption "Optional Redemption," in each case, including accrued and unpaid
interest to the Redemption Date.
Section 3.2 Notices to Trustee. If the Company elects to redeem Notes
pursuant to Paragraph 5 of the Notes, it shall notify the Trustee in writing of
the Redemption Date and the principal amount of Notes to be redeemed and whether
it wants the Trustee to give notice of redemption to the Holders.
The Company shall give each notice to the Trustee provided for in this
Section 3.2 at least 30 days before the Redemption Date (unless a shorter notice
shall be satisfactory to the Trustee).
Section 3.3 Selection of Notes to Be Redeemed. If less than all of the
Notes are to be redeemed pursuant to Paragraph 5 thereof, the Trustee shall
select the Notes to be redeemed pro rata, by lot or in such other manner as in
its sole discretion it deems appropriate and fair, and in such manner as
complies with any applicable legal and stock exchange requirements.
The Trustee shall make the selection from the Notes outstanding and not
previously called for redemption and shall promptly notify the Company in
writing of the Notes selected for redemption and, in the case of any Note
selected for partial redemption, the principal amount thereof to be redeemed.
Notes in denominations of $1,000 or less may be redeemed only in whole. The
Trustee may select for redemption portions (equal to $1,000 or any integral
multiple thereof) of the principal of Notes that have denominations larger than
$1,000. Provisions of this Indenture that apply to Notes called for redemption
also apply to portions of Notes called for redemption.
Section 3.4 Notice of Redemption. At least 30 days but not more than 60
days before a Redemption Date, the Company shall mail a notice of redemption by
first class mail, postage prepaid, to the Trustee and each Holder whose Notes
are to be redeemed. At the Company's request, the Trustee shall give the notice
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of redemption in the Company's name and at the Company's expense. Each notice of
redemption shall identify the Notes to be redeemed and shall state the following
and such other matters as the Trustee shall deem proper:
(1) the Redemption Date;
(2) the Redemption Price, including the amount of accrued
and unpaid interest to be paid upon such redemption;
(3) the name, address and telephone number of the Paying
Agent;
(4) that Notes called for redemption must be surrendered
to the Paying Agent at the address specified in such
notice to collect the Redemption Price;
(5) that, unless the Company defaults in its obligation
to deposit U.S. Legal Tender with the Paying Agent in
accordance with Section 3.6, interest on Notes called
for redemption ceases to accrue on and after the
Redemption Date and the only remaining right of the
Holders of such Notes is to receive payment of the
Redemption Price, including accrued and unpaid
interest, upon surrender to the Paying Agent of the
Notes called for redemption and to be redeemed;
(6) if any Note is being redeemed in part, the portion of
the principal amount, equal to $1,000 or any integral
multiple thereof, of such Note that will not be
redeemed and that, after the Redemption Date and upon
surrender of such Note, a new Note or Notes in
aggregate principal amount equal to the unredeemed
portion thereof will be issued;
(7) if less than all the Notes are to be redeemed, the
identification of the particular Notes (or portion
thereof) to be redeemed, as well as the aggregate
principal amount of such Notes to be redeemed and the
aggregate principal amount of Notes to be outstanding
after such partial redemption;
(8) the CUSIP number of the Notes to be redeemed; and
(9) that the notice is being sent pursuant to this
Section 3.4 and pursuant to the redemption
provisions of Paragraph 5 of the Notes.
Section 3.5 Effect of Notice of Redemption. Once notice of redemption
is mailed in accordance with Section 3.4, Notes called for redemption become due
and payable on the Redemption Date and at the Redemption Price, including
accrued and unpaid interest. Upon surrender to the Trustee or Paying Agent, such
Notes called for redemption shall be paid at the Redemption Price, including
interest, if any, accrued and unpaid on the Redemption Date; provided, however,
that if the Redemption Date is after a regular Record Date and on or prior to
the Interest Payment Date, the accrued interest through the date of redemption
shall be payable to the Holder of the redeemed Notes registered on the relevant
Record Date; and provided, further, that if a Redemption Date is a Legal
Holiday, payment shall be made on the next succeeding Business Day and no
interest shall accrue for the period from such Redemption Date to such
succeeding Business Day.
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Upon compliance by the Company with the provisions of this Article III,
including but not limited to Section 3.6, interest on the Notes called for
redemption will cease to accrue on and after the Redemption Date, regardless of
whether such Notes are presented for payment.
Section 3.6 Deposit of Redemption Price. On or prior to the Redemption
Date, the Company shall deposit with the Paying Agent (other than the Company or
an Affiliate of the Company) U.S. Legal Tender sufficient to pay the Redemption
Price of, including accrued and unpaid interest on, all Notes to be redeemed on
such Redemption Date (other than Notes or portions thereof called for redemption
on that date that have been delivered by the Company to the Trustee for
cancellation). The Paying Agent shall promptly return to the Company any U.S.
Legal Tender so deposited which is not required for that purpose upon the
written request of the Company.
If the Company complies with the preceding paragraph and the other
provisions of this Article III, interest on the Notes to be redeemed will cease
to accrue on the applicable Redemption Date, regardless of whether such Notes
are presented for payment. Notwithstanding anything herein to the contrary, if
any Note surrendered for redemption in the manner provided in the Notes shall
not be so paid upon surrender for redemption because of the failure of the
Company to comply with the preceding paragraph, interest shall continue to
accrue and be paid from the Redemption Date until such payment is made on the
unpaid principal and, to the extent lawful, on any interest not paid on such
unpaid principal, in each case at the rate and in the manner provided in Section
4.1 and the Note.
Section 3.7 Notes Redeemed in Part. Upon surrender of a Note that is
to be redeemed in part, the Company shall execute and the Trustee shall
authenticate and deliver to the Holder, without service charge, a new Note or
Notes equal in principal amount to the unredeemed portion of the Note
surrendered.
ARTICLE IV
COVENANTS
Section 4.1 Payment of Notes. The Company shall pay the principal of
and interest on the outstanding Notes on the dates and in the manner provided in
the Notes to the Trustee at its New York agent's office unless otherwise
instructed in writing by the Trustee. An installment of principal of or interest
on the Notes shall be considered paid on the date it is due if the Trustee or
Paying Agent (other than the Company or an Affiliate of the Company) holds for
the benefit of the Holders, on or before 12:00 noon, New York, New York time on
that date, U.S. Legal Tender deposited and designated for and sufficient to pay
the installment. The Company shall pay any and all amounts, including without
limitation, liquidated damages, if any, on the dates and in the manner required
under the Registration Rights Agreement.
The Company shall pay interest on overdue principal and on overdue
installments of interest at the rate specified in the Notes compounded
semi-annually, to the extent lawful.
Notwithstanding anything to the contrary contained in this Indenture,
the Company or the Trustee may, to the extent required by law, deduct or
withhold income or other similar taxes imposed by the United States of America
from principal, premium or interest payments on the Notes.
Section 4.2 Maintenance of Office or Agency. The Company shall maintain
in the Borough of Manhattan in the City of New York, New York, an office or
agency where Notes may be presented or surrendered for payment, where Notes may
be surrendered for registration of transfer or exchange and where
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notices and demands to or upon the Company in respect of the Notes and this
Indenture may be served. The Company shall give prior written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Section 14.2.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan in the City of New York, New York, for such purposes. The Company
shall give prior written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or agency.
The Company hereby initially designates the corporate trust office of the
Trustee in the Borough of Manhattan in the City of New York, New York, as such
office of the Company.
Section 4.3 Limitation on Restricted Payments. The Company shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly, make
any Restricted Payment.
Section 4.4 Corporate Existence. Subject to Article V, the Company
shall do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence and the corporate or other existence of
each of its Subsidiaries in accordance with the respective organizational
documents of each of them and the rights (charter and statutory) and corporate
franchises of the Company and each of its Subsidiaries; provided, however, that
the Company shall not be required to preserve, with respect to itself, any right
or franchise, and with respect to any of its Subsidiaries, any such existence,
right or franchise, if (a) the Board of Directors of the Company shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Company and (b) the loss thereof is not disadvantageous in any
material respect to the Holders.
Section 4.5 Payment of Taxes and Other Claims. The Company shall, and
shall cause each of its Subsidiaries to, pay or discharge or cause to be paid or
discharged, before the same shall become delinquent all taxes, assessments and
governmental charges (including withholding taxes and any penalties, interest
and additions to taxes) levied or imposed upon the Company or any of its
Subsidiaries or any of their respective properties and assets; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment or charge whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and for which disputed amounts adequate reserves have been
established in accordance with GAAP.
Section 4.6 Maintenance of Properties and Insurance.
(a) Each of the Company and its Subsidiaries shall cause the properties
used or useful to the conduct of its business and the business of each of its
Subsidiaries to be maintained and kept in good condition, repair and working
order (reasonable wear and tear excepted) and supplied with all necessary
equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in its reasonable
judgment may be necessary, so that the business carried on in connection
therewith may be properly and advantageously conducted at all times.
(b) Each of the Company and its Subsidiaries shall provide, or shall
cause to be provided, for itself and each of its Subsidiaries, insurance
(including appropriate self-insurance) against loss or damage of the kinds that,
in its reasonable, good faith opinion, are adequate and appropriate for the
conduct of its business
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and the business of such Subsidiaries in a prudent manner, with reputable
insurers or with the government of the United States of America or an agency or
instrumentality thereof, in such amounts, with such deductibles, and by such
methods as is customary, in its reasonable, good faith opinion, and adequate and
appropriate for the conduct of its business and the business of its Subsidiaries
in a prudent manner for companies engaged in a similar business. In addition,
all such insurance shall be payable to the Trustee as loss payee, as its
interests may appear, under a "standard" or "Texas" loss payee clause. Without
limiting the foregoing, each of the Company and its Subsidiaries shall (i) keep
all of its physical property insured with hazard insurance on an "all risks"
basis, with broad form flood and earthquake coverages, with a full replacement
cost endorsement and an "agreed amount" clause in an amount equal to 100% of the
full replacement cost of such property, (ii) maintain all such workers'
compensation or similar insurance as may be required by law, and (iii) maintain,
in amounts and with deductibles equal to those generally maintained by
businesses engaged in similar activities in similar geographic areas, general
public liability insurance against claims of bodily injury, death or property
damage occurring on, in or about the properties of the Company and its
Subsidiaries.
All policies of insurance shall provide for at least ten days' prior
written cancellation notice to the Trustee. In the event of failure by the
Company and its Subsidiaries to provide and maintain insurance as described
herein; provided, however, the Trustee may, at its option, provide such
insurance and charge the amount thereof to the Company and its Subsidiaries. The
Company and its Subsidiaries shall furnish the Trustee with certificates of
insurance and policies evidencing compliance with the foregoing insurance
provision.
Section 4.7 Compliance Certificate; Notice of Default.
(a) The Company shall deliver to the Trustee within 60 days after the
end of each of its fiscal quarters, or 105 days after the end of a fiscal
quarter that is also the end of a fiscal year, an Officers' Certificate
complying with Section 314(a)(4) of the TIA and stating that a review of its
activities and the activities of its Subsidiaries during the preceding fiscal
quarter has been made under the supervision of the signing Officers with a view
to determining whether the Company and its Subsidiaries have kept, observed,
performed and fulfilled its obligations (excluding those obligations addressed
by Section 11.3) under this Indenture and further stating, as to each such
Officer signing such certificate, regardless of whether the signer knows of any
failure by the Company or any Subsidiary of the Company to comply with any
conditions or covenants in this Indenture, or of the occurrence of any Default,
and, if such signer does know of such a failure to comply or Default, the
certificate shall describe such failure or Default with particularity.
(b) The Company shall deliver to the Trustee within 105 days after the
end of each of its fiscal years a written report of a firm of independent
certified public accountants with an established national reputation stating
that in conducting their audit for such fiscal year, nothing has come to their
attention that caused them to believe that the Company or any Subsidiary of the
Company was not in compliance with the provisions set forth in Section 4.3,
4.11, 4.14 or 4.16.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, immediately upon becoming aware of any Default or Event
of Default under this Indenture, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto. The Trustee shall not be deemed to have knowledge of
a Default or an Event of Default unless one of its trust officers receives
notice of the Default giving rise thereto from the Company or any of the
Holders.
(d) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, promptly after the occurrence thereof, an Officers'
Certificate informing the Trustee in reasonable detail of (i) any
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change in the composition of the Board of Directors of the Company or any of its
Subsidiaries, and/or (ii) any amendment to the charter or bylaws of the Company
or any of its Subsidiaries.
Section 4.8 SEC Reports and TIA Compliance. Whether or not the Company
is subject to the reporting requirements of Section 13 or Section 15(d) of the
Exchange Act, the Company shall deliver to the Trustee and each Holder, within
15 days after it is or would have been (if the Company were subject to such
reporting requirements) required to file such with the SEC, annual and quarterly
financial statements substantially equivalent to financial statements that would
have been included in the reports filed with the SEC if the Company were subject
to the reporting requirements of Section 13 or Section 15(d) of the Exchange
Act, including, with respect to annual information only, a report thereon by the
Company's independent certified public accountants as such would be required in
such reports to the SEC, and, in each case, together with a management's
discussion and analysis of financial condition and results of operations which
would be so required and, unless the SEC will not accept such reports, file with
the SEC the annual, quarterly and other reports which it is or would have (if it
were subject to such reporting obligations) been required to file with the SEC.
Annual and quarterly financial statements required to be delivered by the
Company under this Section 4.8 shall be accompanied by comparable consolidating
balance sheets and consolidating income statements for each Material Subsidiary
(reviewed, with respect to annual information only, by the Company's independent
certified public accountants). The Company shall also comply with the other
provisions of TIA Section 314(a).
Section 4.9 Limitation on Status as Investment Company or Public
Utility Company. The Company shall not, and shall not permit any of its
Subsidiaries to, become an "investment company" (as that term is defined in the
Investment Company Act of 1940, as amended), or a "holding company," or "public
utility company" (as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended) or otherwise become subject to regulation under
the Investment Company Act or the Public Utility Holding Company Act.
Section 4.10 Limitation on Transactions with Affiliates.
(a) The Company shall not, and shall not permit any of its Subsidiaries
to, enter directly or indirectly into, or permit to exist, any Affiliate
Transaction with any Officer Affiliate, except for (i) transactions that
constitute Permitted Investments under clause (vi) of the definition of the term
"Permitted Investments" set forth in Section 1.1, (ii) employee compensation
arrangements relating to the full-time employment of Officer Affiliates by the
Company or any of its Subsidiaries, (iii) the Services Agreement, and (iv)
transactions effected pursuant to and in accordance with the terms of the
Services Agreement.
(b) The Company shall not, and shall not permit any of its Subsidiaries
to, enter directly or indirectly into, or permit to exist, any Affiliate
Transaction with any Non-Officer Affiliate, except for (i) transactions made in
good faith, the terms of which are (x) fair and reasonable to the Company or
such Subsidiary, as the case may be, (y) at least as favorable as the terms
which could be obtained by the Company or such Subsidiary, as the case may be,
in a comparable transaction made on an arm's length basis with Persons who are
not Affiliates and (z) such transaction must first be unanimously approved by
the Board of Directors of the Company or its Subsidiary which is the transacting
party pursuant to a Board Resolution, as fair and reasonable to the Company or
such Subsidiary, as the case may be, and on terms which are at least as
favorable as the terms which could be obtained by the Company or such
Subsidiary, as the case may be, on an arm's length basis with Persons who are
not Affiliates, (ii) transactions between the Company and any of its wholly
owned Subsidiaries or transactions between wholly owned Subsidiaries of the
Company, (iii) transactions pursuant to the Notes, the Security Documents, the
Services Agreement and the Registration Rights Agreements, in each case, as
amended, (iv) transactions effected pursuant to and in accordance with
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the terms and provisions of any court order relating to the Debtors' First
Amended Objection to Claims of Orion Refining Corporation (TransTexas Claim No.
1187) and TCR Holding Corporation (TransTexas Claim No. 971) filed on February
11, 2000, in the TransTexas Case; and (v) any employee compensation arrangement
or ordinary course expense advance.
(c) Without limiting the foregoing provisions of Section 4.10(b), with
respect to any Affiliate Transaction or series of Affiliate Transactions (other
than any Affiliate Transaction described clauses (ii), (iii), or (iv) of Section
4.10(b)) with an aggregate value in excess of $5 million, the Company must first
obtain a favorable written opinion as to the fairness of such transaction to the
Company or such Subsidiary, as the case may be, from a financial point of view,
from a nationally recognized investment banking or "big 5" accounting firm.
Section 4.11 Limitation on Incurrences of Additional Debt and Issuances
of Disqualified Capital Stock. Except as set forth in this Section 4.11, from
and after the Issue Date, the Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee, or
otherwise become liable for, contingently or otherwise (to "Incur" or, as
appropriate, an "Incurrence"), any Debt or issue any Disqualified Capital Stock,
except:
(a) Debt evidenced by the Notes or the Guarantee;
(b) Subordinated Debt of the Company solely to any wholly owned
Subsidiary of the Company, or Debt of any wholly owned Subsidiary of the Company
solely to the Company or to any wholly owned Subsidiary of the Company;
provided, however, that if any Subsidiary holding such Debt, for any reason, is
no longer deemed a Subsidiary of the Company, any outstanding Debt Incurred by
the Company or another Subsidiary pursuant to this Section 4.11(b) shall
constitute a new Incurrence of Debt and be subject to the restrictions of
Section 4.11.
(c) Debt outstanding under a Revolving Credit Facility in an aggregate
principal amount at any one time not to exceed the Borrowing Base as at the time
in effect, plus any amount outstanding under the Revolving Credit Facility to
the extent incurred pursuant to Section 4.11(j);
(d) Debt in an aggregate principal amount outstanding not to exceed at
any one time $120 million, provided, however, that the aggregate principal
amount outstanding under the Post Confirmation Credit Facility shall not exceed
$52.5 million;
(e) Debt of the Company secured by a Permitted Lien that meets the
requirements of clause (c), (d), or (e) of the definition of "Permitted Liens"
set forth in Section 1.1;
(f) any guaranty of Debt permitted by clauses (c), (d), or (j) hereof,
which guaranty shall not be included in the determination of the amount of Debt
which may be incurred pursuant to (c), (d), or (j) hereof;
(g) The Company or any Subsidiary of the Company may Incur Debt as an
extension, renewal, replacement, or refunding of (i) any item of the Debt
permitted to be incurred by Section 4.11(j), (ii) Debt existing on the Issue
Date (other than the Post Confirmation Credit Facility and the Revolving Credit
Facility) that is secured by assets of Galveston Bay Pipeline, up to a maximum
principal amount of such Debt so extended, renewed, replaced or refunded under
this Section 4.11(g) not to exceed $2,000,000, (iii) Debt existing on the Issue
Date (other than the Post Confirmation Credit Facility and the Revolving Credit
Facility) that is secured by assets of Galveston Bay Processing, up to a maximum
principal amount of such Debt so extended, renewed, replaced or refunded under
this Section 4.11(g) not to exceed $10,000,000, or (iv) the
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Debt permitted to be incurred by this Section 4.11(g) (each such item of Debt is
referred to as "Refinancing Debt"), provided, however, that (1) the maximum
principal amount of each item of Refinancing Debt (or, if such item of
Refinancing Debt is issued with original issue discount, the original issue
price of such item of Refinancing Debt) permitted under this clause (g) may not
exceed the lesser of (x) the principal amount of the item of Debt being
extended, renewed, replaced, or refunded plus reasonable financing fees and
other associated reasonable out-of-pocket expenses including consent payments,
premium, if any, and related fees, in each case other than those paid to a
Affiliate (collectively, "Refinancing Fees"), or (y) if such item of Debt being
extended, renewed, replaced, or refunded was issued at an original issue
discount, the original issue price, plus amortization of the original issue
discount as of the time of the Incurrence of such item of Refinancing Debt plus
Refinancing Fees, (2) each item of Refinancing Debt has a Weighted Average Life
and a final maturity that is equal to or greater than the related Debt being
extended, renewed, replaced, or refunded at the time of such extension, renewal,
replacement, or refunding, and (3) each item of Refinancing Debt shall rank with
respect to the Notes to an extent no less favorable in respect thereof to the
Holders than the related Debt being refinanced;
(h) Debt represented by trade payables or accrued expenses, in each
case incurred on normal, customary terms in the ordinary course of business, not
overdue for a period of more than 45 days (or, if overdue for a period of more
than 45 days, being contested in good faith and by appropriate proceedings and
adequate reserves with respect thereto being maintained on the books of Trans
Texas in accordance with GAAP) and not constituting any amounts due to banks or
other financial institutions;
(i) Swap Obligations of the Company;
(j) Debt of the Company to holders of Allowed Priority Tax Claims under
the Plan or to holders of Allowed Claims in classes 2, 5, 6A or 6B under the
Plan, or Debt under surety bonds, letters of credit or reimbursement obligations
related to or constituting collateral securing the Company's obligations
thereunder;
(k) the Company may enter into an agreement for the Presale of Gas for
cash if the net proceeds from such sale are used to make a Note Redemption; and
(l) letters of credit and reimbursement obligations relating thereto to
the extent collateralized by cash or Cash Equivalents.
Debt incurred and Disqualified Capital Stock issued by any Person that
is not a Subsidiary of the Company, which Debt or Disqualified Capital Stock is
outstanding at the time such Person becomes a Subsidiary of, or is merged into,
or consolidated with the Company or one of its Subsidiaries, as the case may be,
shall be deemed to have been incurred or issued, as the case may be, at the time
such Person becomes a Subsidiary of, or is merged into, or consolidated with the
Company or one of its Subsidiaries.
For the purpose of determining compliance with this Section 4.11, (A)
if an item of Debt meets the criteria of more than one of the types of Debt
described in the above clauses, the Company or the Subsidiary in question shall
have the right to determine in its sole discretion the category to which such
Debt applies, shall not be required to include the amount and type of such Debt
in more than one of such categories and may elect to apportion such item of Debt
between or among any two or more of such categories otherwise applicable, and
(B) the amount of any Debt which does not pay interest in cash or which was
issued at a discount to face value shall be deemed to be equal to the amount of
the liability in respect thereof determined in accordance with GAAP.
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Neither the foregoing provisions of this Section 4.11 nor any other
provision of this Indenture or of any of the Security Documents shall be deemed
to prevent the Company from offering to TCW/Southern, as supplements and
additions to the TCW/Southern Production Payment, any TCW/Southern Mandatory
Offered Wells that the Company is obligated to offer pursuant to the terms of
the Production Payment Purchase Agreement dated as of March 14, 2000, between
TCW/Southern and Borrower, and upon request the Trustee shall execute such
documents as may be necessary to permit any such TCW/Southern Mandatory Offered
Well to be made subject to the TCW/Southern Production Payment and to confirm
that the interests therein added to the TCW/Southern Production Payment (but not
the Company's retained interests) are free from any Liens under the Security
Documents. In addition (but not in limitation of the foregoing), the Company may
make additional wells and acreage, other than TCW/Southern Mandatory Offered
Wells, subject to the TCW/Southern Production Payment or any other Drilling
Production Payment if (1) the Incurrence of the Debt attributable to any such
Drilling Production Payment is otherwise permitted under this Section 4.11 and
will not result in a breach of default under the provisions of this Section
4.11, and (2) the Company shall certify to the Trustee that the condition set
forth in the preceding clause (1) has been satisfied and that no Event of
Default then exists. Subject to such conditions, Agent shall upon request
execute such documents as may be necessary to permit the proposed Drilling
Production Payment transaction to be implemented.
Notwithstanding anything to the contrary contained in this Section 4.11
or in Section 4.13, the Company shall not effect the consummation of, and shall
not permit Galveston Bay Pipeline or Galveston Bay Processing, as the case may
be, to consummate, a GB Facility Financing unless (A) concurrently with the
consummation of such GB Facility Financing the Company shall cause a duly
executed and acknowledged GB Nondisturbance and Attornment Agreement to be
delivered to the Trustee and (B) an amount equal to the Net GB Financing
Proceeds resulting therefrom is (i) used by Galveston Bay Pipeline or Galveston
Bay Processing, as the case may be, for Capital Expenditures in a Related
Business of such Person within 180 days after the date of consummation of such
GB Facility Financing, (ii) distributed by Galveston Bay Pipeline or Galveston
Bay Processing, as the case may be, to the Company and used by the Company for
Capital Expenditures in a Related Business of such the Company, each within 180
days after the date of consummation of such GB Facility Financing, (iii) used,
in part, as contemplated in the preceding clause (i), and used, in part, as
contemplated in the preceding clause (ii), or (iv) to the extent not used in
accordance with clause (i), (ii) or (iii) preceding within 180 days after the
date of consummation of such GB Facility Financing, distributed by Galveston Bay
Pipeline or Galveston Bay Processing, as the case may be, to the Company and, on
the 181st day after the date of consummation of such GB Facility Financing, such
amount, if any, distributed to the Company pursuant to this clause (iv) shall be
deemed to be included within the Net Cash Proceeds subject to application
pursuant to Section 4.14(b).
Section 4.12 Limitations on Restricting Subsidiary Dividends. The
Company shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly, create, assume, or suffer to exist any consensual encumbrance or
restriction on the ability of any Subsidiary of the Company to pay dividends or
make other distributions on the Capital Stock of any Subsidiary of the Company,
except encumbrances and restrictions existing under this Indenture, the Post
Confirmation Credit Facility or the Revolving Credit Facility (or any
refinancing of any such Debt facilities incurred in accordance with Section
4.11(g)), and any agreement of a Person acquired by the Company or a Subsidiary
of the Company, which restrictions existed at the time of acquisition, were not
put in place in anticipation of such acquisition and are not applicable to any
Person or property, other than the Person or any property of the Person so
acquired.
Section 4.13 Limitation on Liens. The Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, Incur, or suffer to
exist any Lien upon any of its respective property or assets, whether now owned
or hereafter acquired, which property or assets constitute Collateral, other
than Permitted Liens. For the purpose of determining compliance with this
Section 4.13, if a Lien meets the criteria
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of more than one of the types of Permitted Liens, the Company or the Subsidiary
in question shall have the right to determine in its sole discretion the
category of Permitted Lien to which such Lien applies, shall not be required to
include such Lien in more than one of such categories, and may elect to
apportion such Lien between or among any two or more categories otherwise
applicable.
Section 4.14 Limitation on Asset Sales.
(a) The Company shall not, and shall not permit any of its Subsidiaries
to, consummate an Asset Sale unless (A) an amount equal to the Net Cash Proceeds
therefrom is (i) applied to a Note Redemption, (ii) used to make cash payments
in the ordinary course of business and consistent with past practices that are
not otherwise prohibited by this Indenture, provided, however, that the
aggregate amount so used pursuant to this clause (ii) from and after the Issue
Date does not exceed $3 million (without duplication of amounts used to acquire
any Capital Assets in accordance with clause (iii) of this Section 4.14(a)
below), (iii) used for Capital Expenditures in a Related Business within 180
days after the date of such Asset Sale; or (iv) with respect to an Asset Sale by
the Company or any of its Subsidiaries resulting from (x) the damage to or
destruction of assets for which Insurance Proceeds are paid or (y) condemnation,
eminent domain or similar type proceedings, in each case, used for Capital
Expenditures in a Related Business within 360 days after the date of such Asset
Sale; and (B) in the case of any Asset Sale or series of related Asset Sales for
total proceeds in excess of $1 million, at least 85% of the value of the
consideration for such Asset Sale consists of cash, Cash Equivalents or Exchange
Assets, or any combination thereof. Notwithstanding anything to the contrary
contained in this Section 4.14, the Company shall not effect the consummation
of, and shall not permit Galveston Bay Pipeline or Galveston Bay Processing, as
the case may be, to consummate, a GB Facility Asset Sale unless an amount equal
to the Net GB Financing Proceeds resulting therefrom is (i) distributed by
Galveston Bay Pipeline or Galveston Bay Processing, as the case may be, to the
Company and used by the Company for Capital Expenditures in a Related Business
of such the Company, each within 180 days after the date of consummation of such
GB Facility Asset Sale, or (ii) to the extent not used in accordance with clause
(i) preceding within 180 days after the date of consummation of such GB Facility
Asset Sale, applied by the Company as provided in Section 4.14(b).
(b) To the extent of the balance of such Net Cash Proceeds remaining
after application in accordance with Section 4.14(a), the Company shall make an
offer to the Holders to purchase Notes pursuant to and subject to the conditions
contained in this Indenture. Notwithstanding the foregoing provision of this
paragraph, the Company and its Subsidiaries shall not be required to apply any
Net Cash Proceeds in accordance with this Section 4.14(b) except to the extent
that the aggregate Net Cash Proceeds from all Asset Sales which are not applied
in accordance with Section 4.14(a) or with this Section 4.14(b) exceeds $5
million. Pending application of Net Cash Proceeds pursuant to this Section
4.14(b), such Net Cash Proceeds shall be invested in Permitted Investments.
(c) In the event of an Asset Sale that requires the purchase of Notes
pursuant to Section 4.14(b), the Company shall be required to purchase Notes
tendered pursuant to an offer by the Company for the Notes (the "Repurchase
Offer") at a purchase price of 100% of their principal amount (without premium)
plus accrued but unpaid interest in accordance with the procedures (including
prorating in the event of oversubscription) set forth in Section 4.14(d). The
Company shall not be required to make a Repurchase Offer to purchase Notes
pursuant to this Section 4.14 if the Net Cash Proceeds available therefor is
less than $5 million (which lesser amount shall be carried forward for purposes
of determining whether such an Offer is required with respect to the Net Cash
Proceeds from any subsequent Asset Sale).
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(d) (1) Promptly, and in any event within 20 days after the Company
becomes obligated to make a Repurchase Offer, the Company shall be obligated to
deliver to the Trustee and send, by first-class mail to each Holder, a written
notice stating that the Holder may elect to have his Notes purchased by the
Company either in whole, or in part in integral multiples of $1,000 of principal
amount, at the applicable purchase price (subject to prorating as hereinafter
described in the event the Offer is oversubscribed). The notice shall specify a
purchase date not less than 30 days nor more than 60 days after the date of such
notice (the "Repurchase Date") and shall contain such information concerning the
business of the Company which the Company in good faith believes will enable
such Holders to make an informed decision (which at a minimum will include (i)
the most recently filed Annual Report on Form 10-K (including audited
consolidated financial statements) of the Company, the most recent subsequently
filed Quarterly Report on Form 10-Q of the Company and any Current Report on
Form 8-K of the Company filed subsequent to such Quarterly Report, other than
Current Reports describing Asset Sales otherwise described in the offering
materials (or corresponding successor reports), (ii) a description of material
developments in the Company's. business subsequent to the date of the latest of
such Reports, (iii) if material, appropriate pro forma financial information,
and (iv) all instructions and materials necessary to tender Notes pursuant to
the Repurchase Offer, together with the information contained in clause (3) of
this Section 4.14(d).
(2) Not later than the date upon which written notice of a
Repurchase Offer is delivered to the Trustee as provided below, the Company
shall deliver to the Trustee an Officers' Certificate as to (i) the amount of
the Repurchase Offer (the "Repurchase Offer Amount") , (ii) the allocation of
the Net Cash Proceeds from the Asset Sales pursuant to which such Offer is being
made, and (iii) the compliance of such allocation with the provisions of Section
4.06(b). On such date, the Company shall also irrevocably deposit with the
Trustee or with a paying agent (or, if the Company is acting as its own paying
agent, segregate and hold in trust) in cash or Cash Equivalents, maturing on the
last day prior to the Repurchase Date or on the Repurchase Date if funds are
immediately available by opening of business, an amount equal to the Repurchase
Offer Amount to be held for payment in accordance with the provisions of this
Section 4.14. Upon the expiration of the period for which the Repurchase Offer
remains open (the "Repurchase Offer Period"), the Company shall deliver to the
Trustee for cancellation the Notes or portions thereof which have been properly
tendered to and are to be accepted by the Company. The Trustee shall, on the
Repurchase Date, mail or deliver payment to each tendering Holder in the amount
of the purchase price. In the event that the aggregate purchase price of the
Notes delivered by the Company to the Trustee is less than the Repurchase Offer
Amount applicable to the Notes so delivered, the Trustee shall deliver the
excess to the Company immediately after the expiration of the Repurchase Offer
Period for application in accordance with this Section 4.14, including, during
the period ending 180 days after such delivery, the provisions of Section
4.14(a).
(3) Holders electing to have a Note purchased shall be
required to surrender the Note, with an appropriate form duly completed, to the
Company at the address specified in the notice at least three Business Days
prior to the Repurchase Date. Holders shall be entitled to withdraw their
election if the Trustee or the Company receives not later than one Business Day
prior to the Repurchase Date, a telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Note which was
delivered for purchase by the Holder and a statement that such Holder is
withdrawing his election to have such Note purchased. If at the expiration of
the Offer Period the aggregate principal amount of Notes surrendered by Holders
exceeds the Repurchase Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased). Each Holder whose Notes are
purchased only in part shall be issued new Notes equal in principal amount to
the unpurchased portion of the Notes surrendered by such Holder.
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(4) At the time the Company delivers Notes to the Trustee
which are to be accepted for purchase pursuant to this Section 4.14, the Company
shall also deliver to the Trustee an Officers' Certificate stating that such
Notes are to be accepted by the Company pursuant to and in accordance with the
terms of this Section 4.14. A Note shall be deemed to have been accepted for
purchase at the time the Trustee, directly or through an agent, mails or
delivers payment therefor to the surrendering Holder.
(e) The Company shall comply, to the extent applicable, with the
requirements of Section 14 (e) of the Exchange Act and any other securities laws
or regulations in connection with the purchase of Notes pursuant to this Section
4.14. To the extent that the provisions of any securities laws or regulations
conflict with provisions of this Section 4.14, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section 4.14 by virtue of such compliance.
(f) Notwithstanding the foregoing limitations on Asset Sales and
restrictions on and requirements for the use of Net Cash Proceeds therefrom, the
Company and its Subsidiaries, as the case may be, may at any time and from time
to time effect any of the following transactions, and the Net Cash Proceeds, if
any, realized from any of the following transactions shall not be subject to the
application requirements of Section 4.14(a) or Section 4.14(b):
(i) the Company or any Subsidiary of the Company may convey,
sell, lease, transfer, or otherwise dispose of any or all of its assets
(upon voluntary liquidation or otherwise) to the Company or to a wholly
owned Subsidiary of the Company;
(ii) the Company and its Subsidiaries may engage in Asset
Sales not otherwise permitted in clauses (i) or (iii) through (vi) of
this Section 4.14(f), provided, however, that the aggregate proceeds
from all such Asset Sales and the fair market value of all assets sold
pursuant to this clause (ii) does not exceed $1 million in any
twelve-month period;
(iii) the Company and its Subsidiaries may engage in Asset
Sales incident to and resulting from a transaction expressly permitted
under Section 5.1;
(iv) the Company and its Subsidiaries may sell, assign, lease,
license, transfer, abandon or otherwise dispose of (a) damaged, worn
out, unserviceable or other obsolete property in the ordinary course of
business, or (b) other property no longer necessary for the proper
conduct of their business;
(v) the Company and its Subsidiaries may engage in Asset Sales
(a) in connection with the settlement of litigation or the payment of
judgments, or (b) the Net Cash Proceeds of which are used in connection
with the settlement of litigation or for the payment of judgments;
provided, however, that the aggregate value of assets transferred
pursuant to clauses (a) and (b) preceding from and after the Issue Date
does not exceed $10 million;
(vi) the Company and its Subsidiaries may convey, sell,
transfer or otherwise dispose of Hydrocarbons or other mineral products
in the ordinary course of business; and
(vii) the Company and its Subsidiaries may convey, sell,
transfer or otherwise dispose of Drilling Production Payments (whether
or not relating to Drilling Programs) and interests related to Drilling
Programs; provided, however, that an amount equal to the Net Cash
Proceeds of each such conveyance, sale, transfer or other disposition
shall be used for Capital Expenditures (including, without limitation,
reimbursement of the Company and its Subsidiaries for Capital
Expenditures already made) or to make a Repurchase Offer.
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(g) For the purpose of determining compliance with this Section 4.14
with respect to the application or use of the Net Cash Proceeds of any Asset
Sale consummated by the Company or any Subsidiary of the Company, if such Net
Cash Proceeds would be eligible for application or use under or pursuant to more
than one of the categories of application or use permitted under Section 4.14(a)
or Section 4.14(f), without, for purposes of determining such eligibility only,
giving effect to any specific limitation on the amount or the aggregate amount
of Net Cash Proceeds that may be applied or used under any otherwise eligible
category of application or use in effect at the time such application is to be
effected, the Person in question consummating such Asset Sale shall have the
right to determine in its sole discretion the eligible category or categories of
application or use pursuant to which all or any portion of such Net Cash
Proceeds shall be applied or used, and may, at its option and in its sole
discretion, elect either (i) to effect the application or use of the full amount
of such Net Cash Proceeds pursuant to any one of such eligible categories of
application or use permitted under Section 4.14(a) or Section 4.14(f), subject,
however, to any limitation on the amount or the aggregate amount that may be
applied or used under such eligible category of application or use in effect at
the time such application or use is effected, or (ii) to effect the application
or use of such Net Cash Proceeds by apportioning the full amount of such Net
Cash Proceeds to be applied or used between or among any two or more of such
eligible categories of application or use permitted under Section 4.14(a) or
Section 4.14(f) in such amounts and order of application or use as the Person in
question consummating such Asset Sale may determine in its sole discretion,
subject, however, as to each portion of such Net Cash Proceeds apportioned for
application or use under any one of such eligible categories of application or
use, to any limitation on the amount or the aggregate amount of Net Cash
Proceeds that may be applied or used under such eligible category of application
or use in effect at the time such application or use is effected.
Section 4.15 Waiver of Stay, Extension or Usury Laws. The Company and
each Guarantor covenants (to the extent that it may lawfully do so) that it will
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay or extension law or any usury law or other
law which would prohibit or forgive the Company or any Guarantor from paying all
or any portion of the principal of or interest on the Notes as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture; and (to the extent
that it may lawfully do so) the Company hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
It is the intention of the parties hereto to comply strictly with
applicable usury laws; accordingly, notwithstanding any provision to the
contrary in this Indenture or in any of the documents securing the payment of
the Notes or otherwise relating thereto, in no event shall this Indenture or
such documents require or permit the payment, charging, taking, reserving, or
receiving of any sums constituting interest under applicable laws which exceed
the maximum amount permitted by such laws. If any such excess interest is
contracted for, charged, taken, reserved, or received in connection with the
Notes or in any of the documents securing the payment thereof or otherwise
relating thereto, or in any communication by the Holders or any other Person to
the Company or any other Person, or in the event all or part of the principal or
interest on the Notes shall be prepaid or accelerated, so that under any of such
circumstances or under any other circumstance whatsoever the amount of interest
contracted for, charged, taken, reserved, or received on the amount of principal
actually outstanding from time to time under the Notes shall exceed the maximum
amount of interest permitted by applicable usury laws, then in any such event it
is agreed as follows: (i) the provisions of this paragraph shall govern and
control, (ii) any such excess shall be deemed an accidental and bona fide error
and canceled automatically to the extent of such excess, and shall not be
collected or collectible, (iii) any such excess which is or has been paid or
received notwithstanding this paragraph shall be credited against the then
unpaid principal balance on the Notes or refunded to the Company, at the
Holders' option, and (iv) the
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effective rate of interest shall be automatically reduced to the maximum lawful
rate allowed under applicable laws as construed by courts having jurisdiction
hereof or thereof. Without limiting the foregoing, all calculations of the rate
of interest contracted for, charged, taken, reserved, or received in connection
herewith which are made for the purpose of determining whether such rate exceeds
the maximum lawful rate shall be made to the extent permitted by applicable laws
by amortizing, prorating, allocating and spreading during the period of the full
term of the Notes, including all prior and subsequent renewals and extensions,
all interest at any time contracted for, charged, taken, reserved, or received.
The terms of this paragraph shall be deemed to be incorporated in every
document, security instrument, and communication relating to this Indenture and
the Notes.
Section 4.16 Guarantee by Subsidiaries. If the Company or any of its
Subsidiaries shall make Investments in an aggregate amount, otherwise transfer
(including by capital contribution) or cause to be transferred, in a manner
otherwise permitted pursuant to this Indenture, or permit to be held any assets
(tangible or intangible), businesses, divisions, real property, or equipment
having a book value as shown in the Company's most recent consolidated balance
sheet or the notes thereto (or if greater, a fair market value at the time of
transfer) in excess of $100,000 in, to or by any Subsidiary of the Company, that
is not a Guarantor, the Company shall cause such transferee Subsidiary (a) to
guarantee payment of the Notes by executing a Guarantee, and (b) to execute a
supplemental indenture in which such Subsidiary agrees to become and be a
Guarantor and to be bound by the terms of this Indenture, provided, however,
that the obligations of the Company under this sentence with respect to
Galveston Bay Pipeline and Galveston Bay Processing are subject to the
provisions of Sections 12.7 and 12.8, and, notwithstanding anything to the
contrary contained in this sentence, the Company shall, upon satisfaction of the
applicable conditions set forth therein, be entitled to the benefits of Sections
12.7 and 12.8. If the Company or any of its Subsidiaries shall subsequently sell
or otherwise transfer all of the Capital Stock of such Subsidiary held by the
Company or any of its Subsidiaries, such Subsidiary shall be released and
discharged from the Guarantee. If the Company shall subsequently effect the sale
of all or substantially all of the assets of such Subsidiary pursuant to an
Asset Sale made in accordance with the applicable provisions of this Indenture
and, as a result thereof, the book value of the assets of such Subsidiary is
reduced to an amount less than $100,000, such Subsidiary shall be released and
discharged from the Guarantee.
The liability of each Guarantor under its Guarantee will be limited to
the amount of its Adjusted Net Assets. Each Guarantor that makes a payment under
or by reason of its Guarantee of the Notes shall be entitled to assert a claim
for reimbursement from each other Guarantor of the Notes in an amount not to
exceed the product of (x) the other Guarantor's Adjusted Net Assets multiplied
by (y) a fraction, the numerator of which is the other Guarantor's Adjusted Net
Assets and the denominator of which is the sum of the Adjusted Net Assets of all
Guarantors of the Notes.
Section 4.17 Limitations on Line of Business. The Company shall not,
and shall not permit any Subsidiary of the Company to, directly or indirectly
engage to any substantial extent in any line or lines of business activity other
than a Related Business or such other business activities as are reasonably
related or incidental thereto.
Section 4.18 Separate Existence and Formalities. The Company hereby
covenants and agrees that:
(a) it will maintain procedures designed to prevent commingling of the
funds of the Company and its Subsidiaries.
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(b) all actions taken by the Company and its Subsidiaries will be taken
pursuant to authority granted by the Board of Directors of the Company and its
Subsidiaries, to the extent required by law or the Company's and its
Subsidiaries' Certificate of Incorporation or By-laws;
(c) the Company and its Subsidiaries will maintain separate records and
books of account and such records and books of account shall be separate from
those of any other Person in each case in accordance with GAAP;
(d) the Company and its Subsidiaries will maintain correct minutes of
the meetings and other corporate proceedings of the owners of its Capital Stock
and the Board of Directors and otherwise comply with requisite corporate
formalities required by law;
(e) the Company and its Subsidiaries will not knowingly mislead any
other Person as to the identity or authority of the Company and its
Subsidiaries; and
(f) it will maintain procedures designed to assure that all written
communications of the Company and its Subsidiaries, including, without
limitation, letters, invoices, purchase orders, contracts, statements and
applications, will appropriately identify the entity on whose behalf such
communication is made.
Section 4.19 Limitation on Assets Held by Nominees. Within 270 days of
the acquisition of any Nominee Property by any Nominee (to the extent the
aggregate expenditures for all then existing Nominee Property does not exceed
$500,000), the Company shall cause such Nominee to assign and transfer to the
Company, or such of its Subsidiaries, as the case may be, all of such Nominee's
right, title and interest in and to such Nominee Property.
ARTICLE V
SUCCESSOR CORPORATION
Section 5.1 When the Company May Merge, Etc.
(a) The Company shall not, and shall not permit any of its Subsidiaries
to, consolidate with or merge with or into any other Person, or, directly or
indirectly, sell, lease, assign, transfer or convey all or substantially all of
its assets (computed on a consolidated basis), to another Person or group of
Persons acting in concert, whether in a single transaction or through a series
of related transactions, unless:
(1) either (a) the Company or such Subsidiary, as the case may
be, shall be the continuing Person, or (b) the Person (if other than
the Company) formed by such consolidation or into which the Company or
such Subsidiary, as the case may be, is merged or to which all or
substantially all of the properties and assets of the Company or such
Subsidiary, as the case may be, are transferred as an entirety or
substantially as an entirety (the Company or such Subsidiary, as the
case may be, or such other Person being hereinafter referred to as the
"Surviving Person") shall be a corporation or partnership organized and
validly existing under the laws of the United States, any State thereof
or the District of Columbia, and shall expressly assume, by an
indenture supplemental hereto and any supplements to any Security
Documents as the Trustee in its sole discretion may require, executed
and delivered to the Trustee on or prior to the consummation of such
transaction, in form satisfactory to the Trustee, all the obligations
of the Company or such Subsidiary, as the case may be, under the Notes,
the Security Documents, and this Indenture;
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(2) No Default or Event of Default shall exist or shall occur
immediately after giving effect to such transaction;
(3) immediately after giving effect to such transaction, on a
pro forma basis, (x) the Net Worth of the Surviving Person is at least
equal to the Net Worth of such predecessor or transferring entity
immediately prior to such transaction, and (y) the Surviving Person
immediately after giving effect on a pro forma basis to the
Consolidated Fixed Charges of the Surviving Person, (A) the
Consolidated Fixed Charge Coverage Ratio of the Surviving Person for
the Reference Period is greater than 2.5 to 1, and (B) the Surviving
Person's Adjusted Consolidated Tangible Assets are equal to or greater
than 150% of the total consolidated principal amount or accreted value,
as the case may be, of Debt of the Surviving Person;
(4) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, assignment, or transfer and such supplemental
indenture comply with this Article V and that all conditions precedent
herein pro vided relating to such transaction have been satisfied; and
(5) at the time of or within 120 days after the occurrence of
the event specified above, the Notes have not been or are not
downgraded by S&P, Moody's, or any successor rating agencies to either
entity to a rating below that which existed immediately prior to the
time the event specified above is first publicly announced.
For purposes of this Section 5.1(a), the Consolidated Fixed Charge Coverage
Ratio shall be determined on a pro forma consolidated basis (giving effect to
such transaction) for the four fiscal quarters immediately preceding such
transaction.
(b) For purposes of Section 5.1(a), the sale, lease, conveyance,
assignment, transfer, or other disposition of all or substantially all of the
properties and assets of one or more Subsidiaries of the Company, which
properties and assets, if held by the Company instead of such Subsidiaries,
would constitute all or substantially all of the properties and assets of the
Company, on a consolidated basis, shall be deemed to be the transfer of all or
substantially all of the properties and assets of the Company.
(c) Notwithstanding anything contained in the foregoing to the
contrary, any Subsidiary of the Company with a Net Worth greater than zero may
merge into the Company (or a wholly owned Subsidiary of the Company) at any
time, provided, however, that the Company shall have delivered to the Trustee an
Officers' Certificate stating that such Subsidiary has a Net Worth greater than
zero and such merger does not result in a Default or an Event of Default
hereunder.
Section 5.2 Successor Corporation Substituted. Upon any consolidation
or merger, or any transfer of assets in accordance with Section 5.1, the
Surviving Person formed by such consolidation or into which the Company is
merged or to which such transfer is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this Indenture
and under the Security Documents with the same effect as if such Surviving
Person had been named as the Company herein. When a Surviving Person duly
assumes all of the obligations of the Company pursuant hereto and pursuant to
the Notes, the predecessor shall be released from such obligations.
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ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
Section 6.1 Events of Default. "Event of Default," wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be caused voluntarily or involuntarily or
effected, without limitation, by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) default in the payment of any interest upon any Note as and when
the same becomes due and payable, and the continuance of such default for a
period of thirty (30) days;
(b) default in the payment of all or any part of the principal of (or
premium, if any, applicable to), the Notes when and as the same becomes due and
payable at maturity, redemption, by acceleration, or otherwise, including any
payment due by reason of the occurrence of a Change of Control Offer;
(c) default in the observance or performance of, or breach of, any
covenant, agreement or warranty of the Company or any of its Subsidiaries
contained in the Notes or this Indenture or any of the Security Documents, and
continuance of such default or breach for the period and after the notice, if
any, specified below;
(d) a default which extends beyond any stated period of grace
applicable thereto, including any extension thereof, under any mortgage,
indenture or instrument under which there is outstanding any Debt of the Company
or any of its Subsidiaries with an aggregate principal amount in excess of $5
million if by reason of such default the principal of such Debt and all accrued
and unpaid interest thereon have been declared due and payable, or failure to
pay such Debt at its stated maturity, provided, however, that a waiver by all of
the lenders of such debt of such default shall constitute a waiver hereunder for
the same period;
(e) a decree, judgment, or order by a court of competent jurisdiction
shall have been entered adjudging the Company or any of its Subsidiaries as
bankrupt or insolvent, or ordering relief against the Company or any of its
Subsidiaries in response to the commencement of an involuntary bankruptcy case,
or approving as properly filed a petition seeking reorganization or liquidation
of the Company or any of its Subsidiaries under any bankruptcy or similar law,
and such decree or order shall have continued undischarged and unstayed for a
period of 60 days; or a decree or order of a court of competent jurisdiction
over the appointment of a receiver, liquidator, trustee, or assignee in
bankruptcy or insolvency of the Company, any of its Subsidiaries, or of the
property of any such Person, or for the winding up or liquidation of the affairs
of any such Person, shall have been entered, and such decree, judgment, or order
shall have remained in force undischarged and unstayed for a period of 60 days;
(f) the Company or any of its Subsidiaries shall institute voluntary
bankruptcy proceedings, or shall consent to the filing of a bankruptcy
proceeding against it, or shall file a petition or answer or consent seeking
reorganization or liquidation under any bankruptcy or similar law or similar
statute, or shall consent to the filing of any such petition, or shall consent
to the appointment of a Custodian, receiver, liquidator, trustee, or assignee in
bankruptcy or insolvency of it or any of its assets or property, or shall make a
general assignment for the benefit of creditors, or shall admit in writing its
inability to pay its debts generally as they become due, or shall, within the
meaning of any Bankruptcy Law, become insolvent, fail generally to pay its debts
as they become due, or take any corporate action in furtherance of or to
facilitate, conditionally or otherwise, any of the foregoing;
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(g) final judgments not covered by insurance for the payment of money,
or the issuance of any warrant of attachment against any portion of the property
or assets of the Company or any Subsidiary, which, in the aggregate, equal or
exceed $5 million at any one time shall, be entered against the Company or any
of its Subsidiaries by a court of competent jurisdiction and not be stayed,
bonded or discharged for a period (during which execution shall not be
effectively stayed) of 60 days (or, in the case of any such final judgment which
provides for payment over time, which shall so remain unstayed, unbonded or
undis charged beyond any applicable payment date provided therein); or
(h) except as caused by a release effected pursuant to and in
accordance with this Indenture, any of the Security Documents shall for any
reason cease to be in full force and effect other than pursuant to the terms
thereof (except where no material adverse effect to the Holders would result),
or shall cease to give the Trustee, for the ratable benefit of the Holders the
Liens, rights, powers and privileges purported to be created thereby including
but not limited to, a perfected security interest in, and Lien on, the
Collateral in accordance with the terms thereof, except where the failure to
have such Liens, rights, powers and privileges shall not have a material adverse
effect on the Holders.
If a Default occurs and is continuing and if it is known to the
Trustee, the Trustee must, within 90 days after the occurrence of such default,
give to the Holders notice of such Default; provided, however, that, except in
the case of Default in payment of principal of, premium, if any, or interest on
the Notes, the Trustee will be protected in withholding such notice if it in
good faith determines that the withholding of such notice is in the interest of
the Holders.
A Default under clause (c) above (other than in the case of any
Defaults under Sections 4.3, 4.11, 4.13, 4.14, 4.16 or 5.1, which Defaults shall
become Events of Default without the notice specified in this paragraph or in
Section 4.7(c) and upon the passage of 10 days) is not an Event of Default until
the Trustee notifies the Company, or the Holders of at least 25% in principal
amount of the outstanding Notes notify the Company and the Trustee of the
Default, and the Company does not cure the Default within 30 days after receipt
of the notice. The notice must specify the Default, demand that it be remedied
and state that the notice is a "Notice of Default." Such notice shall be given
by the Trustee if so requested by the Holders of at least 25% in principal
amount of the Notes then outstanding.
In the case of any Event of Default pursuant to the provisions of this
Section 6.1 occurring by reason of any willful action (or inaction) taken (or
not taken) by or on behalf of the Company or any Subsidiary with the intention
of avoiding the period of time the Notes are not optionally redeemable or the
payment of the premium which the Company would have to pay if the Company then
had elected to redeem the Notes pursuant to Paragraph 5 of the Notes, an
equivalent premium (or, in the case of an Event of De fault prior to the time
optional redemptions are permitted, to the extent permitted by law, a premium
equal to the stated interest rate of the Notes multiplied by the quotient of (i)
the number of full years left to maturity plus one, divided by (ii) five) shall
also become and be immediately due and payable to the extent permitted by law,
anything in this Indenture or in the Notes to the contrary notwithstanding.
Section 6.2 Acceleration of Maturity Date; Rescission and Annulment. If
an Event of Default (other than an Event of Default specified in Section 6.1(e)
or Section 6.1(f) relating to the Company or any of its Subsidiaries) occurs and
is continuing, then, and in every such case, unless the principal of all of the
Notes shall have already become due and payable, either the Trustee or the
Holders of not less than 25% in aggregate principal amount of then outstanding
Notes, by a notice in writing to the Company (and to the Trustee if given by
Holders) (an "Acceleration Notice"), may declare all of the principal of the
Notes, determined as set forth below, including in each case accrued interest
thereon, to be due and payable immediately. If an Event of Default specified in
Section 6.1(e) or (f) relating to the Company or any of its Subsidiaries
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occurs, all principal and accrued interest on the Notes shall be immediately due
and payable on all outstanding Notes without any declaration or other act on the
part of the Trustee or the Holders.
At any time after such a declaration of acceleration being made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article VI, the Holders of a
majority in aggregate principal amount of then outstanding Notes, by written
notice to the Company and the Trustee, may waive, on behalf of all Holders, any
such declaration of acceleration if:
(a) the Company has paid or deposited with the Trustee a sum sufficient
to pay:
(1) all accrued but unpaid interest on all Notes,
(2) the principal of (and premium, if any, applicable to) any
Notes which would become due otherwise than by such declaration of
acceleration, and accrued but unpaid interest thereon at the rate borne
by the Notes,
(3) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Notes, and
(4) all sums paid or advanced by the Trustee hereunder and the
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel; and
(b) all Events of Default, other than the non-payment of the principal
of, premium, if any, and interest on Notes which have become due solely by such
declaration of acceleration, have been cured or waived as provided in Section
6.12.
Notwithstanding the previous sentence of this Section 6.2, no waiver
shall be effective for any Event of Default or event which with notice or lapse
of time or both would be an Event of Default with respect to any covenant or
provision which cannot be modified or amended without the consent of (w) 662/3%
in aggregate principal amount of the Notes, or (x) the affected Holder of each
of the outstanding Notes, unless (y) 662/3% in aggregate principal amount of the
Notes, or (z) all such affected Holders, respectively, agree, in writing, to
waive such Event of Default or event. No such waiver shall cure or waive any
subsequent default or impair any right consequent thereon.
Section 6.3 Collection of Indebtedness and Suits for Enforcement by
Trustee. The Company covenants that if an Event of Default in payment of
principal, premium or interest specified in clause (a) or clause (b) of Section
6.1 occurs and is continuing, the Company shall, upon demand of the Trustee, pay
to it, for the benefit of the Holders of such Notes, the whole amount then due
and payable on such Notes for principal, premium (if any) and interest, and, to
the extent that payment of such interest shall be legally enforceable, interest
on any overdue principal (and premium, if any) and on any overdue interest, at
the rate borne by the Notes, and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including
compensation to, and expenses, disbursements and advances of the Trustee, its
agents and counsel.
If the Company fails to pay such amounts within 10 days of such demand,
the Trustee, in its own name and as trustee of an express trust in favor of the
Holders, may institute a judicial proceeding for the collection of the sums so
due and unpaid, may prosecute such proceeding to judgment or final decree and
may enforce the same against the Company or any other obligor upon the Notes and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company or any other obligor upon the Notes,
wherever situated.
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If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
The Trustee shall also be authorized to take whatever additional action
at law or in equity may appear to be necessary or desirable to collect the
monies necessary to pay the principal, premium (if any) and interest on the
Notes.
Section 6.4 Trustee May File Proofs of Claim. In case of the pendency
of any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
the Company or any other obligor upon the Notes or the property of the Company
or of such other obligor or their creditors, the Trustee (irrespective of
whether the principal of the Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand on the Company or any obligor for the payment of
overdue principal or interest) shall be entitled and empowered, by intervention
in such proceeding or other wise to take any and all actions under the TIA,
including:
(a) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the Notes and to
file such other papers or documents as may be necessary or advisable in order to
have the claims of the Trustee (including any claim for the reasonable com
pensation, expenses, disbursements and advances of the Trustee, its agent and
counsel) and of the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any debtor-in-possession or Custodian or other similar official in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee and, in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due it
for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment, or composition affecting the Notes or
the rights of any Holder thereof or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.
Section 6.5 Trustee May Enforce Claims Without Possession of Notes.
All rights of action and claims under this Indenture or the Notes may be
prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own name as trustee
of an express trust in favor of the Holders, and any recovery of judgment shall,
after provision for the payment of compensation to, and expenses, disbursements
and advances of the Trustee, its agents and counsel, be for the ratable benefit
of the Holders of the Notes in respect of which such judgment has been
recovered.
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Section 6.6 Priorities. Subject to the provisions of the Intercreditor
Agreement, any money collected by the Trustee pursuant to this Article VI shall
be applied in the following order, at the date or dates fixed by the Trustee
and, in case of the distribution of such money on account of principal, premium
(if any) or interest, upon presentation of the Notes and the notation thereon of
the payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the Trustee in payment of all amounts due pursuant to Section
7.7;
SECOND: To the Holders in payment of the amounts then due and unpaid
for principal of, premium (if any) and interest on, the Notes in respect of
which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due and
payable on such Notes for principal, premium (if any) and interest respectively;
and
THIRD: To whomsoever may be lawfully entitled thereto, the remainder,
if any.
Section 6.7 Limitation on Suits. No Holder of any Note shall have any
right to order or direct the Trustee to institute any proceeding, judicial or
otherwise, with respect to this Indenture, or for the appointment of a receiver
or trustee, or for any other remedy hereunder, unless:
(a) such Holder has previously given written notice to the Trustee of a
continuing Event of Default;
(b) the Holders of not less than 25% in principal amount of then
outstanding Notes shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default in its own name as Trustee
hereunder;
(c) such Holder or Holders have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities to be incurred
or reasonably probable to be incurred in compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(e) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the outstanding Notes;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
Section 6.8 Unconditional Right of Holders to Receive Principal,
Premium and Interest. Notwithstanding any other provision of this Indenture, the
Holder of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of, and premium (if any) and interest on, such
Note on the Interest Payment Date or Maturity Dates of such payments as
expressed in such Note and to institute suit for the enforcement of any such
payment after such respective dates, and such rights shall not be impaired
without the consent of such Holder.
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Section 6.9 Rights and Remedies Cumulative. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Notes in Section 2.7, no right or remedy herein conferred upon or
reserved to the Trustee or to the Holders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent permitted
by law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
Section 6.10 Delay or Omission Not Waiver. No delay or omission by the
Trustee or by any Holder of any Note to exercise any right or remedy arising
upon any Event of Default shall impair the exercise of any such right or remedy
or constitute a waiver of any such Event of Default. Every right and remedy
given by this Article VI or by law to the Trustee or to the Holders may be
exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders, as the case may be.
Section 6.11 Control by Holders. The Holder or Holders of a majority in
aggregate principal amount of then outstanding Notes shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred upon the
Trustee, provided, however, that:
(a) such direction shall not be in conflict with any rule of law or
with this Indenture,
(b) the Trustee shall not determine that the action so directed would
be unjustly prejudicial to the Holders not taking part in such direction or that
such action may involve the Trustee in personal liability, and
(c) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
Section 6.12 Waiver of Past Default. Subject to Section 6.8, the Holder
or Holders of not less than a majority in aggregate principal amount of the
outstanding Notes may, on behalf of all Holders, prior to the declaration of the
maturity of the Notes, waive any past default hereunder and its consequences,
except a default:
(a) in the payment of the principal of, premium, if any, or interest
on, any Note as specified in clauses (a) and (b) of Section 6.1,
(b) which arises because of a violation of the provisions of Section
9.2, or
(c) in respect of a covenant or provision hereof which, under Article
IX, cannot be modified or amended without the consent of the Holder of each
outstanding Note affected or 662/3% in aggregate principal amount of the Notes
at the time outstanding, as the case may be; provided, however, that such a
default may be waived by the consent of Holders of each outstanding Note
affected or 662/3% in aggregate principal amount of the Notes outstanding, as
the case may be.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair the exercise of any right arising therefrom.
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Section 6.13 Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Note by his acceptance thereof shall be deemed to
have agreed, that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee for any action taken, suffered or omitted to be taken by it as
Trustee, the filing by any party litigant in such suit of an undertaking to pay
the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the provisions of this
Section shall not apply to any suit instituted by the Company, to any suit
instituted by the Trustee, to any suit instituted by any Holder, or group of
Holders, holding in the aggregate more than 10% in aggregate principal amount of
the outstanding Notes, or to any suit instituted by any Holder for enforcement
of the payment of principal of, or premium (if any) or interest on, any Note on
or after the respective Maturity Date expressed in such Note (including, in the
case of redemption, on or after the Redemption Date).
Section 6.14 Restoration of Rights and Remedies. If the Trustee or any
Holder has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any reason,
or has been determined adversely to the Trustee or to such Holder, then and in
every case, subject to any determination in such proceeding, the Company, the
Trustee and the Holders shall be restored severally and respectively to their
former positions hereunder and thereafter all rights and remedies of the Trustee
and the Holders shall continue as though no such proceeding had been instituted.
ARTICLE VII
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture
and covenants and agrees to perform the same, as herein expressed.
Section 7.1 Duties of Trustee.
(a) If a Default or an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of a Default or an Event of Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no others, and no
covenants or obligations shall be implied in or read into this
Indenture which are adverse to the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements
of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b)
of this Section 7.1.
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(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.2 or Section 6.11.
(d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any action
under this Indenture or at the request, order or direction of the Holders or in
the exercise of any of its rights or powers if it shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to subsections (a), (b), (c), (d), and (f) of this Section
7.1.
(f) The Trustee shall not be liable for interest on any assets received
by it except as the Trustee may agree in writing with the Company. Assets held
in trust by the Trustee need not be segregated from other assets except to the
extent required by law.
(g) The Trustee shall execute and deliver the Intercreditor Agreement
and any Subordination Agreements as provided in Section 11.2.
Section 7.2 Rights of Trustee. Subject to Section 7.1:
(a) The Trustee may rely and shall be fully protected in acting or
refraining from acting on any document believed by it to be genuine and to have
been signed or presented by the proper Person. The Trustee need not investigate
any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of Counsel,
which shall conform to Sections 14.4 and 14.5. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on such
certificate or opinion.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers.
(e) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, notice, request, direction, consent, order, bond, debenture, or other
paper or document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders, pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
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(g) Whenever by the terms of this Indenture, the Trustee shall be
required to transmit notices or reports to any or all Holders, the Trustee shall
be entitled to rely on the information provided by the Registrar as to the names
and addresses of the Holders as being correct. If the Registrar is other than
the Trustee, the Trustee shall not be responsible for the accuracy of such
information.
Section 7.3 Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may otherwise deal with the Company, its Subsidiaries, or their respective
Affiliates with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. However, the Trustee must comply with Sections
7.10 and 7.11.
Section 7.4 Trustee's Disclaimer. The Trustee makes no representation
as to the validity or adequacy of this Indenture or the Notes and it shall not
be accountable for the Company's use of the proceeds from the Notes, and it
shall not be responsible for (i) the use or application of any funds received by
a Paying Agent other than the Trustee, (ii) any statement in the Notes, other
than the Trustee's certificate of authentication, or (iii) the sufficiency of
the collateral for the Notes.
The Trustee shall not be bound to ascertain or inquire as to the
performance or observance of any covenants, conditions or agreements on the part
of the Company hereunder or in any Security Documents, except as specifically
set forth herein or therein.
Section 7.5 Notice of Default. If a Default or an Event of Default
occurs and is continuing and if it is known to the Trustee pursuant to Section
4.7(c), the Trustee shall mail to each Noteholder notice of the uncured Default
or Event of Default within 90 days after such Default or Event of Default
occurs. Except in the case of a Default or an Event of Default in payment of
principal (or premium, if any,) of, or interest on, any Note (including all
payments due on any Maturity Date), the Trustee may withhold the notice if and
so long as the board of directors, the executive committee or a trust committee
of directors and/or responsible officers of the Trustee in good faith determines
that withholding the notice is in the interest of the Holders.
Section 7.6 Reports by Trustee to Holders. Within 60 days after each
May 15 beginning with the May 15 following the date of this Indenture, the
Trustee shall, if required, mail to each Noteholder a brief report dated as of
such May 15 that complies with TIA Section 313(a). The Trustee also shall comply
with TIA Sections 313(b) and 313(c).
A copy of each report at the time of its mailing to Noteholders shall
be mailed to the Company and filed with the SEC and each stock exchange, if any,
on which the Notes are listed.
Section 7.7 Compensation and Indemnity. The Company shall pay to the
Trustee from time to time compensation for its services (in whatever capacity
rendered) in accordance with the Trustee's fee schedule, as may be amended from
time to time. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable disbursements, expenses and advances
incurred or made by it. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents, accountants, experts and
counsel.
The Company shall indemnify the Trustee (in its capacity as Trustee)
and each of its officers, directors, attorneys-in-fact and agents for, and hold
it harmless against, any claim, demand, expense (including but not limited to,
compensation, disbursements and expenses of the Trustees' agents and counsel),
loss or liability incurred by it without negligence or bad faith on its part,
arising out of or in connection with (a) the administration of this trust and
its rights or duties hereunder including the reasonable costs and expenses of
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defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder, or (b) violation by the
Company or any other Person of any federal or state environmental law with
respect to the ownership, use, occupancy or operation of any of (i) the real
properties, or interests therein, at any time subjected to the lien of a
Mortgage pursuant to this Indenture, or (ii) any other real properties that has
the effect of causing the release of any hazardous wastes or substances on,
under or over any Collateral in violation of such environmental laws. The
Trustee shall notify the Company promptly of any claim asserted against the
Trustee for which it may seek indemnity. The Company shall defend the claim and
the Trustee shall provide reasonable cooperation at the Company's expense in the
defense. The Trustee may have separate counsel and the Company shall pay the
reasonable fees and expenses of such counsel; provided, however, that the
Company will not be required to pay such fees and expenses if it assumes the
Trustee's defense and there is no conflict of interest as reasonably determined
by the Trustee between the Company and the Trustee in connection with such
defense. The Company need not pay for any settlement made without its written
consent, which shall not be unreasonably withheld. The Company need not
reimburse any expense or indemnify against any loss or liability to the extent
incurred by the Trustee through its negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this Section 7.7, the
Trustee shall have a lien prior to the Notes on all assets held or collected by
the Trustee, in its capacity as Trustee, except assets held in trust to pay
principal (and premium, if any,) or interest on particular Notes.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(e) or Section 6.1(f) occurs, the expenses and
the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The Company's obligations under this Section 7.7 and any lien arising
hereunder shall survive the resignation or removal of the Trustee, the discharge
of the Company's obligations pursuant to Article VIII and any rejection or
termination of this Indenture under any Bankruptcy Law.
Section 7.8 Replacement of Trustee. The Trustee may resign by so
notifying the Company in writing. The Holder or Holders of a majority in
principal amount of the outstanding Notes may remove the Trustee by so notifying
the Company and the Trustee in writing and may appoint a successor trustee with
the Company's consent. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver, Custodian, or other public officer takes charge of
the Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holder or
Holders of a majority in principal amount of the Notes may appoint a successor
Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that
and provided, however, that all sums owing to the Trustee provided for in
Section 7.7 have been paid, the retiring Trustee shall transfer all property
held by it as Trustee to the
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successor Trustee, subject to the lien provided in Section 7.7, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holder or Holders of at least 10% in principal amount of the outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10, any Noteholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.8, the Company's obligations under Section 7.7 shall continue for the benefit
of the retiring Trustee.
Section 7.9 Successor Trustee by Merger, Etc. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation, the resulting,
surviving or transferee corporation without any further act shall, if such
resulting, surviving or transferee corporation is otherwise eligible hereunder,
be the successor Trustee.
Section 7.10 Eligibility; Disqualification. The Trustee shall at all
times satisfy the requirements of TIA Sections 310(a)(1), 310(a)(2) and
310(a)(5). The Trustee shall comply with TIA Section 310(b).
Section 7.11 Preferential Collection of Claims against Company. The
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.
Section 7.12 No Bond. The Trustee shall not be required to give any
bond or surety in respect to the execution of its trusts, powers, rights and
duties under this Indenture or otherwise in respect of the premises.
Section 7.13 Condition to Action. Notwithstanding anything elsewhere
in this Indenture to the contrary, the Trustee shall have the right, but shall
not be required, to demand, in respect of the authentication of any Notes or any
other action within the purview of this Indenture, any showings, certificates,
opinions, or other information, or corporate action or evidence thereof in
addition to that by the terms hereof required, as a condition of such action by
the Trustee if reasonably deemed desirable by the Trustee for the purpose of
establishing the right to the authentication of any Notes or the taking of any
other action by the Trustee.
Section 7.14 Investment. The Trustee shall not be responsible or
liable for any loss suffered in connection with any investment of funds made by
it at the direction of the Company.
ARTICLE VIII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.1 Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at its option at any time within the final year of the Stated
Maturity of the Notes, elect to have Section 8.2 or, at any time, Section 8.3
applied to all outstanding Notes upon compliance with the conditions set forth
below in this Article VIII.
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Section 8.2 Legal Defeasance and Discharge. Upon the Company's
exercise under Section 8.1 of the option applicable to this Section 8.2, the
Company shall be deemed to have been discharged from its obligations with
respect to all outstanding Notes on the date the conditions set forth below are
satisfied (hereinafter, "Legal Defeasance"). For this purpose, such Legal
Defeasance means that the Company shall be deemed to have paid and discharged
the entire indebtedness represented by the outstanding Notes, which shall
thereafter be deemed to be "outstanding" only for the purposes of Section 8.5
and the other Sections of this Indenture referred to in (a) and (b) below, and
to have satisfied all its other obligations under such Notes and this Indenture
(and the Trustee, on demand of and at the expense of the Company, shall execute
proper instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (a) the rights of
Holders of outstanding Notes to receive solely from the trust fund described in
Section 8.4, and as more fully set forth in such section, payments in respect of
the principal of, premium, if any, and interest on such Notes when such payments
are due, (b) the Company's obligations with respect to such Notes under Sections
2.4, 2.6, 2.7, 2.10 and 5.2, (c) the rights, powers, trusts, duties and
immunities of the Trustee hereunder and the Company's obligations in connection
therewith and (d) this Article VIII. Subject to compliance with this Article
VIII, the Company may exercise its option under this Section 8.2 notwithstanding
the prior exercise of its option under Section 8.3 with respect to the Notes.
Section 8.3 Covenant Defeasance. Upon the Company's exercise under
Section 8.1 of the option applicable to this Section 8.3, the Company shall be
released from its obligations under the covenants contained in Sections 4.3,
4.6, 4.7, 4.8, 4.10, 4.11, 4.12, 4.13, 4.14, 4.16, 4.17, 4.18, and 4.19 and
Article V, and in the Security Documents with respect to the outstanding Notes
on and after the date the conditions set forth below are satisfied (hereinafter,
"Covenant Defeasance"), and the Notes shall thereafter be deemed not
"outstanding" for the purposes of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder. For this purpose, such Covenant Defeasance means that, with respect
to the outstanding Notes, the Company need not comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document, but, except as specified
above, the remainder of this Indenture and such Notes shall be unaffected
thereby. In addition, upon the Company's exercise under Section 8.1 of the
option applicable to this Section 8.3, Sections 6.1(c) (with respect to the
covenants referenced in the first sentence of this Section 8.3) through 6.1(h)
shall not constitute Events of Default.
Section 8.4 Conditions to Legal or Covenant Defeasance. The following
shall be the conditions to the applicable of either Section 8.2 or Section 8.3
to the outstanding Notes:
(a) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements of
Section 7.10 who shall agree to comply with the provisions of this Article VIII
applicable to it) as trust funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of such Notes, (a) U.S. Legal Tender in an
amount, or (b) U.S. Government Obligations which through the scheduled payment
of principal and interest in respect thereof in accordance with their terms will
provide, not later than one day before the due date of any payment, U.S. Legal
Tender in an amount, or (c) a combination thereof, in such amounts, as in each
case will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge and which shall be supplied by
the Trustee (or other qualifying trustee) to pay and discharge (i) the principal
of, premium, if any, and interest on the outstanding Notes on the stated
maturity or on the applicable redemption date, as the case may be, of such
principal or installment of principal, premium, if any, or interest;
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provided that the Trustee shall have been irrevocably instructed to apply such
Legal Tender and the proceeds of such U.S. Government obligations to said
payments with respect to the Notes.
(b) In the case of an election under Section 8.2, the Company shall
have delivered to the Trustee an Opinion of counsel in the United States
reasonably satisfactory to the Trustee confirming that (i) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (ii) since the date hereof, there has been a change in the applicable
Federal income tax law, in either case to the effect that, and based thereon
such opinion shall confirm that, the Holders of the outstanding Nots will not
recognize income, gain or loss for Federal income tax purposes as a result of
such Legal Defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance has not occurred;
(c) In the case of an election under Section 8.3, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States to the
effect that the Holders of the outstanding Notes will not recognize income, gain
or loss for Federal income tax purposes as a result of such Covenant Defeasance
and will be subject to Federal income tax in the same amount, in the same manner
and at the same times as would have been the case if such Covenant Defeasance
had not occurred;
(d) No Default or Event of Default with respect to the Notes shall have
occurred and be continuing on the date of such deposit or, in so far as Sections
6.2(e) or 6.2(f) is concerned, at any time in the period ending on the 91st day
after the date of such deposit (it being understood that this condition shall
not be deemed satisfied until the expiration of such period);
(e) Such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or any
other material agreement or instrument to which the Company, the Guarantors, or
any of their Subsidiaries is a party or by which it or its properties is bound;
(f) In the case of an election under either Section 8.2 or 8.3, the
Company shall have delivered to the Trustee an Officers' Certificate stating
that the deposit made by the Company pursuant to its election under Section 8.2
or 8.3 was not made by the Company with the intent of preferring the Holders
over other creditors of the Company or with the intent of defeating, hindering,
delaying or defrauding creditors of the Company or others; and
(g) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel in the United States, each stating that
all conditions precedent providing for relating to either the Legal Defeasance
under Section 8.2 or the Covenant Defeasance under Section 8.3 (as the case may
be) have been complied with as contemplated by this Section 8.4.
Section 8.5 Deposited U.S. Legal Tender and U.S. Government
Obligations to be Held in Trust; Other Miscellaneous Provisions. Subject to
Section 8.6, all U.S. Legal Tender and U.S. Government Obligations (including
the proceeds thereof) deposited with the Trustee (or other qualifying trustee,
collectively for purposes of this Section 8.5, the "Trustee") pursuant to
Section 8.4 in respect of the outstanding Notes shall be held in trust and
applied by the Trustee, in accordance with the provisions of such Notes and this
Indenture, to the payment, either directly or through any Paying Agent as the
Trustee may determine, to the Holders of such Nots of all sums due and to become
due thereon in respect of principal, premium, if any, and interest, but such
money need not be segregated from other funds except to the extent required by
law.
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Anything in this Article VIII to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any U.S. Legal Tender or U.S. Government Obligations held by it
as provided in Section 8.4 which, in the opinion of a nationally recognized firm
of independent public accountants expressed in written certification thereto
delivered to the Trustee (which may be the opinion delivered upon Section
8.4(a)), are in excess of the amount thereof which would then be required to be
deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
Section 8.6 Repayment to Issuers. Any money deposited with the Trustee
or any Paying Agent, or then held by the Company, in trust for the payment for
the principal of premium, if any, or interest on any Notes and remaining
unclaimed for two years after such principal, and premium, if any, or interest
has become due and payable shall be paid to the Company on its request; and the
Holder of such Notes shall thereafter look only to the Company for payment
thereof, and all liability of the Trustee or such Paying Agent with respect to
such trust money shall thereupon cease; provided, however, that the Trustee or
such Paying Agent before being required to make any such repayment, may at the
expense of the Company cause to be published once, in the New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
form the date of such notification or publication, any unclaimed balance of such
money then remaining will be repaid to the Issuers.
Section 8.7 Reinstatement. If the Trustee or Paying Agent is unable
to apply any U.S. Legal Tender or U.S. Government Obligations in accordance with
Section 8.2 or 8.3, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, the Company's obligations under this Indenture and
the Notes shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.2 or Section 8.3 until such time as the Trustee or Paying
Agent is permitted to apply all such money in accordance with Section 8.2 or
Section 8.3, as the case may be; provided, however, that if the Company makes
any payment of principal of, premium, if any, or interest on any Notes because
of the reinstatement of its obligations, the Company shall be subrogated to the
rights of the Holders of such Notes to receive such payment from the Cash held
by the Trustee or Paying Agent.
Section 8.8 Termination of Obligations Upon Cancellation of the Notes.
In addition to the Company's rights under Sections 8.2 and 8.3, the Company and
the Guarantors may terminate all of their obligations under this Indenture and
this Indenture shall be deemed satisfied and discharged (in each case subject to
Section 8.7) when:
(1) all Notes theretofore authenticated and delivered (other
than Notes which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 2.7) have been delivered
to the Trustee for cancellation, and the Company or a Guarantor has
paid or caused to be paid all sums payable hereunder by the Company; or
(2) (i) all Notes not heretofore delivered to the Trustee for
cancellation otherwise have become due and payable or, within 30 days
will become due and payable or subject to redemption as set forth under
Article III and the Company has irrevocably deposited or caused to be
deposited with the Trustee as trust funds in the trust for such purpose
an amount of money sufficient to pay and discharge the entire
indebtedness on the Notes not heretofore delivered to the Trustee for
cancellation, including all principal, premium, if any, and accrued
interest (and liquidated damages, if any), (ii) the Company has paid
all sums payable by it under this Indenture, (iii) the Company has
delivered irrevocable instructions to the Trustee to apply the
deposited money toward the payment of the Notes at the Maturity Date,
and (iv) the Holders of the Notes have a valid perfected, exclusive
security interest in such trust.
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In addition, the Company shall deliver to the Trustee an Officers'
Certificate and an Opinion of Counsel (who is not in-house counsel to the
Company or any of its Subsidiaries), each stating that all conditions precedent
specified herein relating to the satisfaction and discharge of this Indenture
have been complied with and that such satisfaction and discharge will not result
in a breach or violation of, or constitute a Default under, this Indenture or
any other instrument to which the Company, any Guarantor or any of their
Subsidiaries is a party or by which it or their property is bound.
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.1 Supplemental Indentures Without Consent of Holders.
Without the consent of any Holder, the Company, when authorized by Board
Resolutions, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto or a restatement hereof or amendments
to or restatements of any one or more of the Security Documents, in form
satisfactory to the Trustee, for any of the following purposes:
(a) to cure any ambiguity, defect, or inconsistency, or to
make any other provisions with respect to matters or questions arising
under this Indenture or any one or more of the Security Documents which
shall not be inconsistent with the provisions of this Indenture,
provided, however, that such action pursuant to this clause (a) shall
not adversely affect the interests of any Holder in any respect;
(b) to add to the covenants of the Company for the benefit of
the Holders or to surrender any right or power herein conferred upon
the Company or to make any other change that does not adversely affect
the rights of any Holder, provided, however, that the Company has
delivered to the Trustee an Opinion of Counsel stating that such change
does not adversely affect the rights of any Holder;
(c) to provide for additional collateral for the Notes;
(d) to evidence the succession of another Person to the
Company and the assumption by any such successor of the obligations of
the Company herein and in the Notes in accordance with Article V;
(e) to comply with the TIA; or
(f) to restate this Indenture or any one or more of the
Security Documents so that it reflects this Indenture or such Security
Document, as the case may be, as originally executed as amended by all
amendments and supplements hereto or thereto through the date of such
restatement and contains only the then effective provisions of this
Indenture or such Security Document, as the case may be.
Section 9.2 Amendments, Supplemental Indentures and Waivers with
Consent of Holders. Subject to Section 6.8 and the last sentence of this
paragraph, with the consent of the Holders of not less than a majority in
aggregate principal amount of then outstanding Notes, by written act of said
Holders (including an electronic mechanism utilized by the Depository Trust
Company as a means of receiving consents or tenders of securities) delivered to
the Company and the Trustee, the Company, when authorized by Board Resolutions,
and the Trustee may amend or supplement this Indenture, the Notes or any of the
Security Documents or enter into an indenture or indentures supplemental hereto
for the purpose of adding any
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provisions to or changing in any manner or eliminating, or waiving compliance
with, any of the provisions of this Indenture or the Notes or of modifying in
any manner the rights of the Holders under this Indenture or the Notes,
provided, however, that no such amendment, waiver or modification may, without
the consent of the Holders of not less than 66 2/3% in aggregate principal
amount of the Notes at the time outstanding, (i) amend, waive or modify the
provisions (including the definitions of the defined terms used therein) of
Sections 4.3, 4.11, 4.13, 4.14 or 4.16, or of Articles XI, XII or XIII, in a
manner adverse to the Holders, or (ii) amend or supplement any of the Security
Documents in a manner adverse to the Holders. Notwithstanding any of the above,
however, no such amendment, supplemental indenture or waiver shall, without the
consent of the Holder of each outstanding Note affected thereby:
(a) change the Stated Maturity or the payment date of any installment
of principal of, or the payment date of any installment of interest on, any
Note;
(b) reduce the principal amount of any Note or the rate of interest
thereon or any premium payable upon the redemption thereof;
(c) make the principal of, or the interest on, any Note payable with
anything or in any manner other than as provided for in this Indenture
(including changing the place of payment where, or the coin or currency in
which, any Note or any premium or the interest thereon is payable) and the Notes
as in effect on the date hereof;
(d) reduce the percentage of principal amount of Notes whose Holders
must consent to an amendment, supplement or waiver of any provision of this
Indenture or the Notes;
(e) reduce the rate or extend the time for payment of interest on any
Note;
(f) (i) alter the redemption provisions (including the definitions of
the defined terms used therein) of Article III or of Paragraph 5 of the Notes,
or (ii) after the date upon which a Change of Control Offer (as defined in
Section 13.1(b)) is required to be made, reduce the Change of Control Purchase
Price (as defined in Section 13.1(a)) or otherwise alter the terms or provisions
of Article XIII; in any case, in a manner adverse to any Holder;
(g) make any changes in the provisions concerning waivers of Defaults
or Events of Default by Holders of the Notes (except to increase any required
percentage or to provide that certain other provisions hereof cannot be modified
or waived without the consent of the Holders of each outstanding Note affected
thereby) or the rights of Holders to recover the principal or premium of,
interest on, or redemption payment with respect to, any Note;
(h) make any changes that would subordinate the Notes in right of
payment to the payment of any other Debt of the Company or any of its
Subsidiaries (except as expressly provided in Section 11.2 or Section 11.5); or
(i) make any changes in Section 6.4, 6.7 or this third sentence of this
Section 9.2.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
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After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such amendment, supplement or waiver.
After an amendment, supplement or waiver under this Section 9.2 or
Section 9.4 becomes effective, it shall bind each Holder.
In connection with any amendment, supplement or waiver under this
Article IX, the Company may, but shall not be obligated to, offer to any Holder
who consents to such amendment, supplement or waiver, consideration for such
Holder's consent to such amendment, supplement or waiver; provided, that such
consideration is offered to all Holders and paid to all Holders who consent; and
provided further, that notwithstanding the preceding proviso, the Company shall
only be required to offer such consideration for the consent of a Holder if the
solicitation of such consent does not require registration under the Exchange
Act or any applicable state securities laws.
Section 9.3 Compliance with TIA. Every amendment, waiver or supplement
of this Indenture or the Notes shall comply with the TIA as then in effect.
Section 9.4 Revocation and Effect of Consents. Until an amendment,
waiver or supplement becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every subsequent Holder of a Note or
portion of a Note that evidences the same debt as the consenting Holder's Note,
even if notation of the consent is not made on any Note. However, any such
Holder or subsequent Holder may revoke the consent as to his Note or portion of
his Note by written notice to the Company or the Person designated by the
Company as the Person to whom consents should be sent if such revocation is
received by the Company or such Person before the date on which the Trustee
receives an Officers' Certificate certifying that the Holders of the requisite
principal amount of Notes have consented (and not theretofore revoked such
consent) to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be the date so fixed by the
Company notwithstanding the provisions of the TIA. If a record date is fixed,
then notwithstanding the last sentence of the immediately preceding paragraph,
those Persons who were Holders at such record date, and only those Persons (or
their duly designated proxies), shall be entitled to revoke any consent
previously given, regardless of whether such Persons continue to be Holders
after such record date. No such consent shall be valid or effective for more
than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Noteholder; provided, however, that any such waiver shall not impair
or affect the right of any Holder to receive payment of principal and premium of
and interest on a Note, on or after the respective dates set for such amounts to
become due and payable expressed in such Note, or to bring suit for the
enforcement of any such payment on or after such respective dates.
Section 9.5 Notation on or Exchange of Notes. If an amendment,
supplement or waiver changes the terms of a Note, the Trustee may require the
Holder of the Note to deliver it to the Trustee or require the Holder to put an
appropriate notation on the Note. The Trustee may place an appropriate notation
on the Note about the changed terms and return it to the Holder. Alternatively,
if the Company or the Trustee so determines, the Company in exchange for the
Note shall issue and the Trustee shall authenticate a new Note
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that reflects the changed terms. Any failure to make the appropriate notation or
to issue a new Note shall not affect the validity of such amendment, supplement
or waiver.
Section 9.6 Trustee to Sign Amendments, Etc. The Trustee shall
execute any amendment, supplement, restatement or waiver authorized pursuant to
this Article IX, provided, however, that the Trustee may, but shall not be
obligated to, execute any such amendment, supplement, restatement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee at the expense of the Company shall be entitled to
receive, and shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of any amendment, supplement, restatement or waiver
authorized pursuant to this Article IX is authorized or permitted by this
Indenture.
ARTICLE X
MEETINGS OF NOTEHOLDERS
Section 10.1 Purposes for Which Meetings May Be Called. A meeting of
Noteholders may be called at any time and from time to time pursuant to the
provisions of this Article X for any of the following purposes:
(a) to give any notice to the Company or to the Trustee, or to give any
directions to the Trustee, or to waive or to consent to the waiving of any
Default or Event of Default hereunder and its consequences, or to take any other
action authorized to be taken by Noteholders pursuant to any of the provisions
of Article VI;
(b) to remove the Trustee or appoint a successor Trustee pursuant to
the provisions of Article VII;
(c) to consent to an amendment, supplement or waiver pursuant to the
provisions of Section 9.2; or
(d) to take any other action (i) authorized to be taken by or on behalf
of the Holder or Holders of any specified aggregate principal amount of the
Notes under any other provision of this Indenture, or authorized or permitted by
law, or (ii) which the Trustee deems necessary or appropriate in connection with
the administration of this Indenture.
Section 10.2 Manner of Calling Meetings. The Trustee may at any time
call a meeting of Noteholders to take any action specified in Section 10.1, to
be held at such time and at such place in the City of New York, New York or
elsewhere as the Trustee shall determine. Notice of every meeting of
Noteholders, setting forth the time and place of such meeting and in general
terms the action proposed to be taken at such meeting, shall be mailed by the
Trustee, first-class postage prepaid, to the Company and to the Holders at their
last addresses as they shall appear on the registration books of the Registrar,
not less than 10 nor more than 60 days prior to the date fixed for a meeting.
Any meeting of Noteholders shall be valid without notice if the Holders
of all Notes then out standing are present in Person or by proxy, or if notice
is waived before or after the meeting by the Holders of all Notes outstanding,
and if the Company and the Trustee are either present by duly authorized
representatives or have, before or after the meeting, waived notice.
Section 10.3 Call of Meetings by Company or Holders. In case at any
time the Company, pursuant to a Board Resolution, or the Holders of not less
than 25% in aggregate principal amount of the Notes then outstanding, shall have
requested the Trustee to call a meeting of Noteholders to take any action
specified in Section 10.1, by written request setting forth in reasonable detail
the action proposed to be taken at the
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meeting, and the Trustee shall not have mailed the notice of such meeting within
20 days after receipt of such request, then the Company or the Holders of Notes
in the amount above specified may determine the time and place in the City of
New York, New York or elsewhere for such meeting and may call such meeting for
the purpose of taking such action, by mailing or causing to be mailed notice
thereof as provided in Section 10.2, or by causing notice thereof to be
published at least once in each of two successive calendar weeks (on any
Business Day during such week) in a newspaper or newspapers printed in the
English language, customarily published at least five days a week of a general
circulation in the City of New York, State of New York, the first such
publication to be not less than 10 nor more than 60 days prior to the date fixed
for the meeting.
Section 10.4 Who May Attend and Vote at Meetings. To be entitled to
vote at any meeting of Noteholders, a Person shall (a) be a registered Holder of
one or more Notes, or (b) be a Person appointed by an instrument in writing as
proxy for the registered Holder or Holders of Notes. The only Persons who shall
be entitled to be present or to speak at any meeting of Noteholders shall be the
Persons entitled to vote at such meeting and their counsel and any
representatives of the Trustee and its counsel and any representatives of the
Company and its counsel.
Section 10.5 Regulations May Be Made by Trustee; Conduct of the
Meeting; Voting Rights; Adjournment. Notwithstanding any other provision of this
Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any action by or any meeting of Noteholders, in regard to proof of
the holding of Notes and of the appointment of proxies, and in regard to the
appointment and duties of inspectors of votes, and submission and examination of
proxies, certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it shall think appropriate.
Such regulations may fix a record date and time for determining the Holders of
record of Notes entitled to vote at such meeting, in which case those and only
those Persons who are Holders of Notes at the record date and time so fixed, or
their proxies, shall be entitled to vote at such meeting regardless of whether
they shall be such Holders at the time of the meeting.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Noteholders as provided in Section 10.3, in which case the Company
or the Noteholders calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent secretary of
the meeting shall be elected by vote of the Holders of a majority in principal
amount of the Notes represented at the meeting and entitled to vote.
At any meeting each Noteholder or proxy shall be entitled to one vote
for each $1,000 principal amount of Notes held or represented by him; provided,
however that no vote shall be cast or counted at any meeting in respect of any
Notes challenged as not outstanding and ruled by the chairman of the meeting to
be not then outstanding. The chairman of the meeting shall have no right to vote
other than by virtue of Notes held by him or instruments in writing as aforesaid
duly designating him as the proxy to vote on behalf of other Noteholders. Any
meeting of Noteholders duly called pursuant to the provisions of Section 10.2 or
Section 10.3 may be adjourned from time to time by vote of the Holder or Holders
of a majority in aggregate principal amount of the Notes represented at the
meeting and entitled to vote, and the meeting may be held as so adjourned
without further notice.
Section 10.6 Voting at the Meeting and Record to Be Kept. The vote
upon any resolution submitted to any meeting of Noteholders shall be by written
ballots on which shall be subscribed the signatures of the Holders of Notes or
of their representatives by proxy and the principal amount of the Notes voted by
the ballot. The permanent chairman of the meeting shall appoint two inspectors
of votes, who shall count all votes cast at the meeting for or against any
resolution and who shall make and file with the secretary of the
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meeting their verified written reports in duplicate of all votes cast at the
meeting. A record in duplicate of the proceedings of each meeting of Noteholders
shall be prepared by the secretary of the meeting and there shall be attached to
such record the original reports of the inspectors of votes on any vote by
ballot taken thereat and affidavits by one or more Persons having knowledge of
the facts, setting forth a copy of the notice of the meeting and showing that
such notice was mailed as provided in Section 10.2 or published as provided in
Section 10.3. The record shall be signed and verified by the affidavits of the
permanent chairman and the secretary of the meeting and one of the duplicates
shall be delivered to the Company and the other to the Trustee to be preserved
by the Trustee, the latter to have attached thereto the ballots voted at the
meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
Section 10.7 Exercise of Rights of Trustee or Noteholders May Not Be
Hindered or Delayed by Call of Meeting. Nothing contained in this Article X
shall be deemed or construed to authorize or permit, by reason of any call of a
meeting of Noteholders or any rights expressly or impliedly conferred hereunder
to make such call, any hindrance or delay in the exercise of any right or rights
conferred upon or reserved to the Trustee or to the Noteholders under any of the
provisions of this Indenture or of the Notes.
ARTICLE XI
SECURITY
Section 11.1 Grant of Security Interest. In order to secure the payment
and performance of all obligations of the Company with respect to the Notes
including the due and punctual payment of the principal of, interest on and
premium, if any, on the Notes when and as the same shall become due and payable,
whether on an interest payment date, at a Maturity Date, by acceleration, call
for redemption or otherwise, and interest on the overdue principal and interest,
if any, of the Notes, each of the Company and each Guarantor hereby covenants to
execute, deliver and file of record for the benefit of the Holders, the Security
Documents to which it is a party and this Indenture. The Security Documents
shall grant to the Trustee a security interest in the collateral therein
described and when filed shall be deemed hereby incorporated by reference herein
to the same extent and as fully as if set forth in their entirety at this place,
and reference is made hereby to each Security Document for a more complete
description of the terms and provisions thereof. Each Holder, by accepting a
Note, agrees to all of the terms and provisions of the Security Documents and
the Trustee agrees to all of the terms and provisions of the Security Documents
signed by it.
Section 11.2 Trustee's Execution of Intercreditor Agreement and
Subordination Agreements.
(a) The Trustee, at the Company's expense, will execute, deliver, file
and record, all instruments and do all acts and other things as may be
reasonably necessary to provide pursuant to the Intercreditor Agreement among
other things, that (i) the Security Interests will be junior to the Liens on
Shared Collateral securing the Debt and other obligations of the Company under
the Post Confirmation Credit Facility, (ii) in the event of any judicial or
non-judicial foreclosure (or conveyance in lieu thereof), any cash or other
assets paid by reason thereof will be applied, after payment of reasonable costs
and expenses relating to obtaining such proceeds, to the payment of the Debt
outstanding under the Post Confirmation Credit Facility, and only after the Debt
outstanding under the Post Confirmation Credit Facility has been paid in full,
to the payment of the Notes, and (iii) determinations regarding the exercise of
remedies against the Shared Collateral will be made by the Post Confirmation
Credit Facility Agent. The Intercreditor Agreement will provide that nothing
contained therein will impair or affect the right of the Holders of the Notes to
institute suit for the enforcement of any payment thereon as and when due.
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(b) Upon receipt of a Subordination Request, the Trustee (and any
lender, trustee or collateral agent under or with respect to any of the Security
Documents), at the Company's expense, will execute and deliver, within five
Business Days from the receipt of such Subordination Request, any instruments
deemed by the Company (or with respect to the Security Documents, the grantor of
the Security Interest thereunder) to be reasonably necessary or reasonably
appropriate to subordinate the Security Interests to any Lien accorded priority
over the Security Interests by the Plan or by a Plan Order, but only to the
extent, and only with respect to such Collateral as to which, such priority is
accorded, if the provisions of this Section 11.2(b) have been complied with. Any
such Subordination Request shall request the Trustee (and any such lender,
trustee or collateral agent under or with respect to any of the Security
Documents) to execute one or more specifically described instruments of
subordination (which instruments of subordination accompany such Subordination
Request) and shall certify that (i) the Lien to which the Security Interests are
to be subordinated is a Lien accorded priority over the Security Interests by
the Plan or a Plan Order, and (ii) that the subordination requested effects a
subordination of the Security Interests only to the extent, and only with
respect to Collateral as to which such subordination is, contemplated by the
provision of the Plan or the Plan Order on which the subordination requested is
based.
(c) Upon receipt of a Subordination Request, the Trustee (and any
lender, trustee or collateral agent under or with respect to any of the Security
Documents), at the Company's expense, will execute and deliver, within five
Business Days from the receipt of such Subordination Request, any instruments
deemed by the Company (or with respect to the Security Documents, the grantor of
the Security Interest thereunder) to be reasonably necessary or reasonably
appropriate to subordinate the Security Interests to Permitted Liens securing
any First Lien Debt, if the provisions of this Section 11.2(c) have been
complied with. Any such Subordination Request shall request the Trustee (and any
such lender, trustee or collateral agent under or with respect to any of the
Security Documents) to execute one or more specifically described instruments of
subordination (which instruments of subordination accompany such Subordination
Request) and shall certify (1) that no Event of Default has occurred and is
continuing, and (2) that one of the conditions set forth below in clause (i) or
clause (ii) of this Section 11.2(b) has been, or simultaneously with or
immediately following the subordination will be, fulfilled:
(i) the Company (or with respect to the Security Documents,
the grantor of the Security Interest thereunder) represents in the
Subordination Request that the Lien to which the Security Interests are
to be subordinated is a Permitted Lien securing only a Debt or other
obligation that constitutes First Lien Debt; or
(ii) Holders of not less than 66 2/3% of principal amount of
the then outstanding Notes have consented in writing to the
subordination of the Security Interests to such Lien.
(d) The Trustee, at the Company's expense, will cooperate reasonably
with the Company (or with respect to the Security Documents, the grantor of the
Security Interest thereunder) in doing all such acts and things required by the
preceding provisions of this Section 11.2.
(e) The subordination of the Security Interests pursuant to or in
accordance with the provisions of the Intercreditor Agreement or of Section
11.2(b) or Section 11.2(c) shall be deemed not to impair the Security Interests
in contravention of the provisions of this Indenture.
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Section 11.3 Recording; Opinions of Counsel.
(a) The Company has executed, delivered, filed and recorded, and, with
reasonable promptness, from time to time shall execute, deliver, file and
record, all instruments and documents, and has done and shall do all such acts
and other things, at the expense of the Company, as are reasonably necessary to
subject the Collateral to the Security Interests. As soon as practicable, the
Company shall from time to time execute, deliver, file and record all
instruments and do all acts and other things as may be reasonably necessary or
advisable to perfect, maintain and protect the Security Interests, including
without limitation the execution of such Security Documents, and of such
amendments and supplements to Security Documents, as may be necessary or
appropriate to evidence, perfect and continue the Liens in favor of the Trustee
on after acquired Collateral.
(b) The Company shall cause TIA Section 314(b), relating to Opinions of
Counsel regarding the Lien of the Security Documents, and TIA Section 314(d),
relating to (x) the release of Collateral from the Lien of the Security
Documents and (y) Officers' Certificates or other documents regarding fair value
of the Collateral, to be complied with to the extent applicable. Any certificate
or opinion required by TIA Section 314(d) may be made by an Officer of the
Company or any other obligor upon the Notes, as applicable, to the extent
permitted by TIA Section 314(d).
(c) The Company shall furnish to the Trustee, within 30 days after the
end of the Company's first fiscal year after the date hereof, within 30 days
after the end of each fiscal year thereafter, and at least 30 days prior to the
expiration of any financing statements filed in connection with the Security
Interests, an Officers' Certificate, dated as of such date, (i) stating that
either (A) all action has been taken with respect to the recording, registering,
filing, rerecording and refiling of this Indenture, all supplemental indentures,
the Security Documents, financing statements, continuation statements and all
other instruments of further assurance as are necessary and desirable fully to
maintain, protect and preserve the Security Interests and the rights of the
Holders and the Trustee hereunder and under the Security Documents and reciting
the details of such action or referring to prior Officers' Certificates in which
such details are given, or (B) no such action is necessary to maintain, preserve
and protect the Security Interests and the rights of the Holders and the Trustee
hereunder and under the Security Documents during such period, (ii) stating
either (A) that, with respect to the trademarks and service marks, all filings
with the United States Patent and Trademark Office, any state office or other
appropriate governmental body necessary to maintain, protect and preserve the
Security Interests in the trademarks and service marks have been made, or (B)
that no such action is necessary, and (iii) stating what, if any, action of the
forgoing character is necessary during the fiscal year so as to maintain,
protect and preserve the rights of the Holders and the Trustee hereunder and
under the Security Documents.
Section 11.4 Disposition of Certain Collateral Without Requesting
Release.
(a) Notwithstanding the provisions of Sections 11.5, 11.6 and 11.12,
the Company (or with respect to the Security Documents, the grantor of the
Security Interest thereunder) may, without requesting or receiving the consent
of the Trustee (and any lender, trustee or collateral agent under any of the
Security Documents), (i) make cash payments (including repayments of Debt
permitted to be incurred hereby) that are not otherwise prohibited by this
Indenture, and (ii) dispose of Collateral, free from the Security Interests,
pursuant to Sections 4.14(f)(ii), 4.14(f)(iv) or 4.14(f)(vi).
(b) Notwithstanding the provisions of subsection (a) above: (x) the
Company (or with respect to the Security Documents, the grantor of the Security
Interest thereunder) shall not dispose of or transfer (by lease, assignment,
sale or otherwise) Collateral in a transaction or series of transactions
described in Section 4.14(f)(iv) pursuant to the provisions of Section 11.4(a),
having, in the good faith judgment of the
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Company (or with respect to the Security Documents, the grantor of the Security
Interest thereunder) and, if required by the TIA, an Appraiser, a fair value of
5% or more of the aggregate fair value of all Collateral then existing in any
transaction or any series of related transactions without complying with Section
11.5, and (y) the right of the Company (or with respect to the Security
Documents, the grantor of the Security Interest thereunder) to rely upon the
provisions of Sections 11.4(a) with respect to transactions described in Section
4.14(f)(iv) from the date of this Indenture to December 31, 2000, and for each
twelve-month period thereafter beginning on January 1 (a "Twelve-Month Period")
shall be conditioned upon the Company (or with respect to the Security
Documents, the grantor of the Security Interest thereunder) delivering to the
Trustee, on or before January 30, 2001, and thereafter within 30 days following
the end of such Twelve-Month Period, an Officers' Certificate to the effect that
the proceeds of all of such dispositions which involve Collateral during such
Twelve-Month Period (other than those such dispositions wherein the Company (or
with respect to the Security Documents, the grantor of the Security Interests
thereunder) has complied with Section 11.5) were used by the Company (or with
respect to the Security Documents, the grantor of the Security Interest
thereunder) in connection with their businesses and in accordance with the terms
of Section 4.14 herein.
(c) Any disposition of Collateral made in compliance with the
provisions of this Section 11.4 shall be deemed not to impair the Security
Interests in contravention of the provisions of this Indenture.
Section 11.5 Requesting Release of Collateral.
(a) Upon receipt of a Release Request, the Trustee shall execute and
deliver, within five Business Days from the receipt of such Release Request, any
instruments deemed by the Company (or with respect to the Security Documents,
the grantor of the Security Interests thereunder) to be reasonably necessary or
reasonably appropriate to release all or a part of the Collateral from the
Security Interests, if the provisions of this Section 11.5 have been complied
with. Any such Release Request shall request the Trustee to execute one or more
specifically described release instruments (which release instruments shall
accompany such Release Request) and shall certify (i) that no Event of Default
has occurred and is continuing (or with respect to a Release Request relating to
any of the Security Documents, that no event of default has occurred and is
continuing under the applicable Security Document) and (ii) that one of the
conditions of this Section 11.5(a) set forth below (specifying such condition)
has been fulfilled, and if such specified condition is described in clause (i)
below, that the conditions of Section 11.4, if applicable, have been, or
simultaneously with or immediately following the release will be, fulfilled:
(i) the Collateral will be disposed of in compliance with
Section 11.4;
(ii) the Collateral to be released will be used within five
business days either to make redemptions or purchases of Notes which
will be delivered to the Trustee for cancellation;
(iii) the Collateral is to be released in connection with an
Asset Sale made in compliance with Section 4.14;
(iv) all of the conditions precedent to the termination of the
Security Document under which the Lien in the Collateral to be released
was created, or to the release of such Collateral from the Lien created
by such Security Document, as set forth in such Security Document, have
been satisfied;
(v) Holders of not less than 66 2/3% in principal amount of
the then outstanding Notes have consented in writing to such release of
Collateral from the Security Interests;
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(vi) the Collateral to be released secures debt or other
obligations that constitute First Lien Debt and the Company (or with
respect to releases under the Security Documents, the grantor of the
Security Interest thereunder) has satisfied all the requirements for
obtaining subordination of the Security Interests therein pursuant to
Section 11.2(b) and such Collateral is (or will be, upon obtaining such
release) encumbered by a Lien permitted pursuant to the terms of
clauses (j), (l), or (o) of the definition of Permitted Liens; or
(vii) the release of the Collateral to be released is required
pursuant to, or is required in order to effect compliance with, the
Plan or a Plan Order.
(b) As a condition to any release of Collateral under this Section
11.5, the Company shall deliver to the Trustee any certificate or opinion
required by TIA Section 314(d), as to the fair value of any Collateral to be
released, or by TIA Section 314(c), as to the fulfillment of any condition
precedent to such release, dated as of a date not more than 60 days prior to the
date of such release. Such certificate or opinion shall state that the proposed
release of Collateral will not impair the Security Interests in contravention of
the provisions of this Indenture. The Person delivering such certificate or
opinion must be independent with respect to the Company if required by TIA
Section 314(d).
(c) At the request of the Company (or with respect to releases under
the Security Documents, the grantor of the Security Interest thereunder), the
Trustee shall, in lieu of releasing any Collateral pursuant to this Section
11.5, execute and deliver a Subordination Agreement with respect to such
Collateral.
(d) Any release or subordination of Collateral made in compliance with
the provisions of this Section 11.5 shall be deemed not to impair the Security
Interests in contravention of the provisions of this Indenture.
Section 11.6 Release Upon Defeasance or Satisfaction and Discharge of
this Indenture.
(a) In the event that the Company delivers an Officers' Certificate
certifying that all of the provisions of either Section 8.2, Section 8.3 or
Section 8.8 have been satisfied, the Trustee shall disclaim and give up any and
all rights it has in or to the Collateral, and any rights it has under the
Security Documents (subject to Section 8.7).
(b) Any release of Collateral made in compliance with the provisions of
this Section 11.6 shall be deemed not to impair the Security Interests in
contravention of the provisions of this Indenture.
Section 11.7 Reliance on Opinion of Counsel. The Trustee shall, before
taking any action under this Article XI, be entitled to receive an Opinion of
Counsel at the expense of the Company, stating the legal effect of such action,
and that such action will not be in contravention of the provisions hereof, and
such opinion shall be full protection to the Trustee for any action taken or
omitted to be taken in reliance thereon; provided, however, that the Trustee's
action under this Article XI shall at all times be and remain subject to its
duties and protections under Article VII.
Section 11.8 Purchaser May Rely. A purchaser in good faith of the
Collateral or any part thereof or interest therein which is purported to be
transferred, granted or released by the Trustee as provided in this Article XI
(i) shall not be obligated to ascertain the validity of the transfer, grant or
re lease, and may rely on the authority of the Trustee to execute the document
evidencing such transfer, grant or release, (ii) shall not be obligated to
inquire as to the satisfaction of any conditions precedent to the exercise of
such authority, and
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(iii) shall not be obligated to determine whether the application of the
purchase price therefor complies with the terms hereof.
Section 11.9 Payment of Expenses. Without limiting Section 7.7, on
demand of the Trustee, the Company forthwith shall pay or satisfactorily provide
for all reasonable expenditures incurred by the Trustee under this Article XI.
In the event that the Company (or with respect to any Security Documents, the
grantor of the Security Interest thereunder) makes a Release Request more often
than once a month, the Trustee and the Company shall negotiate an additional
reasonable fee for each such request. All such sums referred to in this Section
11.9 shall be a Lien upon the Collateral and shall be secured thereby.
Section 11.10 Trustee's Duties. The powers and duties conferred upon
the Trustee by this Article XI are solely to protect the Security Interests and
shall not impose any duty upon the Trustee to exercise any such powers except as
expressly provided in this Indenture. The Trustee shall be under no duty to the
Company (or with respect to any Security Documents, the grantor of the Security
Interest thereunder) whatsoever to make or give any presentment, demand for
performance, notice of non-performance, protest, notice of protest, notice of
dishonor, or other notice or demand in connection with any Collateral, or to
take any steps necessary to preserve any rights against prior parties except as
expressly provided in this Indenture. The Trustee shall not be liable to the
Company (or with respect to any Security Documents, the grantor of the Security
Interest thereunder) for failure to collect or realize upon any or all of the
Collateral, or for any delay in so doing, nor shall the Trustee be under any
duty to the Company (or with respect to any Security Documents, the grantor of
the Security Interest thereunder) to take any action whatsoever with regard
thereto. The Trustee shall have no duty to the Company (or with respect to any
Security Documents, the grantor of the Security Interest thereunder) to comply
with any recording, filing, or other legal requirements necessary to establish
or maintain the validity, priority or enforceability of the Security Interests
in, or the Trustee's rights in or to, any of the Collateral.
Section 11.11 Authorization of Actions to be Taken by the Trustee Under
the Security Documents. The Trustee may, in its sole discretion and without the
consent of the Holders, but subject to Article VII and the terms of the
Intercreditor Agreement, take all actions it deems necessary or appropriate in
order to enforce or effect the Security Documents. Such actions shall include,
but not be limited to, enforcing or effecting any term or provision of the
Security Documents or advising, instructing or otherwise directing the
collateral agent or other appropriate Person under any Intercreditor Agreement
with respect to the enforcement of any right or remedy with respect to
Collateral and/or any term or provision of the Security Documents. Subject to
the provisions of the Security Documents (and the Intercreditor Agreement), the
Trustee shall have the power to institute and to maintain such suits and
proceedings as it may deem expedient to prevent any impairment of the Collateral
by any acts which may be unlawful or in violation of the Security Documents or
this Indenture, and such suits and proceedings as the Trustee may deem expedient
to preserve or protect its interests and the interests of the Holders in the
Collateral (including power to institute and maintain suits or proceedings to
restrain the enforcement of or compliance with any legislative or other
governmental enactment, rule or order that may be unconstitutional or otherwise
invalid if the enforcement of, or compliance with, such enactment, rule or order
would impair the security hereunder or be prejudicial to the interests of the
Holders or of the Trustee). In addition, the Trustee may act upon any
Subordination Request or Release Request by the Company (or with respect to any
Security Documents, the grantor of the Security Interest thereunder) on behalf
of the Company.
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ARTICLE XII
GUARANTEE
Section 12.1 Guarantee.
(a) In consideration of good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, each Subsidiary of the Company
joining in the execution of this Indenture and the Notes for the purpose of
evidencing its Guarantee and its agreement to be bound by the terms of this
Indenture, and each Subsidiary of the Company that becomes a Guarantor in
accordance with Section 4.16 and/or that executes a supplemental indenture in
which such Subsidiary agrees to become and be a Guarantor and to be bound by the
terms of this Indenture, jointly and severally, hereby unconditionally
guarantees to each Holder of a Note authenticated and delivered by the Trustee
and to the Trustee, irrespective of the validity or enforceability of this
Indenture, the Notes or the obligations of the Company under this Indenture or
the Notes, that: (i) the principal of and interest (and premium, if any) on the
Notes will be paid in full when due, whether at the maturity or interest payment
date, on any Change of Control Payment Date, by acceleration, call for
redemption, purchase or otherwise, and interest on the overdue principal and
interest, if any, of the Notes, if lawful, and all other obligations of the
Company to the Holders or the Trustee under this Indenture or the Notes will be
promptly paid in full or performed, all in accordance with the terms of this
Indenture and the Notes, and (ii) in case of any extension of time of pay ment
or renewal of any Notes or any of such other obligations, they will be paid in
full when due or per formed in accordance with the terms of the extension or
renewal, whether at maturity, on any Change of Control Payment Date, by
acceleration, call for redemption, purchase or otherwise (such guarantees being
the "Guarantee"). The Guarantee is a guarantee of payment and not of collection.
Failing payment when due of any amount so guaranteed for whatever
reason, the Guarantors shall be jointly and severally obligated to pay the same
whether or not the failure to so pay is or becomes an Event of Default.
(b) Each Guarantor agrees that (i) its obligations with regard to this
Guarantee shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any delays in obtaining or realizing upon (or failures to
obtain or realize upon) collateral, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstances that might
otherwise constitute a legal or equitable discharge or defense of a guarantor,
and (ii) this Guarantee will not be discharged except by complete performance of
the obligations contained in the Notes and this Indenture. Each of the
Guarantors hereby waives diligence, presentment, demand of payment, filing of
claims with a court in the event of insolvency or bankruptcy of the Company, any
right to require a proceeding first against the Company or right to require the
prior disposition of the assets of the Company to meet its obligations, protest,
notice and all demands whatsoever and covenants that this Guarantee will not be
discharged except by complete performance of the obligations contained in the
Notes and this Indenture.
(c) If any Holder or the Trustee is required by any court or otherwise
to return to either the Company or any Guarantor, or to any Custodian, trustee,
or similar official acting in relation to either the Company or any Guarantor,
any amount paid by either the Company or any of the Guarantors to the Trustee or
such Holder, this Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect. Each of the Guarantors agrees that it will
not be entitled to any right of subrogation in relation to the Holders in
respect of any obligations guaranteed hereby until all of such obligations are
paid in full.
(d) Each of the Guarantors agrees that (i) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Section 6.2 for
the purposes of the Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration as to the Company of any of the
obligations guaranteed by the Guarantee, and (ii) in the event of any
declaration of acceleration of those obligations as provided in
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Section 6.2, those obligations (regardless of whether due and payable) will
forthwith become due and payable by each of the Guarantors for the purpose of
the Guarantee.
Section 12.2 Execution and Delivery to Evidence and Confirm Guarantee.
To evidence and confirm the Guarantee and its obligations thereunder as set
forth in Section 12.1, each of the Guarantors agrees that this Indenture (or a
supplement hereto) shall be executed on behalf of such Guarantor by two Officers
or an Officer and an Assistant Secretary of such Guarantor.
Each of the Guarantors agrees that the Guarantee and its obligations
thereunder as set forth in Section 12.1 shall remain in full force and effect
and apply to all the Notes.
If an Officer whose facsimile signature is on a Note no longer holds
that office at the time the Trustee authenticates the Note on which the
Guarantee is endorsed, the Guarantee shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Guarantee set forth in
this Indenture on behalf of the Guarantors.
Section 12.3 Limitation of Guarantor's Liability. Each Guarantor and,
by its acceptance hereof, each Holder hereby confirms that it is the intention
of all such parties that the guarantee by such Guarantor pursuant to the
Guarantee not constitute a fraudulent transfer or conveyance for purposes of any
federal or state law. To effectuate the foregoing intention, the Holders and
each Guarantor hereby irrevocably agree that the obligations of each Guarantor
under the Guarantee shall be limited to the maximum amount as will, after giving
effect to all other contingent and fixed liabilities of such Guarantor and after
giving effect to any collections from or payments made by or on behalf of any
other Guarantor in respect of the obligations of such other Guarantor under its
Guarantee or pursuant to Section 12.4, result in the obligations of such
Guarantor under the Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law. This Section 12.3 is for the
benefit of the creditors of each Guarantor. The provisions of this Section 12.3
shall survive until the Notes have been fully paid or deemed to have been fully
paid within the meaning of this Indenture.
Section 12.4 Contribution. In order to provide for just and equitable
contribution among the Guarantors, the Guarantors agree, inter se, that in the
event any payment or distribution is made by any Guarantor (a "Funding
Guarantor") under the Guarantee, such Funding Guarantor shall be entitled to a
contribution from each other Guarantor in a pro rata amount based on the
Adjusted Net Assets of each Guarantor (including the Funding Guarantor) for all
payments, damages and expenses incurred by that Funding Guarantor in discharging
the Company's obligations with respect to the Notes or any other Guarantor's
obligations with respect to the Guarantee.
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Section 12.5 Rights Under the Guarantee.
(a) No payment by any Guarantor pursuant to the provisions hereof to
the Trustee shall entitle such Guarantor to any payment out of any Collateral
held by the Trustee under this Indenture or any Security Documents.
(b) Each of the Guarantors waives notice of the issuance, sale and
purchase of the Notes and notice from the Trustee or the Holders from time to
time of any of the Notes of their acceptance and reliance on this Guarantee.
(c) Notwithstanding any payment or payments made by the Guarantors by
reason of the Guarantee, the Guarantors shall not be subrogated to any rights of
the Trustee or any Holder of the Notes against the Company until all the Notes
shall have been fully paid or deemed to have been fully paid within the meaning
of this Indenture. Any payment made by the Guarantors by reason of this
Guarantee shall be in all respects subordinated to the full and complete payment
or discharge under this Indenture of all obligations guaranteed hereby, and no
payment by the Guarantors by reason of this Guarantee shall give rise to any
claim of the Guarantors against the Trustee or any Holder. Unless and until the
Notes shall have been fully paid or deemed to have been fully paid within the
meaning of this Indenture, neither the Guarantors nor any of them will assign or
otherwise transfer any such claim against the Company to any other Person.
(d) No set-off, counterclaim, reduction or diminution of any obligation
or any defense of any kind or nature (other than performance by the Guarantor of
its obligation hereunder) which the Guarantor may have or assert against the
Trustee or any Holder of any Notes shall be available hereunder to the Guarantor
against the Trustee.
(e) The Guarantor agrees to pay all costs, expense and fees, including
all reasonable attorneys' fees, which may be incurred by the Trustee in
enforcing or attempting to enforce the Guarantee or protecting the rights of the
Trustee or the Holders of Notes, if any, in accordance with this Indenture.
Section 12.6 Severability. In case any provision of the Guarantee
shall be invalid, illegal or unenforceable, that portion of such provision that
is not invalid, illegal or unenforceable shall remain in effect, and the
validity, legality, and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Section 12.7 Release of Galveston Bay Pipeline.
(a) Notwithstanding anything to the contrary contained in Section 4.16,
upon receipt of a written request of the Company in the form of an Officer's
Certificate, the Trustee shall execute and deliver, within five Business Days
from the receipt of such written request, any instruments deemed by the Company
to be reasonably necessary or reasonably appropriate to release Galveston Bay
Pipeline from the Guarantee, if the provisions of this Section 12.7 have been
complied with. Any such written request shall request the Trustee to execute one
or more specifically described release instruments (which release instruments
shall accompany such written request) and shall certify (i) that no Event of
Default has occurred and is continuing, and either (ii) that Galveston Bay
Pipeline is to be released from the Guarantee in connection with a GB Facility
Financing made in compliance with Section 4.11 or (iii) that Galveston Bay
Pipeline is to be released from the Guarantee in connection with a sale or
transfer of the type contemplated in the last sentence of Section 4.16 made in
compliance with this Indenture.
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(b) As a condition to a release of Galveston Bay Pipeline under this
Section 12.7, the Company shall deliver to the Trustee any certificate or
opinion required by TIA Section 314(c) as to the fulfillment of any condition
precedent to such release, dated as of a date not more than 60 days prior to the
date of such release. Such certificate or opinion shall state that the proposed
release of Galveston Bay Pipeline will not impair the Security Interests in
contravention of the provisions of this Indenture.
(c) The release of Galveston Bay Pipeline from the Guarantee made in
compliance with the provisions of this Section 11.5 shall be deemed not to
impair the Security Interests in contravention of the provisions of this
Indenture.
Section 12.8 Release of Galveston Bay Processing.
(a) Notwithstanding anything to the contrary contained in Section 4.16,
upon receipt of a written request of the Company in the form of an Officer's
Certificate, the Trustee shall execute and deliver, within five Business Days
from the receipt of such written request, any instruments deemed by the Company
to be reasonably necessary or reasonably appropriate to release Galveston Bay
Processing from the Guarantee, if the provisions of this Section 12.8 have been
complied with. Any such written request shall request the Trustee to execute one
or more specifically described release instruments (which release instruments
shall accompany such written request) and shall certify (i) that no Event of
Default has occurred and is continuing, and either (ii) that Galveston Bay
Processing is to be released from the Guarantee in connection with a GB Facility
Financing made in compliance with Section 4.11 or (iii) that Galveston Bay
Processing is to be released from the Guarantee in connection with a sale or
transfer of the type contemplated in the last sentence of Section 4.16 made in
compliance with this Indenture.
(b) As a condition to a release of Galveston Bay Processing under this
Section 12.8, the Company shall deliver to the Trustee any certificate or
opinion required by TIA Section 314(c) as to the fulfillment of any condition
precedent to such release, dated as of a date not more than 60 days prior to the
date of such release. Such certificate or opinion shall state that the proposed
release of Galveston Bay Processing will not impair the Security Interests in
contravention of the provisions of this Indenture.
(c) The release of Galveston Bay Processing from the Guarantee made in
compliance with the provisions of this Section 11.5 shall be deemed not to
impair the Security Interests in contravention of the provisions of this
Indenture.
Section 12.9 Release pursuant to Section 4.16.
(a) Upon receipt of a written request of the Company in the form of an
Officer's Certificate, the Trustee shall execute and deliver, within five
Business Days from the receipt of such written request, any instruments deemed
by the Company to be reasonably necessary or reasonably appropriate to release
the appropriate Subsidiary from the Guarantee, if the provisions of this Section
12.8 have been complied with. Any such written request shall request the Trustee
to execute one or more specifically described release instruments (which release
instruments shall accompany such written request) and shall certify (i) that no
Event of Default has occurred and is continuing, and either (ii) that such
Subsidiary is to be released from the Guarantee for the reason provided in the
next to last sentence of Section 4.16 or (iii) that such Subsidiary is to be
released from the Guarantee for the reason provided in the last sentence of
Section 4.16.
(b) As a condition to a release of Galveston Bay Processing under this
Section 12.8, the Company shall deliver to the Trustee any certificate or
opinion required by TIA Section 314(c) as to the fulfillment of any condition
precedent to such release, dated as of a date not more than 60 days prior to the
date of such release. Such certificate or opinion shall state that the proposed
release of Galveston Bay Processing will not impair the Security Interests in
contravention of the provisions of this Indenture.
79
<PAGE> 88
(c) The release of Galveston Bay Processing from the Guarantee made in
compliance with the provisions of this Section 11.5 shall be deemed not to
impair the Security Interests in contravention of the provisions of this
Indenture.
ARTICLE XIII
RIGHT TO REQUIRE REPURCHASE
Section 13.1 Repurchase of Notes at Option of the Holder Upon Change of
Control.
(a) In the event that a Change of Control occurs, each Holder shall
have the right, at such Holder's option, upon the terms and conditions of this
Article XIII, to require the Company to repurchase all or any part of such
Holder's Notes (provided, however, that the principal amount of such Notes at
maturity must be $1,000 or an integral multiple thereof) on a date that is no
later than 60 Business Days after the occurrence of a Change of Control (the
date on which the repurchase is effected being referred to herein as the "Change
of Control Payment Date"), at a cash purchase price (the "Change of Control
Purchase Price") equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, on and including the Change of Control Payment Date.
(b) Within 20 Business Days after the Company knows, or reasonably
should know, of the occurrence of a Change of Control, the Company shall make an
irrevocable unconditional offer (a "Change of Control Offer") to the Holders to
purchase for U.S. Legal Tender all of the Notes pursuant to the offer described
in clause (c) of this Section 13.1 at the Change of Control Purchase Price.
Within five Business Days after each date upon which the Company knows, or
reasonably should know, of the occurrence of a Change of Control requiring the
Company to make a Change of Control Offer pursuant to this Section 13.1, the
Company shall so notify the Trustee.
(c) Notice of a Change of Control Offer shall be sent, at least 20
Business Days prior to the Final Change of Control Put Date (as defined below),
by first class mail, by the Company to each Holder at its registered address,
with a copy to the Trustee. The notice to the Holders shall contain all
instructions and materials required by applicable law and shall contain or make
available to Holders other information material to such Holders' decision to
tender Notes pursuant to the Change of Control Offer. The notice, which shall
govern the terms of the Offer, shall state:
(1) that a Change of Control has occurred and that such Holder
has the right to require the Company to purchase such Holder's Notes at
a purchase price in cash equal to 101% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of Holders of record on the relevant record date
to receive interest on the relevant interest payment date);
(2) the circumstances and relevant facts regarding such Change
of Control (including information with respect to pro forma historical
income, cash flow and capitalization, each after giving effect to such
Change of Control);
(3) that the Change of Control Offer is being made pursuant to
such notice and this Section 13.1 and that all Notes, or portions
thereof, tendered will be accepted for payment;
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<PAGE> 89
(4) the Change of Control Purchase Price, the Change of
Control Payment Date and the Final Change of Control Put Date (as
defined below);
(5) that any Note, or portion thereof, not tendered or
accepted for payment will continue to accrue interest, if interest is
then accruing;
(6) that, unless the Company defaults in depositing U.S.
Legal Tender with the Paying Agent in accordance with the provisions of
Section 11(d), or payment is otherwise prevented, any Note, or portion
thereof, accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest after the Change of Control Payment
Date;
(7) that Holders electing to have a Note, or portion thereof,
purchased pursuant to a Change of Control Offer will be required to
surrender the Note, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Note completed, to the Paying Agent
(which may not for purposes of this Section 11.1, notwithstanding
anything in this Indenture to the contrary, be the Company or any
Affiliate of the Company) at the address specified in the notice prior
to the close of business on the third Business Day prior to the Change
of Control Payment Date (the "Final Change of Control Put Date");
(8) that Holders will be entitled to withdraw their election
if the Paying Agent receives, prior to the close of business on the
Final Change of Control Put Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of the Notes the Holder is withdrawing and a statement
containing a facsimile signature that such Holder is withdrawing his
election to have such principal amount of Notes purchased;
(9) that Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered; and
(10) a brief description of the events resulting in such
Change of Control.
(d) On or before the Change of Control Payment Date, the Company shall
(i) accept for payment Notes or portions thereof properly tendered pursuant to
the Change of Control Offer prior to the close of business on the Final Change
of Control Put Date, (ii) deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the Change of Control Purchase Price (including accrued and
unpaid interest) of all Notes so tendered, and (iii) deliver or cause to be
delivered to the Trustee Notes so accepted together with an Officers'
Certificate listing the Notes or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to the Holders of Notes so
accepted payment in an amount equal to the Change of Control Purchase Price
(including accrued and unpaid interest), and the Trustee shall promptly
authenticate and mail or deliver to such Holders a new Note equal in principal
amount to any unpurchased portion of the Note surrendered. Any Notes not so
accepted shall be promptly mailed or delivered by the Company or the Paying
Agent to the Holder thereof. The Company shall publicly announce the results of
the Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date. Any such Change of Control Offer shall comply with all
applicable provisions of Federal and state laws, rules and regulations,
including, if and to the extent applicable, with the requirements of Section
14(a) of the Exchange Act and any other securities laws or regulations
applicable in connection with the repurchase of Securities pursuant to this
Section 11.1, and, if such laws, rules or regulations require or prohibit any
action inconsistent with the foregoing, compliance by the Company with such
laws, rules and regulations will not constitute a breach of the Company's
obligations with respect to the foregoing.
81
<PAGE> 90
ARTICLE XIV
MISCELLANEOUS
Section 14.1 TIA Controls. If any provision of this Indenture limits,
qualifies, or conflicts with the duties imposed by operation of the TIA, the
imposed duties, upon qualification of this Indenture under the TIA, shall
control.
Section 14.2 Notices. Any notices or other communications to the
Company or the Trustee required or permitted hereunder shall be in writing, and
shall be sufficiently given if made by hand delivery, by telex, by telecopier or
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
if to the Company:
TransTexas Gas Corporation
1300 North Sam Houston Parkway East, Suite 310
Houston, Texas 77032
Attention: Edwin B. Donahue
if to the Trustee:
Firstar Bank, N.A.
Corporate Trust Department
101 East Fifth Street, 12th Floor
St. Paul, Minnesota 55101-1860
Attention: Frank P. Leslie III
The Company or the Trustee by notice to each other party may designate
additional or different addresses as shall be furnished in writing by such
party. Any notice or communication to the Company or the Trustee shall be deemed
to have been given or made as of the date so delivered, if personally delivered;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
five Business Days after mailing if sent by registered or certified mail,
postage prepaid (except that a notice of change of address shall not be deemed
to have been given until actually received by the addressee).
Any notice or communication mailed to a Noteholder shall be mailed to
him by first class mail or other equivalent means at his address as it appears
on the registration books of the Registrar and shall be sufficiently given to
him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Noteholder or any defect
in it shall not affect its sufficiency with respect to other Noteholders. If a
notice or communication is mailed in the manner provided above, it is duly
given, regardless of whether the addressee receives it.
Section 14.3 Communications by Holders with Other Holders. Noteholders
may communicate pursuant to TIA Section 312(b) with other Noteholders with
respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and any other Person shall have the protection of TIA
Section 312(c).
Section 14.4 Certificate and Opinion as to Conditions Precedent. Upon
any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:
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<PAGE> 91
(1) an Officers' Certificate (in form and substance reasonably
satisfactory to the Trustee) stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with; and
(2) an Opinion of Counsel (in form and substance reasonably
satisfactory to the Trustee) stating that, in the opinion of such counsel, all
such conditions precedent have been complied with.
Section 14.5 Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to regardless of whether such covenant or condition has been
complied with; and
(4) a statement as to whether, in the opinion of each such Person, such
condition or covenant has been complied with; provided, however, that with
respect to matters of fact an Opinion of Counsel may rely on an Officers'
Certificate or certificates of public officials.
Section 14.6 Rules by Trustee, Paying Agent, Registrar. The Trustee
may make reasonable rules for action by or at a meeting of Noteholders. The
Paying Agent or Registrar may make reasonable rules for its functions.
Section 14.7 Legal Holidays. A "Legal Holiday" used with respect to a
particular place of payment is a Saturday, a Sunday or a day on which banking
institutions at such place are not required to be open. If a payment date is a
Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
Section 14.8 Governing Law. THIS INDENTURE AND THE NOTES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. INSOFAR AS THIS INDENTURE RELATES TO
THE SECURITY DOCUMENTS OR THE CREATION, PERFECTION OR FORECLOSURE OF LIENS AND
THE ENFORCEMENT OF RIGHTS AND REMEDIES AGAINST THE COLLATERAL UNDER THE SECURITY
DOCUMENTS, IT SHALL BE GOVERNED BY THE LAWS OF THE JURISDICTION SPECIFIED IN
SUCH DOCUMENTS. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF
ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW
YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW
YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS INDENTURE AND THE NOTES AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID
COURTS. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT THEY MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION WHICH
THEY MAY NOW
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<PAGE> 92
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY NOTEHOLDER TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION.
Section 14.9 No Adverse Interpretation of Other Agreements. This
Indenture may not be used to interpret another indenture, loan or debt agreement
of any of the Company or any of its Subsidiaries. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
Section 14.10 No Recourse against Others. A director, officer,
employee, stockholder or incorporator, as such, of the Company or any of its
Subsidiaries shall not have any liability for any obligations of the Company or
such Subsidiary under the Notes, the Guarantee, or this Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creations. Each Noteholder by accepting a Note waives and releases all such
liability. Such waiver and release are part of the consideration for the
issuance of the Notes.
Section 14.11 Successors. All agreements of the Company and each
Guarantor in this Indenture and the Notes shall bind its successor. All
agreements of the Trustee in this Indenture shall bind its successor.
Section 14.12 Duplicate Originals. All parties may sign any number of
copies or counterparts of this Indenture. Each signed copy or counterpart shall
be an original, but all of them together shall represent the same agreement.
Section 14.13 Severability. In case any one or more of the provisions
in this Indenture or in the Notes shall be held invalid, illegal or
unenforceable, in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions shall not in any way be affected or impaired thereby, it being
intended that all of the provisions hereof shall be enforceable to the full
extent permitted by law.
Section 14.14 Table of Contents, Headings, Etc. The Table of Contents,
Cross-Reference Table and headings of the Articles and the Sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof and shall in no way modify or restrict any of the terms
or provisions hereof.
[REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY;
SIGNATURES APPEAR ON THE NEXT-FOLLOWING PAGES]
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<PAGE> 93
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first written above.
<TABLE>
<S> <C>
TRANSTEXAS GAS CORPORATION
By:
-------------------------------------------------
Name: Ed Donahue
Title: Vice President and Chief Financial Officer
Attest:
----------------------------------
Name: Ann F. Gullion
Title: Assistant Secretary
</TABLE>
SIGNATURE PAGE TO INDENTURE
<PAGE> 94
<TABLE>
<S> <C>
GALVESTON BAY PROCESSING CORPORATION
By:
-------------------------------------------------
Name: Ed Donahue
Title: Vice President
Attest:
----------------------------------
Name: Ann F. Gullion
Title: Assistant Secretary
</TABLE>
SIGNATURE PAGE TO INDENTURE
<PAGE> 95
<TABLE>
<S> <C>
GALVESTON BAY PIPELINE COMPANY
By:
-------------------------------------------------
Name: Ed Donahue
Title: Vice President
Attest:
----------------------------------
Name: Ann F. Gullion
Title: Assistant Secretary
</TABLE>
SIGNATURE PAGE TO INDENTURE
<PAGE> 96
FIRSTAR BANK, N.A.,
as Trustee
By:
------------------------------------------
Name: Frank P. Leslie III
Title: Vice President
SIGNATURE PAGE TO INDENTURE
<PAGE> 97
EXHIBIT A
(FACE OF SENIOR SECURED NOTE)
[UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TRUST
COMPANY (THE "DEPOSITORY") TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE
DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DEPOSITORY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR
SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DEPOSITORY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.](1)
- --------
(1) This paragraph should be included only if the Note is issued in global
form.
A-1
<PAGE> 98
[FORM OF SENIOR SECURED NOTE]
TRANSTEXAS GAS CORPORATION
15% SENIOR SECURED NOTE DUE 2005
No. [_____________] $[______________________]
CUSIP 893895AF9
TransTexas Gas Corporation, a Delaware corporation (hereinafter called
the "Company," which term includes any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
______________________, or registered assigns, the principal sum of
________________ Dollars, on March 15, 2005.
Interest Payment Dates: March 15 and September 15, commencing September
15, 2000.
Record Dates: March 1 and September 1.
Reference is made to the further provisions of this Note on
the reverse side, which will, for all purposes, have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
Dated:
TRANSTEXAS GAS CORPORATION
By:
--------------------------------------
Name:
Title:
By:
--------------------------------------
Name:
Title:
Trustee's Certificate of Authentication:
This is one of the Notes referred to
in the within-mentioned Indenture:
Firstar Bank, N.A., as Trustee
By:
-------------------------------
Authorized Signature
A-2
<PAGE> 99
(BACK OF NOTE)
TRANSTEXAS GAS CORPORATION
15% Senior Secured Note due 2005
1. Interest.
TransTexas Gas Corporation, a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Note at a rate of 15%
per annum. To the extent it is lawful, the Company promises to pay interest on
any interest payment due but unpaid on such principal amount at a rate of 17%
per annum compounded semi-annually.
The Company will pay interest semi-annually on March 15 and September
15 of each year (each, an "Interest Payment Date"), commencing September 15,
2000. Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
issuance of the Notes. Interest on the Notes will be computed on the basis of a
360-day year consisting of twelve 30-day months.
2. Method of Payment.
The Company shall pay interest on the Notes (except defaulted interest)
to the Persons who are the registered Holders at the close of business on the
Record Date immediately preceding the Interest Payment Date. Holders must
surrender Notes to a Paying Agent to collect principal payments. Except as
provided below, the Company shall pay principal and interest in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for payment of public and private debts ("U.S. Legal Tender").
However, the Company may pay principal and interest by wire transfer of Federal
funds, or interest by its check payable in such U.S. Legal Tender. The Company
shall deliver any such interest payment to the Paying Agent who shall remit such
payment to a Holder at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, Firstar Bank, N.A. (the "Trustee") will act as Paying Agent
and Registrar. The Company may change any Paying Agent, Registrar or
co-Registrar without notice to the Holders. The Company or an Affiliate of it
may, subject to certain exceptions, act as Paying Agent, Registrar or co-
Registrar.
4. Indenture.
The Company issued the Notes under an Indenture, dated as of March 15,
2000 (the "Indenture"), among the Company, as Issuer, Galveston Bay Pipeline
Company and Galveston Bay Processing Corporation, as Guarantors, and the
Trustee. Capitalized terms herein are used as defined in the Indenture unless
otherwise defined herein. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as in effect on the date of the Indenture. The Notes are
subject to all such terms, and Holders of Notes are referred to the Indenture
and said Act for a statement of them. The Notes are senior secured obligations
of the Company limited in aggregate principal amount to $200,000,000.
A-3
<PAGE> 100
5. Optional Redemption.
The Notes may be redeemed in whole or from time to time in part at any
time, at the option of the Company, at the Redemption Price (expressed as a
percentage of principal amount) set forth below with respect to the indicated
Redemption Date, in each case, together with any accrued but unpaid interest to
the Redemption Date.
<TABLE>
<CAPTION>
If redeemed during
the 12-month period
beginning March 15: Redemption Price
------------------- ----------------
<S> <C>
2000 115%
2001 112%
2002 109%
2003 106%
2004 103%
</TABLE>
Any such redemption will comply with Article III of the Indenture.
6. Notice of Redemption.
Notice of redemption will be mailed by first class mail at least 30
days but not more than 60 days before the Redemption Date to each Holder of
Notes to be redeemed at his registered address. Notes in denominations larger
than $1,000 may be redeemed in part.
Except as set forth in the Indenture, from and after any Redemption
Date, if monies for the redemption of the Notes called for redemption shall have
been deposited with the Paying Agent on such Redemption Date the Notes called
for redemption will cease to bear interest and the only right of the Holders of
such Notes will be to receive payment of the Redemption Price and any accrued
and unpaid interest to the Redemption Date.
7. Denominations; Transfer; Exchange.
The Notes are in registered form, without coupons, in denominations of
$1,000 and integral multiples of $1,000, provided, however, that, as provided in
the Indenture, the Company may issue Notes from time to time in denominations
other than $1,000 or an integral multiple thereof, and the Trustee is expressly
authorized pursuant to the Indenture to authenticate any such Notes so issued by
the Company. A Holder may register the transfer of, or exchange Notes in
accordance with, the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
need not register the transfer of or exchange any Notes selected for redemption.
8. Persons Deemed Owners.
The registered Holder of a Note may be treated as the owner of it for
all purposes.
A-4
<PAGE> 101
9. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed for
two years, the Trustee and the Paying Agent(s) will pay the money back to the
Company at its written request. Thereafter, all liability of the Trustee and
such Paying Agent(s) with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
If the Company at any time deposits into an irrevocable trust with the
Trustee U.S. Legal Tender or U.S. Government Obligations sufficient to pay the
principal of and interest on the Notes to redemption or maturity and complies
with the other provisions of the Indenture relating thereto, the Company will be
discharged from certain provisions of the Indenture and the Notes (including the
financial covenants, but excluding its obligation to pay the principal of and
interest on the Notes).
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Notes then outstanding, and any
existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of at least a majority in aggregate
principal amount of the Notes then outstanding. Without notice to or consent of
any Holder, the parties thereto may amend or supplement the Indenture or the
Notes to, among other things, cure any ambiguity, defect or inconsistency
(provided, however, that such amendment or supplement does not adversely affect
the rights of any Holder of a Note).
12. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of the Company
and its Subsidiaries to, among other things, Incur additional Debt or issue
Disqualified Capital Stock, make payments in respect of its Capital Stock, enter
into transactions with Affiliates, incur Liens, sell assets, change the nature
of its business, merge or consolidate with any other Person and sell, lease,
transfer or otherwise dispose of substantially all of its properties or assets.
The limitations are subject to a number of important qualifications and
exceptions. The Company must deliver a quarterly report to the Trustee on
compliance with such limitations.
13. Change of Control.
In the event there shall occur any Change of Control, each Holder of
Notes shall have the right, at such Holder's option but subject to the
limitations and conditions set forth in the Indenture, to require the Company to
purchase on the Change of Control Payment Date in the manner specified in the
Indenture, all or any part (in integral multiples of $1,000) of such Holder's
Notes at a Change of Control Purchase Price equal to 101% of the principal
amount thereof, together with accrued and unpaid interest, if any, on and
including the Change of Control Payment Date.
14. Successors.
When a successor assumes all the obligations of its predecessor under
the Notes and the Indenture, the predecessor will be released from those
obligations.
A-5
<PAGE> 102
15. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate combined principal amount of the Notes and
the Company's Senior Secured Discount Notes then outstanding may declare all the
Notes to be due and payable immediately in the manner and with the effect
provided in the Indenture. Holders of Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. The Trustee may require indemnity
satisfactory to it before it enforces the Indenture or the Notes. Subject to
certain limitations, Holders of a majority in aggregate principal amount of the
Notes then outstanding may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of Notes notice of any continuing
Default or Event of Default (except a Default in payment of principal, premium,
if any, or interest, including a Default at any Maturity Date), if it determines
that withholding notice is in their interest.
16. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such,
past, present or future, of the Company or any of its Subsidiaries or any
successor corporation shall have any liability for any obligation of the Company
or such Subsidiary under the Notes or the Indenture or for any claim based on,
in respect of or by reason of, such obligations or their creation. Each Holder
of a Note by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for the issuance of the Notes.
17. Authentication.
This Note shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on the other side of this Note.
18. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a Note
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act). Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to them in the Indenture.
19. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Notes as a convenience to the Holders of the Notes. No
representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
20. Guarantee.
As and to the extent provided in Article XII of the Indenture, and
subject to the provisions of the Indenture relative the release thereof, payment
of the Notes is guaranteed by certain Subsidiaries of the Company.
A-6
<PAGE> 103
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
- --------------------------------------------------------------------------------
Date: Signature
------------------- -------------------------------------
(Sign exactly as your name appears on
the face of this Note)
Signature Guarantee*
- ----------
* NOTICE: The signature must be guaranteed by an institution which is a
member of one of the following recognized signature guarantee
programs:
(1) The Securities Transfer Agents Medallion Program
(STAMP);
(2) The New York Stock Exchange Medallion Signature
Program (MSP);
(3) The Stock Exchange Medallion Program (SEMP).
A-7
<PAGE> 104
OPTION OF HOLDER TO ELECT PURCHASE
[ ] CHECK HERE, if you want to elect to have this Note purchased
in its entirety by the Company pursuant to Section 4.14 or
Section 13.1 of the Indenture.
[ ] CHECK HERE, if the principal amount of this Note exceeds
$1,000 and you want to elect to have only part of this Note
purchased by the Company pursuant to Section 4.14 or Section
13.1 of the Indenture, and state the principal amount (in an
integral multiple of $1,000) of this Note that you want to be
purchased:
$
-------------------
Date: Signature
------------------- -------------------------------------
(Sign exactly as your name appears on
the face of this Note)
Your Social Security or Tax Identification Number:
---------------------
Signature Guarantee*
- ----------
* NOTICE: The signature must be guaranteed by an institution which is a
member of one of the following recognized signature guarantee
programs:
(1) The Securities Transfer Agents Medallion Program
(STAMP);
(2) The New York Stock Exchange Medallion Signature
Program (MSP);
(3) The Stock Exchange Medallion Program (SEMP).
A-8
<PAGE> 105
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTES(2)
The following exchanges of a part of this Global Note for Definitive Notes
have been made:
<TABLE>
<S> <C> <C> <C> <C>
Amount of decrease Amount of increase Principal Amount Signature of
in Principal Amount in Principal Amount of this Global Note authorized signatory
Date of Exchange of this Global Note of this Global Note decrease (or increase) of Trustee
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
- --------
(2) This Schedule should be included only if the Note is issued in global
form.
A-9
<PAGE> 106
EXHIBIT B
INTERCREDITOR AGREEMENT
Agreement dated as of March 15, 2000 by and among GMAC COMMERCIAL
CREDIT LLC ("Lender"), GMAC COMMERCIAL CREDIT LLC, as agent for itself and the
lenders under the Security Agreement (as hereafter defined) (in such capacity,
"Agent") and FIRSTAR BANK, N.A., in its capacity as Indenture Trustee under the
Indenture (as hereinafter defined) ("Trustee").
BACKGROUND
Whereas, TransTexas Gas Corporation, a Delaware corporation (the
"Company"), Agent, various lenders, Galveston Bay Pipeline Company ("Pipeline")
and Galveston Bay Processing Corporation ("Processing") (Pipeline and
Processing, collectively, "Guarantors") have entered into the Oil and Gas
Agreement (as defined below).
Whereas, the Company, Trustee and Guarantors have entered into the
Indenture (as defined below).
Whereas, the Company and Lender have entered into the Loan Agreement
(as defined below).
Whereas, Trustee has agreed to enter into this intercreditor agreement
to provide for subordination of the Trustee's "Liens" in the assets of Company
to the "Liens" in such assets granted to Agent, and Agent has agreed to enter
into this intercreditor agreement to provide for subordination of its "Liens" in
certain assets of Company to the "Liens" in such assets granted to Lender.
AGREEMENTS
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, the parties hereto agree as follows:
1. Definitions.
1.1 General Terms. For purposes of this Agreement, the
following terms shall have the following meanings:
"Agent Collateral" shall mean all of the property and
interests in property, tangible or intangible, real or personal, now owned or
hereafter acquired by the Company, in or upon which Agent at any time has a Lien
to secure the obligations of the Company under the Oil and Gas Facility
Agreements, and including, without limitation, all proceeds and products of such
property and interests in property.
"Collateral" shall mean (a) with respect to the Lender, the
Lender Collateral, (b) with respect to the Agent, the Agent Collateral, and (c)
with respect to the Trustee, the Trustee Collateral.
<PAGE> 107
"Agreements" shall mean, collectively, the Lender Agreements,
the Oil and Gas Facility Agreements and the Trustee Agreements.
"Company" shall mean TransTexas Gas Corporation, a Delaware
corporation, and its successors and assigns.
"Creditors" shall mean, collectively, Lender, Agent, the
lenders under the Oil and Gas Agreement and Trustee and their respective
successors and assigns.
"Indenture" shall mean the Indenture dated as of March 15,
2000 by Borrower, as Issuer, Galveston Bay Processing Corporation and Galveston
Bay Pipeline Company, as Guarantors, and Firstar Bank, N.A., as Trustee,
pursuant to which the Indenture Notes were issued, as the same may be amended,
supplemented or modified from time to time.
"Indenture Notes" shall mean the $200,000,000 of Senior
Secured Notes due 2005 issued pursuant to the Indenture.
"Lender" shall mean GMAC Commercial Credit LLC and its
successors and assigns.
"Lender Agreements" shall mean the Loan Agreement and the
Ancillary Agreements (as that term is defined in the Loan Agreement).
"Lender Collateral" shall mean the Collateral described on
Schedule 1.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, security interest, encumbrance
(including, but not limited to, easements, rights of way and the like), lien
(statutory or other), security agreement or transfer intended as security,
including without limitation, any conditional sale or other title retention
agreement, the interest of a lessor under a capital lease or any financing lease
having substantially the same economic effect as any of the foregoing.
"Loan Agreement" shall mean the Third Amended and Restated
Accounts Receivable Management and Security Agreement dated as of March 15, 2000
between Lender and the Company as the same may be amended, supplemented,
modified or restated from time to time.
"Notes" shall have the meaning set forth in the Oil and Gas
Agreement.
"Obligations" shall have the meaning set forth in the Loan
Agreement.
"Oil and Gas Agreement" shall mean the Oil & Gas Revolving
Credit and Term Loan Agreement dated as of March 15, 2000 by and among Agent,
the lenders which are or become parties thereto, and Company as the same may be
amended, supplemented, modified or restated from time to time.
<PAGE> 108
"Oil and Gas Facility Agreements" shall mean the Oil and Gas
Agreement, the Notes, the Security Agreement and the Ancillary Documents (as
that term is defined in the Oil and Gas Agreement).
"Person" shall mean an individual, a partnership, a limited
liability company, a corporation (including a business trust), a joint stock
company, a trust, an unincorporated association, a joint venture, or other
entity or a government or any agency, instrumentality or political subdivision
thereof.
"Security Agreement" shall mean the Security and Pledge
Agreement dated as of March 15, 2000 between Agent and Company as the same may
be amended, supplemented, modified or restated from time to time.
"Secured Lender Remedies" means any action which results in
the sale, foreclosure, realization upon, or a liquidation of any of the
Collateral, including without limitation, the exercise of any similar remedies
or rights of a "Secured Party" under Article 9 of the Uniform Commercial Code,
such as, without limitation, the notification of account debtors.
"Shared Collateral" shall mean any Collateral of any Creditor
that also secures obligations of the Company to another Creditor in connection
with the financings described herein.
"Trustee" shall mean Firstar Bank, N.A., and its successors
and assigns, in its capacity as Indenture Trustee under the Indenture.
"Trustee Agreements" shall mean, collectively, the Indenture,
the Indenture Notes and all agreements, documents and instruments now or at any
time hereafter executed and/or delivered by the Company or any other person to,
with or in favor of the Trustee in connection therewith or related thereto, as
all of the foregoing now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
"Trustee Collateral" shall mean all of the property and
interests in property, tangible or intangible, real or personal, new owned or
hereafter acquired by the Company, in or upon which Trustee at any time has a
Lien to secure the obligations of the Company under the Trustee Agreements and
including, without limitation, all proceeds and products of such property and
interests in property.
1.2 Other Terms. Capitalized terms not otherwise defined
herein shall have the meanings given to them in the Oil and Gas Agreement.
1.3 Certain Matters of Construction. The terms "herein",
"hereof" and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular section, paragraph or
subdivision. Any pronoun used shall be deemed to cover all genders. Wherever
appropriate in the context, terms used herein in the singular also include the
plural and vice versa. All references to statutes and related regulations shall
include any amendments of same and any successor statutes and regulations. All
references to any instruments or agreements, including, without limitation,
references to any of the Agreements
<PAGE> 109
shall include any and all modifications or amendments thereto and any and all
extensions or renewals thereof.
2. Intercreditor Provisions
2.1 Acknowledgment of Lien. Each Creditor hereby agrees and
acknowledges that each of the other Creditors may have been granted a Lien upon
certain of its respective Collateral, provided, however, that Trustee and Lender
do not share any Collateral, and Trustee disclaims any Lien upon the Lender
Collateral.
2.2 Priority. Notwithstanding the order or time of attachment,
or the order, time or manner of perfection, or the order or time of filing or
recordation of any document or instrument, or other method of perfecting a Lien
in favor of each Creditor in any Collateral, and notwithstanding any conflicting
terms or conditions which may be contained in any of the Agreements, (a) to the
extent that the Lender Collateral constitutes Shared Collateral, the Liens of
Lender upon the Lender Collateral have and shall have priority over the Liens of
Agent upon the Agent Collateral and such Liens of Agent are and shall be, in all
respects, subject and subordinate to the Liens of Lender therein to the full
extent of the Obligations outstanding from time to time under the Lender
Agreements, and (b) to the extent that the Agent Collateral constitutes Shared
Collateral, the Liens of the Agent upon the Agent Collateral have and shall have
priority over the Liens of Trustee upon the Trustee Collateral and such liens of
Trustee are and shall be, in all respects, subject and subordinated to the Liens
of Agent therein to the full extent of the obligations outstanding from time to
time under the Oil and Gas Facility Agreements. The maximum principal amount of
the obligations outstanding from time to time under the Oil and Gas Agreement
shall not exceed $52,500,000, except with the consent of the Trustee.
2.3 No Alteration of Priority. The Lien priorities provided in
Section 2.2 hereof shall not be altered or otherwise affected by any amendment,
modification, supplement, extension, renewal, restatement or refinancing of
either the Obligations, the indebtedness payable under the Oil and Gas Facility
Agreements or the indebtedness payable under the Trustee Agreements, nor by any
action or inaction which any Creditor may take or fail to take in respect of the
Collateral.
2.4 Perfection. (a) Each Creditor shall be solely responsible
for perfecting and maintaining the perfection of its Lien in and to each item
constituting the Collateral in which such Creditor has been granted a Lien. The
foregoing provisions of this Agreement are intended solely to govern the
respective Lien priorities as between the Creditors and shall not impose on
Lender (with respect to the Lender Collateral), Agent (with respect to the Agent
Collateral) or Trustee (with respect to the Trustee Collateral) any obligation
in respect of the disposition of proceeds of foreclosure on any Collateral which
would conflict with prior perfected claims therein in favor of any other Person.
(b) Agent and Trustee agree that they will not contest the
validity, perfection, priority or enforceability of the Liens of Lender upon the
Lender Collateral and that as between Lender on the one hand, and Agent and
Trustee on the other hand, the terms of this Agreement shall govern even if part
or all of the Obligations or the Liens securing payment and performance thereof
are avoided, disallowed, set aside or otherwise invalidated in any judicial
proceeding or
<PAGE> 110
otherwise; provided, however, that the terms, provisions and restrictions of
this Agreement in favor of Lender shall be void and of no further force and
effect upon the indefeasible payment and satisfaction in full of the Obligations
and the irrevocable termination of the Loan Agreement.
(c) Subject to the last sentence of Section 2.2 of this
Agreement, Trustee agrees that it will not contest the validity, perfection,
priority or enforceability of the Liens of Agent upon the Agent Collateral and
that as between Agent and Trustee, the terms of this Agreement shall govern even
if part or all of the obligations outstanding from time to time under the Oil
and Gas Facility Agreements or the Liens securing payment and performance
thereof are avoided, disallowed, set aside or otherwise invalidated in any
judicial proceeding or otherwise; provided, however, that the terms, provisions
and restrictions of this Agreement in favor of Agent shall be void and of no
further force and effect upon the indefeasible payment and satisfaction in full
of the obligations under the Oil and Gas Facility Agreements and the irrevocable
termination of the Oil and Gas Agreement.
(d) Lender and Agent agree that they will not contest the
validity, perfection or enforceability of the Liens of Trustee upon the Trustee
Collateral.
(e) Agent shall hold any Pledged Securities (as that term is
defined in the Security Agreement) of which it has possession for both its
benefit and the benefit of the lenders under the Oil and Gas Agreement and as
bailee for the benefit of Trustee. In the event the indebtedness under the Oil
and Gas Facility Agreements is repaid in full (other than pursuant to a
refinance in which event such refinancing party shall assume in writing the
obligations of Agent under this provision as a condition precedent to such
refinancing being effectuated) and the Oil and Gas Agreement is irrevocably
terminated. Agent shall deliver any Pledged Securities of which it has
possession in accordance with the written instructions of, and at the expense
of, the Trustee, or as otherwise may be required by law.
2.5 Management of Collateral. (a) Regardless of whether or not
the Lender Collateral constitutes Shared Collateral, Lender shall have the
exclusive right to manage, perform and enforce the terms of the Lender
Agreements with respect to the Lender Collateral and to exercise and enforce all
privileges and rights thereunder according to its discretion and the exercise of
its business judgment, including, without limitation, the exclusive right to
enforce or settle insurance claims, take or retake control or possession of such
Lender Collateral and to hold, prepare for sale, process, sell, lease, dispose
of, or liquidate such Collateral. In connection therewith, Agent and Trustee
each waives any and all rights to affect the method or challenge the
appropriateness of any action by Lender.
(b) Regardless of whether or not the Agent Collateral
constitutes Shared Collateral (but subject to the foregoing provisions of
subparagraph (a) above), Agent shall have the exclusive right to manage, perform
and enforce the terms of the Oil and Gas Facility Agreements with respect to the
Agent Collateral and to exercise and enforce all privileges and rights
thereunder according to its discretion and the exercise of its business
judgement including, without limitation, the exclusive right to enforce or
settle insurance claims, take or retake control or possession of such Agent
Collateral and to hold, prepare for sale, process, sell, lease, dispose of or
liquidate such Collateral. In connection therewith, Trustee waives any and all
rights to effect the method or challenge the appropriateness of any action by
Agent.
<PAGE> 111
2.6 Sale of Collateral. (a) Notwithstanding anything to the
contrary contained in any of the Agreements, until such time as the Obligations
have been paid in full and the Loan Agreement has been terminated, only Lender
shall have the right to restrict or permit, or approve or disapprove, the sale,
transfer or other disposition of Lender Collateral, even if such Lender
Collateral may constitute Shared Collateral. Agent will, immediately upon the
request of Lender, release or otherwise terminate its respective Liens, if any,
upon any Lender Collateral that constitutes Shared Collateral, to the extent
such Lender Collateral is sold or otherwise disposed of either by Lender or by
the Company with the consent of Lender, and Agent will immediately deliver such
release documents as Lender may require in connection therewith.
(b) Trustee will, promptly upon the request of Agent and
Company, release or otherwise terminate its Liens upon any Trustee Collateral
that constitutes Shared Collateral, to the extent provided for and in accordance
with the terms of the Indenture.
2.7 Secured Lender Remedies. (a) In no event shall Trustee
exercise any Secured Lender Remedies until such time the obligations under the
Oil and Gas Agreements shall have been paid in full in cash and the Agent and
Lenders shall no longer be obligated to make additional Advances (as defined in
the Oil and Gas Agreement). In the event Trustee shall receive pursuant to its
exercise of any Secured Lender Remedies any payment or distribution of any kind
representing proceeds of any Shared Collateral as to which its Lien in the
Collateral is or is required to be subordinated to the Lien of Agent, before the
obligations under the Oil and Gas Facility Agreements shall have been paid in
full in cash, and the Agent and Lenders shall no longer be obligated to make
additional Advances, such sums shall be held in trust by Trustee for the benefit
and on account of Agent, and such amounts shall be paid to Agent for application
to the then unpaid obligations under the Oil and Gas Facility Agreements, and
(b) in no event shall Agent exercise any Secured Lender Remedies with respect to
Lender Collateral until such time as the Obligations shall have been paid in
full in cash and the Agent and Lenders shall no longer be obligated to make
additional Advances under the Loan Agreement. In the event Agent shall receive
any payment or distribution of any kind representing proceeds of any Shared
Collateral as to which its Lien in the Collateral is or is required to be
subordinated to the Lien of Lender, before the Obligations shall have been paid
in full in cash and the Agent and Lenders shall no longer be obligated to make
Additional Advances, such sums shall be held in trust by Agent for the benefit
and or account of Lender, and such amounts shall be paid to Lender for
application to the then unpaid Obligations under the Lending Agreements.
Notwithstanding the foregoing provisions, in no event shall the Agent or the
Trustee (or the holders of the Notes (as the case may be)) be restricted in any
way in filing a proof of claim, voting or taking any other actions to protect
its interests in any bankruptcy proceeding.
2.8 Section 9-504 Notice and Waiver of Marshaling. Each
Creditor acknowledges that this Agreement shall constitute notice of its
respective interests in the Collateral as provided by Section 9-504 of the
Uniform Commercial Code and each hereby waive any right to compel any marshaling
of any of the Collateral.
<PAGE> 112
3. Miscellaneous.
3.1 Survival of Rights. The right of Lender or Agent to
enforce the provisions of this Agreement shall not be prejudiced or impaired by
any act or omitted act of the Company or Lender or Agent, including forbearance,
waiver, consent, compromise, amendment, extension, renewal, or taking or release
of security in respect of any Obligations or obligations under the Oil and Gas
Facility Agreements, as the case may be, or noncompliance by the Company with
such provisions, regardless of the actual or imputed knowledge.
3.2 Amendments to Lending Agreements. Nothing contained in
this Agreement, or in any other agreement or instrument binding upon any of the
parties hereto, shall:
(a) in any manner limit or restrict the ability of Lender from
increasing or changing the terms of the loans under the Lender Agreements, or to
otherwise waive, amend or modify the terms and conditions of the Lender
Agreements, in such manner as Lender and the Company shall mutually determine.
Agent hereby consents to any and all such waivers, amendments, modifications and
compromises, and any other renewals, extensions, indulgences, releases of Lender
Collateral or other accommodations granted by the Lender to the Company from
time to time, and Agent and Trustee (even though it does not expressly consent
to such occurrences) each agrees that none of such actions shall in any manner
affect or impair the relative Lien priorities and subordination established by
this Agreement, or
(b) in any manner limit or restrict the ability of Agent from
increasing (subject to the limitations in the last sentence of Section 2.2
hereof) or changing the terms of the loans under the Oil and Gas Facility
Agreements, or to otherwise waive, amend or modify the terms and conditions of
the Oil and Gas Facility Agreements, in such manner as Agent, the lenders under
the Oil and Gas Agreement (to the extent applicable), and the Company shall
mutually determine. Trustee (even though it does not expressly consent to such
occurrences) hereby agrees that none of such actions shall in any manner affect
or impair the relative Lien priorities and subordination established by this
Agreement.
3.3 Bankruptcy Financing Issues. This Agreement shall continue
in full force and effect after the filing of any petition ("Petition") by or
against the Company under the United States Bankruptcy Code (the "Code") and all
converted or succeeding cases in respect thereof. All references herein to the
Company shall be deemed to apply to the Company as debtor-in-possession and to
a trustee for the Company. If the Company shall become subject to a proceeding
under the Code, and if the Lender shall desire to permit the use of cash
collateral or to provide post-petition financing from the Lender to the Company
under the Code, Agent and Trustee agree no objection will be raised by Agent or
Trustee to any such use of cash collateral or such post-petition financing from
Lender on the grounds of a failure to provide adequate protection for Agent's or
Trustee's junior Lien, provided that (i) Lender is not seeking a lien on any
Collateral which does not constitute Lender Collateral,) (ii) the Trustee
obtains a lien on properties acquired by the Company after the filing of the
Petition consistent with its rights under the Indenture and subject to the prior
rights of Agent's lien upon such after acquired properties; and (iii) the
maximum amount of revolving credit to be extended by Lender to the Company, both
pre-petition and post-petition, does not exceed at any time or from time to time
the principal amount of $15,000,000.
<PAGE> 113
3.4 Notice of Default and Certain Events. Each Creditor shall
undertake in good faith to notify the other Creditors of the occurrence of any
of the following as applicable:
(a) the acceleration of amounts owing by the Company
under the Lender Agreements, Oil and Gas Facility Agreements, or Trustee
Agreements, as applicable;
(b) the payment in full by the Company (whether as a
result of refinancing or otherwise) of all amounts owing by the Company under
the Lender Agreements, Oil and Gas Facility Agreements, or Trustee Agreements,
as applicable; or
(c) the sale or liquidation of, or realization upon,
any of the Collateral.
The failure of any party to give such notice shall not affect the
relative Lien priorities as provided in this Agreement.
3.5 Notices. Any notice or other communication required or
permitted pursuant to this Agreement shall be deemed given (a) when personally
delivered to any officer of the party to whom it is addressed, (b) on the
earlier of actual receipt thereof or three days following posting thereof by
certified or registered mail, postage prepaid, or (c) upon actual receipt
thereof when sent by a recognized overnight delivery service or (d) upon actual
receipt thereof when sent by telecopier to the number set forth below with
electronic confirmation of receipt, in each case addressed to each party at its
address set forth below or at such other address as has been furnished in
writing by a party to the other by like notice:
If to Agent or to Lender: GMAC Commercial Credit LLC
1290 Avenue of the Americas
New York, New York 10104
Attention: Jack MacGowan
Telephone: (212) 408-7531
Telecopier: (212) 408-4384
If to Trustee: Firstar Bank, N.A.
Corporate Trust Department
101 East Fifth Street, 12th Floor
St. Paul, Minnesota 55101-1860
Attention: Frank P. Leslie III
Telephone: (651) 229-2600
Telecopier: (651) 229-6415
3.6 Binding Effect; Other. This Agreement shall be a
continuing agreement, shall be binding upon and shall inure to the benefit of
the parties hereto from time to time and their respective successors and
assigns, shall be irrevocable and shall remain in full force and effect until
the Obligations and indebtedness under the Oil and Gas Facility Agreements shall
have been satisfied or paid in full in cash and the Lender shall no longer be
obligated to make additional Revolving Credit Advances under the Loan Agreement
and Agent and Lenders shall no longer be obligated to make additional Advances
under the Oil and Gas Agreement, this Agreement shall continue to be effective,
or be reinstated, as the case may be, if at any time
<PAGE> 114
payment, or any part thereof, of any amount paid by or on behalf of the Company
with regard to the Obligations or the indebtedness under the Oil and Gas
Facility Agreements is rescinded or must otherwise be restored or returned upon
the insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Company, or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee, custodian, or similar officer, for the Company or
any substantial part of its property, or otherwise, all as though such payments
had not been made. Any waiver or amendment hereunder (including any amendment to
Schedule 1 hereto) must be evidenced by a signed writing of the party to be
bound thereby, and shall only be effective in the specific instance. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York. The headings in this Agreement are for convenience of
reference only, and shall not alter or otherwise affect the meaning hereof.
4. Representations and Warranties. (a) Trustee agrees that it shall not
assign or transfer any of the Liens other than as permitted under the Indenture.
Trustee agrees upon Lender's or Agent's request to execute and file an amendment
to any financing statement or mortgage, trust deed or other encumbrance now on
file which covers Trustee Collateral constituting Shared Collateral to the
effect that the same is subject to the terms of this Intercreditor Agreement,
and agrees to so mark any extension of such financing statements, or any
financing statement or mortgage, trust deed or other encumbrance filed by
Trustee on Trustee Collateral in the future. Relying upon the opinion letter of
Gardere & Wynne, L.L.P. rendered to Trustee, and the delivery of an Officer's
Certificate in form and substance satisfactory to Trustee, and having no actual
knowledge that reliance upon the matters set forth in such opinion letter and
Officer's Certificate is inappropriate, or that such representation is
incorrect, Trustee represents to Lender and Agent that it has full right, power
and authority pursuant to the Indenture, subject to the outcome of any pending
appeal relating to the Confirmation Order, to enter into this Intercreditor
Agreement.
(b) Lender and Agent each represents and warrants to Trustee
that Lender and Agent each is the holder of the Liens which secure or will
secure the Obligations and the indebtedness under the Oil and Gas Facility
Agreements, respectively. Lender and Agent each agrees that it shall not assign
or transfer any of the Liens on its respective Collateral that constitutes
Shared Collateral on which the Trustee has a Lien without (i) prior notice being
given to Trustee and (ii) such assignment or transfer being made expressly
subject to the terms and provisions of this Intercreditor Agreement. Lender and
Agent each further warrants to Trustee that it has full right, power and
authority to enter into this Intercreditor Agreement and, to the extent Lender
or Agent is an agent or trustee for other parties, that this Intercreditor
Agreement shall fully bind all such other parties.
5. Refinancing. In the event that the Obligations or the indebtedness
under the Oil and Gas Facility Agreements are refinanced in full, each of the
Trustee and the Lender or Agent, as the case may be, agrees at the request of
such refinancing party to enter into an intercreditor agreement on terms
substantially similar to this Intercreditor Agreement.
6. Proceedings. ANY JUDICIAL PROCEEDING BROUGHT BY OR AGAINST ANY
CREDITOR WITH RESPECT TO THIS OR ANY RELATED AGREEMENT MAY BE BROUGHT IN ANY
COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK, UNITED STATES OF
AMERICA, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT TRUSTEE, LENDER, AGENT
AND THE COMPANY ACCEPT FOR
<PAGE> 115
THEMSELVES AND IN CONNECTION WITH THEIR PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND
IRREVOCABLY AGREE TO BE BOUND BY ANY FINAL JUDGMENT RENDERED THEREBY IN
CONNECTION WITH THIS AGREEMENT. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE
PROCESS IN ANY MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE LENDER OR
AGENT TO BRING PROCEEDINGS AGAINST TRUSTEE IN ANY COURTS OF ANY OTHER
JURISDICTION. ANY JUDICIAL PROCEEDING BY TRUSTEE AGAINST THE LENDER OR AGENT
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER OR CLAIM IN ANY WAY ARISING OUT
OF, RELATED TO OR CONNECTED WITH THIS AGREEMENT OR ANY RELATED AGREEMENT, SHALL
BE BROUGHT ONLY IN A COURT LOCATED IN THE CITY OF NEW YORK, STATE OF NEW YORK;
PROVIDED THAT NOTWITHSTANDING THE FOREGOING, IF IN ANY JUDICIAL PROCEEDING BY OR
AGAINST TRUSTEE THAT IS BROUGHT IN ANY OTHER COURT SUCH COURT DETERMINES THAT
LENDER OR AGENT IS AN INDISPENSABLE PARTY, TRUSTEE SHALL BE ENTITLED TO JOIN OR
INCLUDE LENDER OR AGENT IN SUCH PROCEEDINGS IN SUCH OTHER COURT. EACH CREDITOR
WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED
HEREUNDER IN THE CITY OF NEW YORK, STATE OF NEW YORK AND SHALL NOT ASSERT ANY
DEFENSE BASED ON LACK OF JURISDICTION OR VENUE OR BASED UPON FORUM NON
CONVENIENS.
7. Waiver Of Jury Trial. TRUSTEE, AGENT AND LENDER HEREBY EXPRESSLY
WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
(A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF TRUSTEE, AGENT AND LENDER OR ANY ONE
OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENTS OR
AGREEMENT EXECUTED OR DELIVERED BY THEM IN CONNECTION HEREWITH, OR THE
TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND
TRUSTEE, AGENT AND LENDER HEREBY AGREE AND CONSENT THAT ANY CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT JURY, AND THAT
ANY OF THEM MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY
COURT AS WRITTEN EVIDENCE OF THEIR CONSENT TO THE WAIVER OF THEIR RIGHT TO TRIAL
BY JURY.
8. Counterparts; Telecopied Signatures. This Agreement may be executed
in any number of and by different parties hereto on separate counterparts, all
of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
<PAGE> 116
IN WITNESS WHEREOF, the undersigned have entered into this Agreement
this ___ day of March, 2000.
GMAC COMMERCIAL CREDIT LLC,
as Lender
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
FIRSTAR BANK, N.A.,
as Trustee
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
GMAC COMMERCIAL CREDIT LLC,
as Agent
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
COMPANY'S ACKNOWLEDGMENT
The undersigned Company hereby consents to the Intercreditor Agreement
and acknowledges and agrees that nothing therein shall be deemed to amend,
modify, waive, supersede or otherwise alter the terms of the respective
agreements between the undersigned and each Creditor, including without
limitation any provisions in the Indenture restricting the incurrence,
extension, renewal, replacement, refinancing or refunding of indebtedness by the
Company. The undersigned further agrees that the Intercreditor Agreement is
solely for the benefit of the Creditors and shall not give the undersigned, its
successors and assigns, or any other person, any rights vis-a-vis any Creditor.
TRANSTEXAS GAS CORPORATION,
Company
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
<PAGE> 117
STATE OF )
)
COUNTY OF )
On the __ day of March, 2000, before me personally came
_________________, to me known, who being by me duly sworn, did depose and say
that he is the ___________ of GMAC Commercial Credit LLC, the limited liability
company described in and which executed the foregoing instrument and that he was
authorized to sign his name thereto on behalf of said limited liability company.
--------------------------------------------
Notary Public
STATE OF )
)
COUNTY OF )
On the __ day of March, 2000, before me personally came
_________________, to me known, who being by me duly sworn, did depose and say
that he is the ___________ of GMAC Commercial Credit LLC, the limited liability
company described in and which executed the foregoing instrument and that he was
authorized to sign his name thereto on behalf of said limited liability company.
--------------------------------------------
Notary Public
STATE OF )
)
COUNTY OF )
On the __ day of March, 2000, before me personally came
_________________, to me known, who being by me duly sworn, did depose and say
that he is the ___________ of Firstar Bank, N.A., the national association
described in and which executed the foregoing instrument and that he was
authorized to sign his name thereto on behalf of said national association.
---------------------------------------------
Notary Public
<PAGE> 118
SCHEDULE I
LENDER COLLATERAL
Lender Collateral means and includes the following:
(a) all Inventory;
(b) all Receivables, and
(c) all products and proceeds of (a) and (b) above.
As used herein, the following terms shall have the meanings set forth
below:
"Inventory" means and includes any and all of Debtor's now owned or
hereafter acquired "inventory" as such term is defined in Article 9 of the
Uniform Commercial Code in the State of New York, including, without limitation,
all of Debtor's now owned or hereafter acquired casing, drill pipe and other
supplies accounted for as inventory (whether or not constituting equipment for
purposes of any applicable Uniform Commercial Code) by Debtor on its financial
statements (excluding any Hydrocarbons), all proceeds thereof, and all documents
of title, books, records, ledger cards, files, correspondence, and computer
files, tapes, disks and related data processing software that at any time
evidence or contain information relating to the foregoing.
"Receivables" means and includes any and all of Debtor's now owned or
hereafter acquired "accounts" as such term is defined in Article 9 of the
Uniform Commercial Code in the State of New York, all products and proceeds
thereof, and all books, records, ledger cards, files, correspondence, and
computer files, tapes, disks or software that at any time evidence or contain
information relating got the foregoing.
"Hydrocarbons" means oils, gas, condensate and natural gas liquids.
<PAGE> 1
EXHIBIT 4.36
MORTGAGE, DEED OF TRUST, ASSIGNMENT OF
PRODUCTION, SECURITY AGREEMENT AND FINANCING STATEMENT
DATED AS OF MARCH 15, 2000
BETWEEN
TRANSTEXAS GAS CORPORATION
(MORTGAGOR AND DEBTOR)
TO
ROBERT M. GALPERIN, TRUSTEE
FOR THE BENEFIT OF
FIRSTAR BANK, N.A., AS INDENTURE TRUSTEE FOR THE
HOLDERS OF THE TRANSTEXAS GAS CORPORATION'S
15% SENIOR SECURED NOTES DUE 2005
(MORTGAGEE AND SECURED PARTY)
"THE OIL AND GAS INTERESTS INCLUDED IN THE MORTGAGED PROPERTY WILL BE FINANCED
AT THE WELLHEADS OF THE WELLS LOCATED ON THE PROPERTIES DESCRIBED HEREIN, AND
THIS FINANCING STATEMENT IS TO BE FILED FOR RECORD, AMONG OTHER PLACES, IN THE
REAL ESTATE RECORDS."
"SOME OF THE PERSONAL PROPERTY CONSTITUTING A PORTION OF THE MORTGAGED PROPERTY
IS OR IS TO BE AFFIXED TO THE PROPERTIES DESCRIBED HEREIN AND THIS FINANCING
STATEMENT IS TO BE FILED FOR RECORD, AMONG OTHER PLACES, IN THE REAL ESTATE
RECORDS."
The mailing address of the above-named Mortgagee and Secured Party is
c/o FIRSTAR BANK, NA., 101 East Fifth Street, St. Paul, Minnesota 55101, Attn:
Corporate Trust Department; the mailing address of the above-named Mortgagor and
Debtor is 1300 North Sam Houston Parkway East, Suite 310, Houston, Texas 77032,
Attn: Ed Donahue; and the mailing address of the Trustee is 7557 Rambler Road,
Suite 1200, Dallas, Texas 75231.
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.
ATTENTION OF RECORDING OFFICERS: This instrument is a Mortgage of both
real and personal property and is, among other things, a Security Agreement and
Financing Statement under the Uniform Commercial Code. This instrument creates a
lien on rights in or relating to lands of Mortgagor which are described in
Schedule 1, together with its accompanying Exhibits, all of which are attached
hereto.
<PAGE> 2
Recorded counterparts should be returned to:
Sheinfeld, Maley & Kay, P.C.
1001 Fannin, Suite 3700
Houston, Texas 77002
Attention: Anne Pilati Burke
2
<PAGE> 3
MORTGAGE, DEED OF TRUST, ASSIGNMENT OF
PRODUCTION, SECURITY AGREEMENT AND FINANCING STATEMENT
This Mortgage, Deed of Trust, Assignment of Production, Security
Agreement and Financing Statement, from TRANSTEXAS GAS CORPORATION, a Delaware
corporation ("Mortgagor"), to ROBERT M. GALPERIN ("Trustee") for the benefit of
FIRSTAR BANK, N.A., as indenture trustee for the HOLDERS OF MORTGAGOR'S 15%
SENIOR SECURED NOTES DUE 2005 (together with its successors or assigns,
"Mortgagee"), is made and entered into as of this 15th day of March, 2000.
RECITALS
Mortgagor is a debtor in bankruptcy in the proceedings styled In re:
TransTexas Gas Corporation, TransAmerican Energy Corporation, TransAmerican
Refining Corporation, Case No. 99-21550-C-11 (Jointly Administered) in the
United States Bankruptcy Court for the Southern District of Texas, Corpus
Christi Division (the "Court").
Mortgagor has filed with the Court that certain Second Amended Modified
and Restated Plan of Reorganization under Chapter 11 of the Bankruptcy Code
Proposed by Debtor (the "Plan"). On February 7, 2000, the Court entered its
Order Confirming Debtor's Second Amended, Modified and Restated Plan of
Reorganization confirming the Plan. Additionally, the Court has issued its Order
in Furtherance of Order Dated February 7, 2000 Confirming Debtor's Chapter 11
Plan, a copy of which is attached hereto as Schedule 1 (the "Implementation
Order") (except that, in accordance with the provisions of the Implementation
Order, there are attached as Exhibits to the copy of the Implementation Order
attached hereto the legal descriptions of the real properties and estates, and
interest therein, situated in the county and state in which a counterpart of
this Mortgage is filed of record).
Pursuant to the Plan, Mortgagor and Mortgagee are entering into that
certain Indenture, dated as of March 15, 2000 (as amended or modified and in
effect from time to time, the "Indenture").
Pursuant to and on the terms and conditions set forth in the Indenture,
Mortgagor is issuing to Mortgagee certain 15% Senior Secured Notes due 2005 in
the aggregate principal amount of TWO HUNDRED MILLION and N0/100
($200,000,000.00) (as supplemented from time to time in accordance with the
terms of the Indenture, collectively the "Notes").
Mortgagor is entering into this Mortgage pursuant to its obligations
under the Indenture and for the purpose, among other things, of securing and
providing for the repayment of the Notes.
ARTICLE I
Definitions
1.1. Certain Defined Terms. Unless the context otherwise requires, as
used in this Mortgage and all amendments, extensions, modifications, renewals,
supplements or waivers hereof or hereto, the following terms shall have the
following meanings, which meanings shall be equally applicable to both the
singular and plural form of such terms.
3
<PAGE> 4
"Business Day" shall have the meaning assigned to that term in
the Indenture.
"Collateral" shall have the meaning set out in Article VIII of
this Mortgage.
"Contract Rights" shall mean all contracts, operating
agreements, mineral purchase agreements, rights of way, easements, surface
leases, permits, licenses, pooling or unitization agreements, pooling
designations and pooling orders and all other contracts or agreements pertaining
to or affecting the Mortgaged Properties or which were executed in connection
with the drilling for, producing, processing, treating, handling, storing,
transporting or marketing oil, gas or other minerals from the Mortgaged
Properties or from any properties unitized or pooled therewith, including but
not limited to, the contracts listed on Schedule 1, Exhibit D attached hereto.
"Debtor" shall have the meaning set out in Article VIII of
this Mortgage.
"DTPA" shall mean the Texas Deceptive Trade Practices Consumer
Protection Act, Subchapter E of Chapter 17 of the Texas Business and Commerce
Code.
"Equipment" shall mean and include all of Mortgagor's now
owned or hereafter acquired equipment (as such term is defined in the New York
Uniform Commercial Code), including, without limitation, Vehicles, drilling
rigs, workover rigs, fracture stimulation equipment, compressors, rolling stock
and related equipment and other assets accounted for as equipment by Mortgagor
on its financial statements, all proceeds thereof (from insurance or otherwise),
and all documents of title, books, records, ledger cards, files, correspondence
and computer files, tapes, disks and related data processing software that at
any time evidence or contain information relating to the foregoing.
"Event of Default" shall have the meaning assigned to that
term in Section 6.1.
"Highest Lawful Rate" shall mean the maximum non-usurious
amount and the maximum non-usurious rate of interest that, under applicable law,
is permitted to be contracted for, charged, reserved, or received on the
Indebtedness.
"Hydrocarbons" shall mean oil, natural gas, condensate and
natural gas liquids, including any held as "inventory" (as such term is defined
in Article 9 of the New York UCC).
"Indebtedness" shall mean the following indebtedness and
liabilities of Mortgagor (and any extensions, renewals, refundings, increases,
substitutions, replacements, consolidations, modifications or rearrangements of
such indebtedness and liabilities, whether or not Mortgagor executes any
extension agreement or renewal instrument):
(a) all principal, premiums, accrued interest and any other
sums now or hereafter owing on the Notes;
4
<PAGE> 5
(b) all amounts advanced or expended by Mortgagee under or in
connection with the Indenture or this Mortgage, all reasonable costs and
out-of-pocket expenses (excluding expenses representing administrative overhead)
at any time and from time to time incurred by the Trustee or Mortgagee in
connection with the administration and/or enforcement of this Mortgage, the
Notes or the Indenture (including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel employed by the Trustee or Mortgagee in
connection therewith), and all sums due or to become due at any time and from
time to time hereunder or under the Indenture to the Trustee or Mortgagee, it
being contemplated that Mortgagor may hereafter become indebted to Trustee or
Mortgagee in such further sum or sums; and
(c) all other amounts payable by Mortgagor under the
Indenture.
"Inventory" shall mean all of Mortgagor's now owned or
hereafter acquired inventory (as such term is defined in the New York Uniform
Commercial Code), including, without limitation, casing, drill pipe and other
supplies accounted for as inventory by the Mortgagor on its consolidated
financial statements (excluding Hydrocarbons), all proceeds thereof (from
insurance or otherwise), and all documents of title, books, records, ledger
cards, files, correspondence and computer files, tapes, disks and related data
processing software that at any time evidence or contain information relating to
the foregoing.
"Lands" shall mean that real property in AUSTIN, BRAZORIA,
CALHOUN, CHAMBERS, COLORADO, GALVESTON, HARRIS, HIDALGO, JIM HOGG, KENT, LIVE
OAK, POLK, SAN JACINTO, STARR, TRINITY, TYLER, VAL VERDE, WALKER, WEBB, WHARTON
AND ZAPATA Counties described, referred to or covered by the Leases described in
Schedule1, Exhibits A and C hereto, and the Pipelines and the real property
included and described in Schedule 1, Exhibit B hereto, or the description of
which is incorporated in any such exhibit by reference to any other instrument
or document, together with any and all other land in any state or the
Outer-Continental Shelf in which Mortgagor has any interest, legal or
beneficial, recorded or unrecorded now owned or hereafter acquired in overriding
royalty interests, mineral interests, leasehold interests, mineral rights,
royalty interests, net profits interests, oil payments, production payments,
carried interests, or otherwise.
"Leases" shall mean those Oil and Gas Leases covering Lands in
AUSTIN, BRAZORIA, CALHOUN, CHAMBERS, COLORADO, GALVESTON, HARRIS, HIDALGO, JIM
HOGG, KENT, LIVE OAK, POLK, SAN JACINTO, STARR, TRINITY, TYLER, VAL VERDE,
WALKER, WEBB, WHARTON AND ZAPATA Counties described in Schedule 1, Exhibit A
hereto, or the description of which is incorporated in Schedule 1, Exhibit A by
reference to any other instrument or document, together with any and all other
Oil and Gas Leases or leasehold estates covering Lands in any state or the
Outer-Continental Shelf including any lands pooled or unitized therewith, in
which, or in any portion of which, Mortgagor has an interest, now owned or
hereafter acquired as well as any extensions, renewals or replacements of or for
any of the foregoing.
"Mortgage" shall mean this Mortgage, Deed of Trust, Assignment
of Production, Security Agreement and Financing Statement, as same may from time
to time be amended or modified and in effect.
5
<PAGE> 6
"Mortgaged Property" shall have the meaning set out in Article
II to this Mortgage.
"Mortgagee" shall have the meaning assigned to that term in
the introduction to this Mortgage.
"Mortgagor" shall have the meaning assigned to that term in
the introduction to this Mortgage.
"New York Uniform Commercial Code" means the Uniform
Commercial Code as in effect in the State of New York.
"Notes" shall have the meaning assigned to that term in the
introduction to this Mortgage.
"Oil and Gas Leases" shall include oil, gas and mineral leases
and shall also include subleases and assignments of operating rights.
"Operating Equipment" shall mean Mortgagor's interest in all
personal property, surface or subsurface machinery, equipment, facilities,
supplies or other property of whatsoever kind or nature, now or hereafter
located on or under any of the Lands or Leases or on a unit, including all or
part of the Lands or Leases or now or hereafter used, held for use or useful in
connection with the exploration, development, operation, production, treatment,
storage, processing or transportation of Hydrocarbons, helium and/or other
minerals produced or to be produced from or attributable to the Lands or Leases,
including, but not by way of limitation, all oil wells, gas wells, water wells,
injection wells, casing, tubing, rods, pumps, pumping units and engines,
christmas trees, derricks, separators, gun barrels, flow lines, tanks, tank
batteries, gas systems (for gathering, treating, compression, disposal or
injection), chemicals, solutions, water systems (for treating, disposal and
injection), pipe, pipelines, boilers, meters, apparatus, compressors, liquid
extractors, connectors, valves, fittings, power plants, poles, lines, cables,
wires, transformers, starters and controllers, machine shops, tools, machinery
and parts, storage yards and equipment stored therein, buildings and camps,
telegraph, telephone and other communication systems, roads, loading docks,
loading racks and shipping facilities, computer equipment and software, fixtures
and other appurtenances, appliances and property of every kind and character,
movable or immovable, together with all improvements, betterments and additions,
accessories and attachments thereto and replacements thereof.
"Permitted Liens" shall have the meaning assigned to that term
in the Indenture.
"Permitted Prior Lien" shall mean those Permitted Liens to
which the priority of the lien and security interest created by this Mortgage is
subject, but only to the limited extent permitted or authorized by the
Indenture.
"Pipelines" shall mean the Pipeline Assets and all pipelines
owned and/or operated by Mortgagor for the gathering, transmission or
distribution of Hydrocarbons including, without
6
<PAGE> 7
limitation, those pipelines described in Schedule 1, Exhibit B attached hereto,
and any interests in real property relating thereto.
"Pipeline Assets" shall mean all parts or aspects of the gas
pipeline system of Mortgagor now or hereafter situated on any of the Lands, and
the Rights-of-Way and Franchises, including, without limitation, the pipeline
system described in Schedule 1, Exhibit B, and all fixtures, improvements,
equipment, surface or subsurface machinery, facilities, supplies, replacement
parts, vehicles of every description, all process control computer systems and
equipment or other property of whatsoever kind or nature, including, without
limitation, all buildings, structures, machinery, gas processing plants,
Pipelines, stations, substations, compression or dehydration equipment, pumps,
pumping stations, meter houses, metering stations, regulator houses, ponds,
tanks, scrapers and scraper traps, fittings, valves, connections, cathodic or
electrical protection by-passes, regulators, drips, meters, pumps, pumping
units, pumping stations, storage or tankage facilities, engines, pipes, gates,
telephone and telegraph lines, electric power lines, poles, wires, casings,
radio towers, fixtures, mechanical equipment, electrical equipment, computer
equipment and software, machine shops and other equipment, used or useful in
connection therewith; together with all of Mortgagor's liquid hydrocarbons,
carbon dioxide, natural gas liquids, refined petroleum products and other
inventory fuels, carbon, chemicals, electric energy and other consumable
materials or products manufactured, processed, generated, produced, transmitted,
stored (whether above or below ground) or purchased by Mortgagor for sale,
exchange, distribution, consumption or transmission by Mortgagor, including,
without limitation, all system gas, drip gas and line fill.
"Production Sale Contracts" shall mean, except to the extent
that the same constitute Receivables, all contracts now or hereafter in effect,
including, without limitation, any gas sales contracts, entered into by
Mortgagor, or Mortgagor's predecessors in interest, for the production, sale,
purchase, exchange or processing of Subject Minerals, including, but not limited
to, any of the foregoing contracts listed on Schedule 1, Exhibit D, and the
Contract Rights related thereto.
"Receivables" shall mean any and all of Mortgagor's now owned
or hereafter acquired "accounts," as such term is defined in Article 9 of the
New York Uniform Commercial Code, together with the proceeds and products
thereof, and all books, records, ledger cards, files, correspondence and
computer files, tapes, disks or software that at any time evidence or contain
information relating to the foregoing.
"Rights-of-Way and Franchises" shall mean all leases,
leaseholds, easements, rights-of-way, licenses, franchises, privileges, permits,
ordinances, grants, rights, consents, servitudes, surfaces leases or rights,
amendatory grants and interests in land for the installation, maintenance and
operation of the Subject Interests or the Pipelines, or any portion thereof, now
owned or held by Mortgagor, including, without limitation, those leases,
leaseholds, easements, rights-of-way, licenses, franchises, privileges, permits,
ordinances, grants, rights, consents, servitudes, surface leases or rights,
amendatory grants and interests in land applicable to the Subject Interests or
the Pipelines owned or held by Mortgagor and those leases, leaseholds,
easements, rights-of-way, licenses, franchises, privileges, permits, ordinances,
grants, rights, consents, servitudes, surfaces leases or rights, amendatory
grants and interests in land owned or held by
7
<PAGE> 8
Mortgagor, including, without limitation, any described in Schedule 1, Exhibit B
attached hereto or arising by virtue of the documents described in Schedule 1,
Exhibit B attached hereto, which descriptions of real property set forth in
Schedule 1, Exhibit B or incorporated by reference to the documents described on
Schedule 1, Exhibit B are hereby made a part so that all of the property rights,
other rights and other assets described therein shall be subject to this
Mortgage to the same extent as if they were described herein.
"Secured Party" shall have the meaning set out in Article VIII
of this Mortgage.
"Subject Interests" shall mean each kind and character of
right, title, interest or estate, whether now owned or hereafter acquired, which
Mortgagor has in, under or to the Leases and all right, title, interest or
estate, whether now owned or hereafter acquired, which Mortgagor has in and to
the Lands, together with each kind and character of right, title, interest or
estate now or hereafter vested in Mortgagor in and to any and all overriding
royalty interests, mineral interests, leasehold interests, mineral rights,
royalty interests, net profits interests, oil payments, production payments,
carried interests and all other properties or interests of every kind or
character which relate to any of the Lands or Leases, whether such right, title,
interest or estate be under and by virtue of a Lease, a unitization or pooling
agreement, a unitization or pooling order, a mineral deed, a royalty deed, an
operating agreement, a revenue sharing agreement, a division order, a transfer
order, a farmout agreement, a fee simple conveyance or any other type of
contract, conveyance or instrument or under any other type of claim or title,
legal or equitable, recorded or unrecorded, all as the same shall be enlarged by
the discharge of any payments out of production or by the removal of any charges
or encumbrances to which any of same are subject.
"Subject Minerals" shall mean all Hydrocarbons, helium and/or
other minerals in, under, upon, produced or to be produced or which may be
produced, saved and sold from and which shall accrue and be attributable to the
Subject Interests, including, without limitation, all oil in tanks and all
rents, royalties, issues, profits, proceeds, products, revenues, and other
income arising from or attributable to the Subject Interests and Mortgagor's
interest therein.
"Trustee" shall have the meaning assigned to that term in the
introduction to this Mortgage.
"Uniform Commercial Code" shall mean the Uniform Commercial
Code as in effect in the State of Texas.
"Vehicles" shall mean all trucks, automobiles, trailers and
other vehicles covered by a certificate of title.
8
<PAGE> 9
ARTICLE II
Mortgage, Deed of Trust
2.1. Grant of Deed of Trust on Real Property and Security Interest in
Personal Property. To secure the payment of the Indebtedness and to secure the
performance of the covenants, agreements and obligations of Mortgagor contained
herein, in the Indenture and in all other security documents executed in
accordance therewith, Mortgagor, for and in consideration of the premises and of
the debts and trusts hereinafter mentioned, except to the extent that the same
constitute Inventory or Receivables, has granted, bargained, sold, warranted,
mortgaged, assigned, transferred and conveyed a security interest, and by these
presents does grant, bargain, sell, warrant, mortgage, assign, transfer and
convey and grant a security interest, unto the Trustee, for the use and benefit
of Mortgagee with power of sale, all of Mortgagor's rights, titles, interests
and estates, if any, in, to, under, derived from or with respect to all of the
assets of Mortgagor, including without limitation the following described real
and personal property, whether now owned or hereafter acquired:
(a) the Subject Interests, the Subject Minerals and the
Hydrocarbons;
(b) the Contract Rights and the Production Sale Contracts;
(c) the Equipment;
(d) the Operating Equipment;
(e) the Leases and the Lands;
(f) the Pipelines;
(g) the Pipeline Assets;
(h) the Rights-of-Way and Franchises;
(i) all unitization, communitization, operating agreements,
pooling agreements and declarations of pooled units and the properties covered
and the units created thereby (including all units formed under orders,
regulations, rules or other official acts of any federal, state or other
governmental agency providing for pooling or unitization, spacing orders or
other well permits and other instruments) which relate to or affect all or any
portion of the Subject Interests;
(j) all contract rights, operating rights, general
intangibles, chattel paper, documents and instruments arising under any of the
foregoing, including without limitation, the Production Sale Contracts and all
transmission contracts or other contracts now or hereafter in effect with
respect to the Pipelines or the Pipeline Assets;
9
<PAGE> 10
(k) all subleases, farmout agreements, assignments of
interests, assignments of operating rights, contracts, operating agreements,
bidding agreements, advance payment agreements, rights-of-way, surface leases,
franchises, servitudes, privileges, permits, licenses, easements, tenements,
hereditaments, improvements, appurtenances and benefits now existing or in the
future obtained and incident and appurtenant to any of the foregoing;
(l) all lease records, well records, production records and
accounting and other records and files which relate to any of the foregoing, and
all maps, data bases, manuals, information and data which relate to any of the
foregoing, including without limitation engineering, geological and geophysical
data;
(m) all income, revenues, rents, profits and proceeds arising
out of the gathering, transportation, processing or sale of Hydrocarbons through
the Pipelines and other accounts, contract rights, operating rights, general
intangibles, chattel paper, documents, investment property and instruments
arising under any of the foregoing, but expressly excluding therefrom
Receivables;
(n) any liens and security interests in the Subject Interests
in favor of Mortgagor securing payment of proceeds from the sale of the Subject
Minerals including, but not limited to, those liens and security interests
provided for in Tex. Bus. & Com. Code Ann. Section 9.319 (Tex. UCC), as amended;
(o) all other rights, titles and interests of Mortgagor in, to
and under or derived from the Lands, the Leases, the Rights-of-Way and
Franchises, the Production Sale Contracts and/or other properties described in
Schedule 1, Exhibits A, B or C hereto;
(p) any property that may from time to time hereafter, by
delivery or by writing of any kind executed by or on behalf of Mortgagor, be
subjected to the lien and security interest hereof by Mortgagor or by anyone
authorized on Mortgagor's behalf, and Mortgagee and Trustee are hereby
authorized to receive the same as additional security;
(q) all other property of every nature and kind and
wheresoever situated, now owned or hereafter acquired by Mortgagor or to which
Mortgagor is now or may hereafter be entitled at law or in equity, other than
Receivables and Inventory;
(r) any and all proceeds, returns, rents, royalties, issues,
profits, products, revenues and other income arising from or by virtue of the
sale, lease or other disposition of, or from any condemnation, eminent domain or
insurance payable with respect to damage, loss or destruction of, the items
described in subparagraphs (a) through (q) above;
together with any and all proceeds, products, increases, profits, substitutions,
replacements, renewals, additions, amendments and accessions of, to and for all
of the foregoing property. All the aforesaid properties, rights and interests
which are hereby subjected to the lien and/or security interest of this
instrument, together with any additions thereto which may be subjected to the
lien and/or security
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<PAGE> 11
interest of this instrument by means of supplements hereto or otherwise, other
than Inventory and Receivables, shall hereinafter be referred to as the
"Mortgaged Property."
TO HAVE AND TO HOLD the Mortgaged Property unto the Trustee and to his
successors and assigns forever.
2.2 Limited License. Without limiting the security interest granted
hereby, Mortgagor hereby grants to Mortgagee a limited license in Mortgagor's
trade names, trademarks and service marks, together with Mortgagor's goodwill
associated with such trade names, trademarks and service marks, for purposes of
allowing Mortgagee to use the same in connection with any foreclosure sale or
any other disposition pursuant to the Uniform Commercial Code or this Mortgage.
ARTICLE III
Warranties and Representations of Mortgagor
Mortgagor represents and warrants that each of the representations and
warranties set forth in SCHEDULE 2 attached hereto is true and correct.
Additionally, each representation and warranty in the Indenture and officer's
certificate provided to Mortgagee is true and correct (each of which
representation and warranty is incorporated herein by reference together with
related definitions and ancillary provisions) as if set forth herein verbatim.
ARTICLE IV
Particular Covenants and Agreements of Mortgagor
Mortgagor will, for Mortgagee's benefit, timely and properly observe,
perform, and otherwise comply with each covenant and agreement in the Indenture
and officer's certificate provided to Mortgagee (each of which is incorporated
herein by reference together with related definitions and ancillary provisions)
as if set forth herein verbatim.
ARTICLE V
Assignment of Production
5.1. Assignment. As further security for the payment of the
Indebtedness, subject however to the rights of the holder of any Permitted Prior
Liens, Mortgagor has transferred, assigned, warranted and conveyed and does
hereby transfer, warrant and convey to Mortgagee, effective as of the date
hereof at 9:00 a.m., local time, all of Mortgagor's rights, titles, interests
and estates in and to the following property, except to the extent that any of
the same constitutes Inventory or Receivables: all Hydrocarbons, helium and/or
other minerals which are thereafter produced and which accrue to the Subject
Interests, all products obtained or processed therefrom and all revenues and
proceeds now or hereafter attributable to said Hydrocarbons, helium and/or other
minerals and said products as well as any liens and security interests securing
any sales of said Hydrocarbons, helium and/or other minerals, including, but not
limited to, those liens and security interests provided for in Tex. Bus. & Com.
Code Ann. Section 9.319 (Tex. UCC) (Vernon 1968), as amended. All parties
producing, purchasing or receiving any such Hydrocarbons, helium and/or other
minerals or
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products, or having such Hydrocarbons, helium and/or other minerals, products,
or proceeds therefrom, in their possession for which they or others are
accountable to Mortgagee by virtue of the provisions of this Article, are
authorized and directed to treat and regard Mortgagee as the assignee and
transferee of Mortgagor and entitled in Mortgagor's place and stead to receive
such Hydrocarbons, helium and/or other minerals and all proceeds therefrom,
subject to the rights of the holder of any Permitted Prior Liens, and said
parties and each of them shall be fully protected in so treating and regarding
Mortgagee and shall be under no obligation to see to the application by
Mortgagee of any such proceeds or payments received by it; provided, however;
that, until Mortgagee or Mortgagor shall have instructed such parties to deliver
such Hydrocarbons, helium and/or other minerals and all products, revenues
and/or proceeds therefrom directly to Mortgagee (which such instructions may be
given only after the occurrence and during the continuance of an Event of
Default, as herein defined, but the giving of such instructions shall as to all
such parties be conclusive as to the occurrence of an Event of Default), such
parties shall be entitled to deliver such Hydrocarbons, helium and/or other
minerals and all products, revenues and/or proceeds therefrom to Mortgagor.
Mortgagor agrees, subject to the rights of the holder of any Permitted Prior
Liens, to perform all such acts, and to execute all such further assignments,
transfers and division orders and other instruments as may be required or
desired by Mortgagee or any party in order to have said revenues and proceeds so
paid to Mortgagee and/or to have such Hydrocarbons, helium and/or other minerals
delivered to Mortgagee. Mortgagee is fully authorized to receive and issue a
receipt for said revenue and proceeds, to endorse and cash any and all checks
and drafts payable to the order of Mortgagor or Mortgagee for the account of
Mortgagor received from or in connection with said revenues or proceeds and
apply the proceeds thereof in accordance with Section 5.2 hereof, and to execute
transfer and division orders in the name of Mortgagor, or otherwise, with
warranties binding Mortgagor. In the event that Mortgagee elects to take
delivery of any such Hydrocarbons, helium or other minerals in kind, Mortgagee
shall have the right to sell such Hydrocarbons, helium or minerals upon such
terms as Mortgagee may desire, and to apply the proceeds of such sale as
provided in Section 5.2 below.
5.2. Application of Proceeds. Any and all payments and sale proceeds
received by Mortgagee pursuant to Section 5.1 hereof shall be placed in a cash
collateral account with Mortgagee and on the first day of each month applied as
follows:
First: to the payment and satisfaction of all costs and expenses
incurred in connection with the collection of such proceeds
(and in the event Mortgagee shall have taken delivery in kind,
to the costs and expenses of the sale of such Hydrocarbons,
helium or other minerals); and
Second: then in accordance with the provisions of Section 7.9 below.
5.3. No Liability of Mortgagee in Collecting. Mortgagee is hereby
absolved from all liability for failure to enforce collection of any proceeds so
assigned and from all other responsibility in connection therewith, except the
responsibility to account to Mortgagor for funds actually received. Mortgagee
shall have the right, at its election, to prosecute and defend any and all
actions or legal proceedings deemed advisable by Mortgagee in order to collect
such funds and to protect
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the interests of Mortgagee and/or Mortgagor, with all reasonable costs, expenses
and attorneys' fees incurred in connection therewith being paid by Mortgagor.
5.4. Assignment Not a Restriction on Mortgagee's Rights. Nothing herein
contained shall detract from or limit the absolute obligation of Mortgagor to
make payment in full of the Indebtedness, regardless of whether the proceeds
assigned by this Article are sufficient to pay the same, and the rights under
this Article V shall be in addition to all other security now or hereafter
existing to secure the payment of the Indebtedness.
5.5. Status of Assignment. Notwithstanding the other provisions of this
Article V, the Trustee or any receiver appointed in judicial proceedings for the
enforcement of this instrument shall have the right to receive all of the
Hydrocarbons, helium, and/or other minerals herein assigned and, subject to the
rights of the holder of any Permitted Prior Liens, the proceeds therefrom after
the Notes have been declared due and payable in accordance with the provisions
of Section 6.2 hereof and to apply all of said proceeds as set forth in Section
5.2 hereof. Upon any sale of the Subject Interests or any part thereof pursuant
to Article VII hereof, the Hydrocarbons, helium, and/or other minerals
thereafter produced from the Subject Interests so sold, and the proceeds
therefrom, shall be included in such sale and shall pass to the purchaser free
and clear of the assignment contained in this Article V.
5.6. Indemnity. MORTGAGOR AGREES TO INDEMNIFY, DEFEND AND HOLD THE
TRUSTEE AND MORTGAGEE HARMLESS AGAINST ALL CLAIMS, ACTIONS, LIABILITIES,
JUDGMENTS, COSTS, ATTORNEYS' FEES OR OTHER CHARGES OF WHATSOEVER KIND OR NATURE
(INCLUDING WITHOUT LIMITATION AMOUNTS PAID IN SETTLEMENT, COURT COSTS AND THE
FEES AND DISBURSEMENTS OF COUNSEL INCURRED IN CONNECTION WITH ANY INVESTIGATION,
LITIGATION OR OTHER PROCEEDING) (ALL HEREINAFTER IN THIS SECTION 5.6 CALLED
"CLAIMS"), OTHER THAN CLAIMS ARISING FROM MORTGAGEE'S OWN GROSS NEGLIGENCE,
WILLFUL MISCONDUCT OR BAD FAITH, MADE AGAINST OR INCURRED BY THEM OR ANY OF THEM
AS A CONSEQUENCE, EITHER BEFORE OR AFTER THE PAYMENT IN FULL OF THE
INDEBTEDNESS, OF (I) THE BREACH BY MORTGAGOR OF ANY COVENANT, REPRESENTATION OR
WARRANTY CONTAINED IN THIS MORTGAGE OR TO WHICH IT REFERS, (II) ANY VIOLATION OF
LAW BY MORTGAGOR, OR (III) THE ASSERTION THAT MORTGAGOR AND/OR TRUSTEE RECEIVED
HYDROCARBONS, HELIUM AND/OR OTHER MINERALS HEREIN ASSIGNED OR THE PROCEEDS
THEREOF CLAIMED BY THIRD PERSONS. THE TRUSTEE AND MORTGAGEE SHALL HAVE THE RIGHT
TO DEFEND AGAINST ANY SUCH CLAIMS, EMPLOYING ATTORNEYS THEREFOR, AND UNLESS
FURNISHED WITH REASONABLE INDEMNITY, THEY OR EITHER OF THEM SHALL HAVE THE RIGHT
TO PAY OR COMPROMISE AND ADJUST ALL SUCH CLAIMS. MORTGAGOR WILL INDEMNIFY AND
PAY TO THE TRUSTEE OR MORTGAGEE ANY AND ALL SUCH AMOUNTS AS MAY BE PAID IN
RESPECT OF SUCH CLAIMS OR AS MAY BE SUCCESSFULLY ADJUDGED AGAINST MORTGAGEE AND
THE TRUSTEE OR EITHER OF THEM. THE OBLIGATIONS OF MORTGAGOR AS
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HEREINABOVE SET FORTH IN THIS SECTION 5.6 SHALL SURVIVE THE RELEASE OF THIS
INSTRUMENT.
ARTICLE VI
Events of Default
6.1. Events of Default. It shall constitute an "Event of Default"
hereunder if an "Event of Default" occurs under the terms and provisions of the
Indenture.
6.2. Effect of Event of Default. If an Event of Default shall occur and
be continuing:
(a) Mortgagee may, subject to and in accordance with the terms
of the Indenture, by notice in writing to Mortgagor declare the principal of and
accrued interest on the Notes and all other outstanding Indebtedness secured
hereby to be immediately due and payable whereupon the Notes and all other
outstanding Indebtedness shall become and be immediately due and payable, in
each instance without (except for any grace and notice expressly provided for in
the Indenture) grace, demand, presentment for payment, protest or notice of any
kind to Mortgagor or any other person (including, but not limited to, notice of
intent to accelerate and notice of acceleration), all of which are hereby
expressly waived; and
(b) Mortgagee may proceed to enforce its rights hereunder.
ARTICLE VII
Enforcement of Remedies
7.1. Power of Sale of Real Property Constituting a Part of the
Mortgaged Property. Upon the occurrence and during the continuance of an Event
of Default, the Trustee is hereby authorized and empowered to sell or offer for
sale any part of the Mortgaged Property, with or without having first taken
possession of same, to the highest bidder for cash at public auction. Such sale
shall be made at the courthouse of the county in which the Mortgaged Property or
any part thereof is situated, as herein described, between the hours of 10:00
a.m. and 4:00 p.m. on the first Tuesday of any month, beginning within three (3)
hours of the time provided in the notices described herein, after posting a
written or printed notice or notices of the place, the earliest time at which
the sale will begin and the terms of the sale, and the portion of the Mortgaged
Property to be sold, by posting (or having some person or persons acting for the
Trustee post) for at least twenty-one (21) days preceding the date of the sale,
written or printed notice of the proposed sale at the courthouse door of said
county in which the sale is to be made, and if such portion of the Mortgaged
Property lies in more than one county, one such notice of sale shall be posted
at the courthouse door of each county in which such part of the Mortgaged
Property is situated and such part of the Mortgaged Property may be sold at the
courthouse door of any one of such counties, and the notice so posted shall
designate in which county such property shall be sold. In addition to such
posting of notice, Mortgagee, the Trustee or other holder of the Indebtedness
hereby secured (or some person or persons acting for the Trustee, Mortgagee or
other such holder) shall, at least twenty-one (21) days preceding the date of
sale, file a copy of such notice(s) in the office of the county clerk in each of
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such counties and serve or cause to be served written notice of the proposed
sale by certified mail on Mortgagor and on each other debtor, if any, obligated
to pay the Indebtedness hereby secured according to the records of Mortgagee.
Service of such notice shall be completed upon deposit of the notice, enclosed
in a postpaid wrapper properly addressed to Mortgagor and such other debtors at
their most recent address or addresses as shown by the records of Mortgagee in a
post office or official depository under the care and custody of the United
States Postal Service. The affidavit of any person having knowledge of the facts
to the effect that such a service was completed shall be prima facie evidence of
the fact of service. Mortgagor agrees that no notice of any sale, other than as
set out in this paragraph, need be given by the Trustee, Mortgagee or any other
person. Mortgagor hereby designates as its address for the purpose of such
notice, the address set out on the signature page hereof and agrees that such
address shall be changed only by depositing notice of such change enclosed in a
postpaid wrapper in post office or official depository under the care and
custody of the United States Postal Service, certified mail, postage prepaid,
return receipt requested, addressed to Mortgagee or other holder of the
Indebtedness secured hereby at the address for Mortgagee set out herein (or to
such other address as Mortgagee or other holder of the Indebtedness secured
hereby may have designated by notice given as above provided to Mortgagor and
such other debtors). Any such notice of change of address of Mortgagor or other
debtors or of Mortgagee or other holders of the Indebtedness secured hereby
shall be effective three (3) business days after such deposit if such post
office official depository is located in the State of Texas, otherwise to be
effective upon receipt. Mortgagor authorizes and empowers the Trustee to sell
the Mortgaged Property in lots or parcels or in its entirety as the Trustee
shall deem expedient and to execute and deliver to the purchaser or purchasers
thereof good and sufficient deeds of conveyance thereto by fee simple title,
with evidence of warranty by Mortgagor, subject only to Permitted Prior Liens,
and Mortgagor binds itself to warrant and forever defend the title of such
purchaser or purchasers when so made by the Trustee. Where portions of the
Mortgaged Property lie in different counties, sales in such counties may be
conducted in any order that the Trustee may deem expedient and one or more such
sales may be conducted in the same month or in successive or different months as
the Trustee may deem expedient.
As to Mortgaged Property located in the State of Texas or the Outer-Continental
Shelf adjacent to the State of Texas, such sales of all or any part of such
Mortgaged Property shall be conducted at the courthouse of any county (whether
or not the counties in which the Mortgaged Property is located are contiguous)
in the State of Texas in which any part of the Mortgaged Property is situated
(or if all of the Mortgaged Property are in the Outer-Continental Shelf, then
any county adjacent to any of the Mortgaged Property). This instrument, insofar
as it covers Mortgaged Property located in the State of Texas or the
Outer-Continental Shelf adjacent to the State of Texas, is a single instrument,
but has been executed in multiple counterparts. Attached to each such
counterpart are descriptions of Mortgaged Property located only in the
particular county in which such counterpart is to be recorded, except that a
full and complete copy of this instrument with the entire exhibits attached is
to be of record in Galveston County, Texas.
7.2. Rights of the Trustee with Respect to Personal Property
Constituting a Part of the Mortgaged Property. Upon the occurrence and during
the continuance of an Event of Default, the Trustee will have all rights and
remedies granted by law, and particularly by the Uniform
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Commercial Code, including, but not limited to, (i) the right to proceed as to
both the real and the personal property covered hereby in accordance with the
Trustee's rights and remedies in respect of the real property covered hereby and
(ii) the right to take possession of all personal property constituting a part
of the Mortgaged Property, and for this purpose the Trustee may enter upon any
premises on which any or all of such personal property is situated and take
possession of and operate such personal property (or any portion thereof) or
remove it therefrom. The Trustee may require Mortgagor to assemble such personal
property and make it available to the Trustee at a place to be designated by the
Trustee which is reasonably convenient to all parties. If the Trustee elects to
foreclose under the Uniform Commercial Code and unless such personal property is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, the Trustee will give Mortgagor reasonable notice
of the time and place of any public sale or of the time after which any private
sale or other disposition of such personal property is to be made. This
requirement of sending reasonable notice will be met if the notice is mailed by
first class mail, postage prepaid, to Mortgagor at the address shown below the
signatures at the end of this instrument at least five (5) Business Days before
the time of the sale or disposition.
7.3. Rights of the Trustee with Respect to Fixtures Constituting a Part
of the Mortgaged Property. Upon the occurrence and during the continuance of an
Event of Default, the Trustee may elect to treat the fixtures constituting a
part of the Mortgaged Property as either real property collateral or personal
property collateral and proceed to exercise such rights as apply to such type of
collateral.
7.4. Judicial Proceedings. Upon the occurrence and during the
continuance of an Event of Default, the Trustee, in lieu of or in addition to
exercising any power of sale hereinabove given, may proceed by a suit or suits
in equity or at law, whether for a foreclosure hereunder, or for the sale of the
Mortgaged Property, or for the specific performance of any covenant or agreement
herein contained or in aid of the execution of any power herein granted, or for
the appointment of a receiver pending any foreclosure hereunder or the sale of
the Mortgaged Property, or for the enforcement of any other appropriate legal or
equitable remedy.
7.5. Possession of the Mortgaged Property. It shall not be necessary
for the Trustee to have physically present or constructively in his possession
at any sale held by the Trustee or by any court, receiver or public officer any
or all of the Mortgaged Property, and Mortgagor shall deliver to the purchaser
at such sale on the date of sale the Mortgaged Property purchased by such
purchasers at such sale, and, if it should be impossible or impracticable for
any of such purchasers to take actual delivery of the Mortgaged Property, then
the title and right of possession to the Mortgaged Property shall pass to the
purchaser at such sale as completely as if the same had been actually present
and delivered.
7.6. Certain Aspects of a Sale. Mortgagee shall have the right to
become the purchaser at any sale held by the Trustee or by any court, receiver
or public officer, and Mortgagee shall have the right to credit upon the amount
of the bid made therefor the amount payable out of the net proceeds of such sale
to it. Recitals contained in any conveyance made to any purchaser at any sale
made hereunder shall conclusively establish the truth and accuracy of the
matters therein stated,
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including, without limiting the generality of the foregoing, nonpayment of the
unpaid principal sum of, and the interest accrued on, the Notes after the same
have become due and payable, advertisement and conduct of such sale in the
manner provided herein or appointment of any successor Trustee hereunder.
7.7. Receipt of Purchaser. Upon any sale, whether made under the
Uniform Commercial Code, the power of sale herein granted and conferred or by
virtue of judicial proceedings, the receipt of the Trustee, or of the officer
making sale under judicial proceedings, shall be sufficient discharge to the
purchaser or purchasers at any sale for his or their purchase money, and such
purchaser or purchasers, his or their assigns or personal representatives shall
not, after paying such purchase money and receiving such receipt of the Trustee
or of such officer therefor, be obliged to see to the application of such
purchase money or be in anywise answerable for any loss, misapplication or
non-application thereof.
7.8. Effect of Sale. Any sale or sales of the Mortgaged Property or any
part thereof, whether under the Uniform Commercial Code, the power of sale
herein granted and conferred or by virtue of judicial proceedings, shall operate
to divest all right, title, interest, claim and demand whatsoever either at law
or in equity, of Mortgagor of, in and to the Mortgaged Property sold, and shall
be a perpetual bar, both at law and in equity, against Mortgagor, and
Mortgagor's successors or assigns, and against any and all persons claiming or
who shall thereafter claim all or any of the property sold from, through or
under Mortgagor, or Mortgagor's successors or assigns. Nevertheless, Mortgagor,
if requested by the Trustee or Mortgagee so to do, shall join in the execution
and delivery of all proper conveyances, assignments and transfers of the
properties so sold.
7.9. Application of Proceeds. The proceeds of any sale of the Mortgaged
Property, or any part thereof, whether under the Uniform Commercial Code, the
power of sale herein granted and conferred or by virtue of judicial proceedings,
whose application has not elsewhere herein been specifically provided for, shall
be applied as follows:
First: to the payment of all expenses incurred by the Trustee or
Mortgagee incident to the enforcement of this Mortgage, the
Notes or any of the Indebtedness including, without limiting
the generality of the foregoing, all expenses of any entry or
taking of possession, of any sale, of advertisement thereof,
and of conveyances, and as well, court costs, compensation of
agents and employees and legal fees and expenses and a
reasonable fee to the Trustee;
Second: to the payment of all other costs, charges, expenses,
liabilities and advances incurred or made by the Trustee or
Mortgagee under this Mortgage or in executing any trust or
power hereunder;
Third: to the payment of the Notes and any other Indebtedness (other
than Indebtedness described in "First" and "Second" above),
with interest to the date of such payment, in such order and
manner as set forth in the Indenture; and
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Fourth: any surplus thereafter remaining shall be paid to Mortgagor or
Mortgagor's successors or assigns, as their interests shall
appear.
7.10. Mortgagor's Waiver of Rights of Marshaling, etc. Mortgagor
agrees, to the full extent that Mortgagor may lawfully so agree, that Mortgagor
will not at any time insist upon or plead or in any manner whatever claim the
benefit of any stay, extension or redemption law now or hereafter in force, in
order to prevent or hinder the enforcement or foreclosure of this Mortgage or
the absolute sale of the Mortgaged Property or the possession thereof by any
purchaser at any sale made pursuant to any provision hereof, or pursuant to the
decree of any court of competent jurisdiction; but Mortgagor, for Mortgagor and
all who may claim by, through or under Mortgagor, to the maximum extent that
Mortgagor or those claiming by, through or under Mortgagor now or hereafter
lawfully may, hereby waives the benefit of all such laws. Mortgagor, for
Mortgagor and all who may claim through or under Mortgagor, waives, to the
maximum extent that Mortgagor or those claiming by, through or under Mortgagor
now or hereafter lawfully may do so, any and all right to have any of the
Mortgaged Property marshaled upon any foreclosure of the lien hereof, or sold in
inverse order of alienation, and agrees that the Trustee or any court having
jurisdiction to foreclose such lien may sell the Mortgaged Property as an
entirety. If any law in this Section 7.10 referred to and now in force, of which
Mortgagor or Mortgagor's successor or successors might take advantage despite
the provisions hereof, shall hereafter be repealed or cease to be in force, such
law shall not thereafter be deemed to constitute any part of the contract herein
contained or to preclude the operation or application of the provisions of this
Section 7.10.
7.11. Costs and Expenses. All reasonable costs and out-of-pocket
expenses (excluding expenses representing Mortgagee's administrative overhead
and including, without limitation, reasonable attorneys' fees) incurred by the
Trustee or Mortgagee in protecting and enforcing their rights hereunder shall
constitute a demand obligation owing by Mortgagor to the party incurring such
costs and expenses and shall draw interest at an annual rate equal to the
highest rate of interest accruing among the Notes until paid, all of which shall
constitute a portion of the Indebtedness, provided, however, that in no event
shall such interest rate ever exceed the Highest Lawful Rate.
7.12. Operation of Property by the Trustee. Upon the occurrence and
during the continuance of an Event of Default and in addition to all other
rights herein conferred on the Trustee or Mortgagee, the Trustee (or any person,
firm or corporation designated by the Trustee) shall have the right and power,
but shall not be obligated, to enter upon and take possession of any of the
Mortgaged Property, and to exclude Mortgagor, and Mortgagor's agents or
servants, wholly therefrom, and to hold, use, administer, manage and operate the
same to the extent that Mortgagor shall be at the time entitled and in its place
and stead. The Trustee or Mortgagee, or any person, firm or corporation
designated by the Trustee or Mortgagee, may operate the same without any
liability to Mortgagor in connection with such operations, except for its gross
negligence or willful misconduct in the operation of such properties, and the
Trustee or any person, firm or corporation designated by the Trustee, shall have
the right and power, but shall not be obligated, to collect, receive and issue a
receipt for all Hydrocarbons produced and sold from said properties, to make
repairs, purchase machinery and equipment, conduit and power, to enter work over
operations, drill additional wells and to exercise every power, right and
privilege of Mortgagor with respect to the
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Mortgaged Property. When and if the expenses of such operation and development
(including costs of unsuccessful work over operations or additional wells) have
been paid and the Indebtedness paid, said properties shall, if there has been no
sale or foreclosure, be returned to Mortgagor.
ARTICLE VIII
Security Agreement
8.1. Without limiting any of the provisions of this instrument, to
secure the Indebtedness, Mortgagor, as Debtor (referred to in this Article VIII
as "Debtor"), hereby expressly GRANTS, ASSIGNS, TRANSFERS and SETS OVER unto
Mortgagee, as Secured Party (referred to in this Article VIII as "Secured
Party," whether one or more), a lien upon and a security interest in all the
Mortgaged Property, together with any and all proceeds, products, increases,
profits, substitutions, replacements, renewals, additions, amendments and
accessions of, to and for the Mortgaged Property, insofar as such property
consists of Equipment, contract rights, instruments, general intangibles,
chattel paper, documents, investment property, Hydrocarbons, helium and/or other
minerals, fixtures and any and all other personal property of any kind or
character (including both those now and those hereafter existing and the
following types of property as defined in S.B.1058, 76th Texas Legislature,
Regular Session, 1999: commercial tort claims, letter of credit rights, payment
intangibles and software) to the full extent that such property may be subject
to the uniform commercial code of the state or states where such property is
located, but expressly excluding any and all Inventory and Receivables (said
Mortgaged Property, Equipment, contract rights, instruments, general
intangibles, chattel paper, documents, investment property, Hydrocarbons, helium
and/or other minerals and all other personal property of any kind or character
[including both those now and those hereafter existing and the following types
of property as defined in S.B.1058, 76th Texas Legislature, Regular Session,
1999: commercial tort claims, letter of credit rights, payment intangibles and
software] together with any and all proceeds, products, increases, profits,
substitutions, replacements, renewals, additions, amendments and accessions of,
to and for the foregoing property, but expressly excluding any and all Inventory
and Receivables, being hereinafter collectively referred to as the "Collateral"
for the purposes of this Article VIII.) The lien and security interest created
by this Mortgage attaches upon the delivery hereof. Debtor covenants and agrees
with Secured Party that:
(a) In addition to and cumulative of any other remedies
granted in this instrument to Secured Party or to the Trustee, Secured Party
may, upon the occurrence and during the continuance of an Event of Default,
proceed under said Uniform Commercial Code as to all or any part of the
Collateral and shall have and may exercise with respect to the Collateral all
the rights, remedies and powers of a secured party after default under said
Uniform Commercial Code, including, without limitation, the right and power to
sell, at public or private sale or sales, or otherwise dispose of, lease or
utilize the Collateral and any part or parts thereof in any manner authorized or
permitted under said Uniform Commercial Code after default by a debtor, and to
apply the proceeds thereof toward payment of any costs and expenses and
attorneys' fees and legal expenses thereby incurred by Secured Party, and toward
payment of the Indebtedness in accordance with Section 7.9 hereof.
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(b) Upon the occurrence and during the continuance of any
Event of Default, Secured Party shall have the right (without limitation) to
take possession of the Collateral and to enter upon any premises where same may
be situated for such purpose without being deemed guilty of trespass and without
liability for damages thereby occasioned (other than damages arising from the
gross negligence, willful misconduct or bad faith of Secured Party) and to take
any action deemed necessary or appropriate or desirable by Secured Party, at its
option and in its discretion, to repair, refurbish or otherwise prepare the
Collateral for sale, lease or other use or disposition as herein authorized.
Debtor waives, to the maximum extent permitted by law, any and all rights that
it may have to a judicial hearing in advance of the enforcement of any of the
Secured Party's rights hereunder, including without limitation, its rights
following an Event of Default to take immediate possession of the Collateral and
to exercise its rights with respect thereto. To the extent that any of the
Indebtedness is to be paid or performed by a person other than Debtor, Debtor
waives and agrees not to assert any rights or privileges which it may have under
Section 9-112 of the Uniform Commercial Code.
(c) To the maximum extent permitted by law, Debtor expressly
waives any notice of sale or other disposition of the Collateral and any other
right or remedies of a debtor or formalities prescribed by law relative to sale
or disposition of the Collateral or exercise of any other right or remedy of
Secured Party existing after default hereunder; and to the extent any such
notice is mailed, postage prepaid, to Debtor at the address shown with Debtor's
signature hereinbelow at least five (5) Business Days before the time of the
sale or disposition, such notice shall be deemed reasonable and shall fully
satisfy any requirement for giving of said notice. Such notice, in case of a
public sale or disposition, shall state the time and place fixed for such sale
or disposition and, in case of a private sale or disposition, shall state the
date after which such sale or disposition is to be made.
(d) Any public sale of the Collateral shall be held at such
time or times within ordinary business hours at such places as Secured Party may
fix in the notice of such sale. At any such sale, the Collateral may be sold in
one lot as an entirety or in separate parcels, as Secured Party may determine.
(e) Secured Party shall not be obligated to make any sale
pursuant to any such notice. Secured Party may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for the sale, and such sale
may be made at any time or place to which the same shall be so adjourned.
(f) In case of any sale of all or any part of the Collateral
on credit or for future delivery, the Collateral so sold may be retained by
Secured Party until the selling price is paid by the purchaser thereof, but
Secured Party shall not incur any liability in case of the failure of such
purchaser to take up and pay for the Collateral so sold and, in case of any such
failure, such Collateral may again be sold upon like notice.
(g) Upon the occurrence and during the continuance of an Event
of Default, Secured Party is expressly granted the right, at its option, to
transfer at any time to itself or to its nominee the Collateral, or any part
thereof and to hold the same as security for the Indebtedness, and
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to receive the monies, income, proceeds or benefits attributable or accruing
thereto and to apply the same toward payment of the Indebtedness, whether or not
then due, in accordance with Section 7.9 hereof. All rights to marshaling of
assets of Debtor, including any such right with respect to the Collateral, are
hereby waived to the maximum extent permitted by law.
(h) All recitals in any instrument of assignment or any other
instrument executed by Secured Party incident to sale, transfer, assignment,
lease or other disposition or utilization of the Collateral or any part thereof
hereunder shall be full proof of the matter stated therein, no other proof shall
be required to establish full legal propriety of the sale or other action or of
any fact, condition or thing incident thereto, and all prerequisites of such
sale or other action and of any fact, condition or thing incident thereto shall
be presumed conclusively to have been performed or to have occurred.
(i) Upon the occurrence and during the continuance of an Event
of Default, Secured Party may require Debtor to assemble the Collateral and make
it available to Secured Party at a place to be designated by Secured Party that
is reasonably convenient to both parties. All expenses of retaking, holding,
preparing for sale, lease or other use or disposition, selling, leasing or
otherwise using or disposing of the Collateral and the like which are incurred
or paid by Secured Party as authorized or permitted hereunder, including also
all attorneys' fees, legal expenses and costs, shall be added to the
Indebtedness.
(j) Should Secured Party elect to exercise its rights under
said Uniform Commercial Code as to part of the personal property and fixtures
described herein, this election shall not preclude Secured Party, Mortgagee or
the Trustee from exercising the rights and remedies granted by the preceding
paragraphs of this instrument as to the remaining personal property and
fixtures.
(k) Secured Party may, at its election, at any time after
delivery of this instrument, sign one or more photocopies hereof in order that
such photocopies may be used as a financing statement under said Uniform
Commercial Code. Such signature by Secured Party may be placed between the last
sentence of this instrument and Debtor's acknowledgment or may follow Debtor's
acknowledgment. Secured Party's signature need not be acknowledged and is not
necessary to the effectiveness hereof as a deed of trust, mortgage, assignment,
pledge or security agreement.
(l) Except as permitted by the Indenture, so long as any
amount remains unpaid on the Indebtedness, Debtor will not execute nor file in
any public office any financing statement or statements affecting the Collateral
other than financing statements in favor of Secured Party hereunder, unless the
prior written specific consent and approval of Secured Party shall have first
been obtained.
(m) Secured Party is authorized to file, in any jurisdiction
where Secured Party deems it necessary, a financing statement or statements, and
at the request of Secured Party, Debtor will join Secured Party in executing one
or more financing statements pursuant to said Uniform Commercial Code in form
satisfactory to Secured Party, and will pay the cost of filing or recording this
or any other instrument, as a financing statement, in all public offices at any
time and from time
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to time whenever filing or recording of any financing statement or of this
instrument is deemed by Secured Party to be necessary or desirable. The
addresses of Debtor and Secured Party are those addresses set forth for
Mortgagor and Mortgagee, respectively, on the cover page of this Mortgage.
(n) Without in any manner limiting the generality of any of
the other provisions of this Mortgage: (i) some portions of the goods described
or to which reference is made herein are or are to become fixtures on the Lands;
(ii) the security interests created hereby under applicable provisions of the
Uniform Commercial Code of one or more of the jurisdictions in which the
Mortgaged Property is situated will attach to Hydrocarbons or the accounts
(other than Receivables) resulting from the sale thereof at the wellhead or
minehead located on the Lands; and (iii) this instrument is to be filed of
record in the real estate records as a financing statement.
(o) Debtor hereby irrevocably designates and appoints Secured
Party as its attorney-in-fact, with full power of substitution, for the purposes
of carrying out the provisions of this Mortgage and taking any action and
executing any instrument that Secured Party may deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact is
effective without further action of Mortgagor or Mortgagee upon the occurrence
and during the continuance of an Event of Default (but the determination of an
Event of Default by Secured Party shall as to all parties for the purposes
hereof be conclusive as to the occurrence of an Event of Default) and is
irrevocable and coupled with an interest.
(p) Without limiting the generality of the foregoing, Debtor
hereby irrevocably authorizes and empowers Secured Party, upon the occurrence
and during the continuance of an Event of Default, at the expense of Debtor, at
any time and from time to time, but subject to the rights of the holders of any
Permitted Prior Liens, (a) to ask, demand, receive, receipt, give acquittance
for, settle and compromise any and all monies which may be or become due or
payable or remain unpaid at any time or times to Debtor under or with respect to
the Collateral; (b) to endorse any drafts, checks, orders or other instruments
for the payment of money payable to Debtor on account of the Collateral
(including any such draft, check, order or instrument issued by an insurance
company payable jointly to Debtor and Secured Party); and (c) in the discretion
of Secured Party, to settle, compromise, prosecute or defend any action, claim
or proceeding, or take any other action, all either in its own name or in the
name of Debtor or otherwise, which Secured Party may deem to be necessary or
advisable for the purpose of exercising and enforcing its powers and rights
under this Mortgage or in furtherance of the purposes hereof, including any
action which by the terms of this Mortgage is to be taken by Debtor. Nothing in
this Mortgage shall be construed as requiring or obligating Secured Party to
make any demand or to make any inquiry as to the nature or sufficiency of any
payment received by it or to present or file any claim or notice, or to take any
action with respect to any of the Collateral or the amounts due or to become due
under any thereof, or to collect or enforce the payment of any amounts assigned
to it or to which it may otherwise be entitled hereunder at any time or times,
other than to account for amounts or Collateral received.
(q) Secured Party shall incur no liability as a result of the
sale of Collateral, or any part thereof, at any private sale. Debtor hereby
waives, to the extent permitted by applicable law, any claims against Secured
Party arising by reason of the fact that the price at which the Collateral
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may have been sold at such a private sale was less than the price which might
have been obtained at a public sale or was less than the aggregate amount of the
Indebtedness, even if Secured Party accepts the first offer received and does
not offer such Collateral to more than one offeree.
(r) Without precluding any other methods of sale, Debtor
acknowledges that the sale of the Collateral shall have been made in a
commercially reasonable manner if conducted in conformity with reasonable
commercial practices of banks disposing of similar property. Secured Party shall
not be liable for any depreciation in the value of the Collateral.
ARTICLE IX
Other Agreements
9.1. Indenture Prevails. In the event of any conflict or inconsistency
between the terms, covenants, conditions and provisions set forth in this
Mortgage and the terms, covenants, conditions and provisions set forth in the
Indenture, the terms, covenants, conditions and provisions of the Indenture
shall prevail.
9.2 Production Payment Conveyance. This Mortgage has been executed and
delivered after Mortgagor's execution and delivery of that certain Production
Payment Conveyance (the "Production Payment Conveyance"), made effective as of
9:00 a.m. Houston, Texas time, on March 1, 2000, from Mortgagor to Southern
Producer Services, L.P. ("SPS"), TCW Portfolio No. 1555 DR V Sub-Custody
Partnership, L.P. ("Fund V") and TCW DR VI Investment Partnership, L.P. ("Fund
VI"), counterparts of which are being filed for record concurrently herewith in
Chambers, Galveston, Jim Hogg, Live Oak, Wharton and Zapata Counties, Texas.
Reference to the Production Payment Conveyance is here made for all purposes.
Pursuant to the Production Payment Conveyance, Mortgagor has conveyed
and assigned to SPS, Fund V and Fund VI the "Production Payment" (as defined in
the Production Payment Conveyance and herein so called). As provided in the
Order of the United States Bankruptcy Court attached to the Production Payment
Conveyance, the Production Payment is conveyed free and clear of any liens,
claims or other rights of Mortgagee, whether under this Mortgage or otherwise,
and the Mortgaged Property does not include the rights, titles and interests
granted under the Production Payment Conveyance as the Production Payment,
including without limitation the proceeds of the Production Payment.
The Mortgaged Property does, however, include (among other things) the
rights, titles and interests retained by Mortgagor after the conveyance of the
Production Payment which are referred to in the Production Payment Conveyance as
the "Retained Interests" (herein so called). By its acceptance of the benefits
of this Mortgage, Mortgagee and each other beneficiary hereof hereby agrees,
with and for the benefit of Mortgagor, SPS, Fund V and Fund VI and their
respective successors and assigns: (a) not to enforce any rights with respect to
the possession or use of such Retained Interests or the Equipment and fixtures
thereon (under this Mortgage or otherwise) in any way which prevents any owner
or any Person (hereafter defined) in possession of the Retained Interests
(whether Mortgagor or its successors and assigns, or any Person taking upon
foreclosure,
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or any receiver, it being understood that this Section 9.2 in no way prevents
foreclosure of this Mortgage) from honoring its duties with respect to the
Production Payment Conveyance, (b) that any Person acquiring the Retained
Interests by foreclosure or other sale pursuant to this Mortgage will take the
same subject to the obligation to perform, from and after the date of such
acquisition, the duties of Mortgagor with respect to the Production Payment
Conveyance (other than any duties of Mortgagor to pay damages for breach of any
title warranty or to pay damages for any other breach of the Production Payment
Conveyance by Mortgagor prior to the date of such acquisition), and (c) that to
the extent that Mortgagor or any other beneficiary hereof might have any lien,
claim or other right to the Production Payment (or the proceeds thereof) that
arises other than under this Mortgage, such lien or claim is hereby released and
discharged. The term "Person" shall have the meaning assigned to such term in
the Indenture.
9.3 Intercreditor Agreement. Reference is made herein for all purposes
to that certain Intercreditor Agreement (herein so called) dated the date
hereof, executed among Mortgagee and GMAC Commercial Credit, LLC ("Lender"),
acknowledged by Mortgagor. Under the terms of the Intercreditor Agreement,
Mortgagee and Lender have agreed (among other things) that the interests of
Mortgagee under this Mortgage in and to the Mortgaged Property shall be
inferior, and subject to, the interests of Lender in accordance with the
Intercreditor Agreement.
ARTICLE X
Miscellaneous
10.1. Successor Trustees. The Trustee may resign in writing addressed
to Mortgagee or be removed at any time with or without cause by an instrument in
writing duly executed by Mortgagee. In case of the death, resignation or removal
of a Trustee, a successor Trustee or Trustees may be appointed by Mortgagee from
time to time by instrument of substitution complying with any applicable
requirements of law and, in the absence of any such requirement, without other
formality than appointment and designation in writing. Such appointment and
designation shall be full evidence of the right and authority to make the same
and of all facts therein recited, and, upon the making of any such appointment
and designation, this conveyance shall vest in the named successor Trustee or
Trustees all the estate and title of the prior Trustee or Trustees in all of the
Mortgaged Property, and such successor Trustee or Trustees shall thereupon
succeed to all the rights, powers, privileges, immunities and duties hereby
conferred upon the Trustee named herein. All references herein to the Trustee
shall be deemed to refer to the Trustees from time to time acting hereunder.
10.2. Legal Proceedings by and against Trustee. The Trustee shall not
be required to take any action for the enforcement of this instrument or the
exercise of any rights or remedies hereunder or to appear in or defend any
action, suit or other proceeding in connection therewith, where, in the opinion
of the Trustee, such action will be likely to involve him in expense or
liability, unless the Trustee be tendered security and indemnity satisfactory to
him against cost, expense or liability in connection therewith.
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10.3. Responsibilities of Trustee. It shall be no part of the duty of
the Trustee to see to any recording, filing or registration of this instrument
or of any instrument supplemental hereto or to see to the payment of or be under
any duty in respect to any tax or assessment or other governmental charge which
may be levied or assessed on the Mortgaged Property or against Mortgagor or to
see to the performance or observance by Mortgagor of any of the covenants or
agreements herein contained. The Trustee shall not be responsible for the
execution, acknowledgment or validity of this instrument or of any instrument
supplemental hereto or of the Notes or for the sufficiency of the security
purported to be created hereby, and the Trustee makes no representation in
respect thereof or in respect of those rights of the holders of any of the
Notes. The Trustee shall have the right to consult with counsel upon any matters
arising hereunder and shall be fully protected in relying as to legal matters on
the advice of such counsel. The Trustee shall not incur any personal liability
hereunder except for his own gross negligence, willful misconduct or bad faith,
and the Trustee shall have the right to rely on any instrument, document or
signature authorizing or supporting any action taken or proposed to be taken by
him hereunder which is believed by him in good faith to be genuine.
10.4. Advances by Mortgagee or Trustee. Each and every covenant herein
contained shall be performed and kept by Mortgagor solely at Mortgagor's
expense. If Mortgagor shall fail to perform or keep any of the covenants of
whatsoever kind or nature contained in this instrument, then, if such failure is
not remedied by Mortgagor within 30 days following notice thereof by Mortgagee,
the Trustee or any receiver appointed hereunder may, but shall not be obligated
to, make advances to perform the same in Mortgagor's behalf, and Mortgagor
hereby agrees to repay such sums upon demand plus interest at an annual rate
equal to the highest rate of interest from time to time accruing on the Notes
until paid or, in the event any promissory note evidences such indebtedness,
upon the terms and conditions thereof; provided, however, that in no event shall
such interest rate ever exceed the Highest Lawful Rate. No such advance shall be
deemed to relieve Mortgagor from any default hereunder. All such advances shall
be included in the Indebtedness.
10.5. Defense of Claims. Mortgagor will notify the Trustee and
Mortgagee, in writing, promptly of the commencement of any legal proceedings
affecting the lien hereof or the Mortgaged Property, or any part thereof, and
will take such action as may be necessary to preserve Mortgagor's, the Trustee's
and Mortgagee's rights affected thereby, and should Mortgagor fail or refuse to
take any such action, the Trustee or Mortgagee may, upon giving prior written
notice thereof to Mortgagor, take such action on behalf of and in the name of
Mortgagor and at Mortgagor's expense. Moreover, Mortgagee, or the Trustee on
behalf of Mortgagee, may take such independent action in connection therewith as
they may in their reasonable discretion deem proper, Mortgagor hereby agreeing
that all sums advanced or all expenses incurred in such actions plus interest at
an annual rate equal to the highest rate of interest from time to time accruing
on the Notes will, on demand, be reimbursed to Mortgagee, the Trustee or any
receiver appointed hereunder; provided, however, that in no event shall such
interest rate ever exceed the Highest Lawful Rate.
10.6. Survival of Covenants and Liens. All of the covenants and
agreements of Mortgagor set forth herein shall survive the execution and
delivery of this Mortgage and shall continue in force until the Indebtedness is
paid in full. Accordingly, if Mortgagor shall perform faithfully each and
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all of the covenants and agreements herein contained, then, and then only, this
conveyance shall become null and void and shall be released in due form, upon
Mortgagor's written request and at Mortgagor's expense; otherwise, it shall
remain in full force and effect. No release of this conveyance or the lien
thereof shall be valid unless executed by Mortgagee.
10.7. Renewals and Other Security. Renewals and extensions of the
Indebtedness may be given at any time, and Mortgagee may take or may now hold
other security for the Indebtedness without notice to or consent of Mortgagor.
The Trustee or Mortgagee may resort first to such other security or any part
thereof or first to the security herein given or any part thereof, or from time
to time to either or both, even to the partial or complete abandonment of either
security, and such action shall not be a waiver of any rights conferred by this
instrument, which shall continue as a perfected lien upon the Mortgaged Property
not expressly released until the Indebtedness secured hereby is fully paid.
10.8. Instrument an Assignment, Etc. This instrument shall be deemed to
be and may be enforced from time to time as an assignment, chattel mortgage,
hypothecation, contract, deed of trust, mortgage, conveyance, financing
statement, real estate mortgage, pledge or security agreement, and from time to
time as any one or more thereof.
10.9. No Usury Intended. It is the intention of the parties hereto to
comply strictly with applicable usury laws; accordingly, notwithstanding any
provision to the contrary contained herein, in the Notes, or in any of the
documents securing or relating to any Indebtedness, in no event shall this
instrument, the Notes, or such documents require or permit the payment,
charging, taking, reserving, or receiving of any sums constituting interest
under applicable laws which exceed the maximum amount permitted by such laws. If
any such excess interest is contracted for, charged, taken, reserved, or
received in connection with this instrument or the Notes or in any of the
documents securing or relating to any Indebtedness, or in any communication by
Mortgagee or any other person to Mortgagor or any other person, or in the event
all or part of the Indebtedness shall be prepaid or accelerated, so that under
any of such circumstances or under any other circumstance whatsoever the amount
of interest contracted for, charged, taken, reserved, or received on the amount
of principal actually outstanding from time to time under this instrument or the
Notes shall exceed the maximum amount of interest permitted by applicable usury
laws, then in any such event it is agreed as follows: (i) the provisions of this
Section shall govern and control, (ii) any such excess shall be deemed an
accidental and bona fide error and canceled automatically to the extent of such
excess, and shall not be collected or collectible, (iii) any such excess which
is or has been paid or received notwithstanding this Section shall be credited
against the then unpaid principal balance hereof with the excess, if any,
refunded to Mortgagor, and (iv) the effective rate of interest shall be
automatically reduced to the maximum lawful rate allowed under applicable laws
as construed by courts having jurisdiction hereof or thereof. Without limiting
the foregoing, all calculations of the rate of interest contracted for, charged,
taken, reserved, or received in connection herewith which are made for the
purpose of determining whether such rate exceeds the maximum lawful rate shall
be made to the extent permitted by applicable laws by amortizing, prorating,
allocating and spreading during the period of the full term of the Notes,
including all prior and subsequent renewals and extensions, all interest at any
time contracted for, charged, taken, reserved, or received. The terms
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of this Section shall be deemed to be incorporated in every document, security
instrument, and communication relating to this instrument and the Notes. The
term "applicable usury laws" shall mean such laws of the State of Texas or the
laws of the United States, whichever laws allow the higher rate of interest, as
such laws now exist; provided, however, that if such laws shall hereafter allow
higher rates of interest, then the applicable usury laws shall be the laws
allowing the higher rates, to be effective as of the effective date of such
laws. Mortgagor hereby waives its rights under Texas Finance Code Section
305.006(d) and will, in connection with any counterclaim alleging usurious
interest, give Trustee and Mortgagee the notice required in Texas Finance Code
Section 305.006(b) prior to filing such counterclaim and Trustee and Mortgagee
shall have the right to correct any violation as provided by Texas Finance Code
Section 305.103.
10.10. Separability. If any provision hereof or of the Notes is invalid
or unenforceable in any jurisdiction, the other provisions hereof or of the
Notes shall remain in full force and effect in such jurisdiction, and the
remaining provisions hereof shall be liberally construed in favor of the Trustee
and Mortgagee in order to effectuate the provisions hereof, and the invalidity
of any provision hereof in any jurisdiction shall not affect the validity or
enforceability of any such provision in any other jurisdiction.
10.11. Rights Cumulative. Each and every right, power and remedy herein
given to the Trustee or Mortgagee shall be cumulative and not exclusive, and
every right, power and remedy whether specifically herein given or otherwise
existing may be exercised from time to time and so often and in such order as
may be deemed expedient by the Trustee or Mortgagee, as the case may be, and the
exercise, or the beginning of the exercise, of any such right, power or remedy
shall not be deemed a waiver of the right to exercise, at the same time or
thereafter, any other right, power or remedy. No delay or omission by the
Trustee or Mortgagee in the exercise of any right, power or remedy shall impair
any such right, power or remedy or operate as a waiver thereof or of any other
right, power or remedy then or thereafter existing.
10.12. Binding Effect. This instrument is binding upon Mortgagor,
Mortgagor's successors and assigns, and shall inure to the benefit of the
Trustee, his successors and assigns and Mortgagee and its successors and
assigns, and the provisions hereof shall likewise constitute covenants running
with the land.
10.13 Article and Section Headings. The article and section headings in
this instrument are inserted for convenience and shall not be considered a part
of this instrument or used in its interpretation.
10.14. Counterparts. This instrument may be executed in any number of
counterparts, each of which shall for all purposes be deemed to be an original
and all of which are identical except that, to facilitate recordation, the
Schedules and Exhibits in any particular counterpart may omit the description of
properties situated in counties other than the county in which such counterpart
is to be recorded.
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10.15. Notices. Except as otherwise provided in the Indenture or
herein, any notice, request, demand or other instrument which may be required or
permitted to be given or served upon Mortgagor shall be sufficiently given when
made by hand delivery, by telex, by telecopier or registered or certified mail,
postage prepaid, return receipt requested and addressed to Mortgagor at the
address shown below the signatures at the end of this Mortgage or to such
different address as Mortgagor shall have designated by written notice received
by Mortgagee or the Trustee.
10.16. Amendments, Modifications and Waivers, Etc. Except as provided
in Section 10.1, this instrument may be amended, modified, revised, discharged,
released or terminated only by a written instrument or instruments executed by
Mortgagor and Mortgagee. Any alleged amendment, revision, discharge, release or
termination which is not so documented shall not be effective as to any party.
No waiver of any provision of this Mortgage nor consent to any departure by
Mortgagor therefrom shall in any event be effective unless the same shall be in
writing, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given.
10.17. Survival of Agreements. All representations and warranties of
Mortgagor herein and all covenants and agreements herein not fully and finally
performed before the effective date or dates of this Mortgage shall survive such
date or dates. All covenants and obligations in this Mortgage are intended by
the parties to be, and shall be construed as, covenants running with the Lands.
10.18. Governing Law. This Mortgage and the Indebtedness arising in
connection herewith shall be governed by, and construed in accordance with, the
laws of the State of New York applicable to contracts made and performed in such
State (without regard to principles of conflict of laws except Section 5-1401 of
the New York General Obligations Law) and any applicable law of the United
States of America, including, without limiting the generality of the foregoing,
matters of construction, validity and performance, except that at all times the
provisions for the creation, perfection, and enforcement of the liens and
security interests created pursuant hereto shall be governed by and construed
according to the law of Texas.
10.19. Subrogation. To the extent the Indebtedness represents funds
utilized to satisfy certain outstanding indebtedness and obligations secured by
liens, rights and/or claims against the Mortgaged Property or any part thereof,
Mortgagee shall be subrogated to any and all liens, rights, superior titles and
equities owned or claimed by the holder of any such outstanding indebtedness or
obligation so satisfied, regardless of whether said liens, rights, superior
titles and equities are assigned to the Mortgagee by the holder(s) thereof or
released. Mortgagee shall be subrogated to all covenants and warranties
heretofore given or made with respect to the Mortgaged Property.
10.20. DTPA Waiver. Mortgagor acknowledges and agrees, on Mortgagor's
own behalf and on behalf of any permitted assigns and successors hereafter, that
the DTPA is not applicable to this transaction. Accordingly, Mortgagor's rights
and remedies with respect to the transaction contemplated under this Mortgage
and the Indenture and with respect to all acts or practices of Mortgagee and
Trustee, past, present or future, in connection with such transaction, shall be
governed by legal principles other than the DTPA. In furtherance thereof,
Mortgagor agrees as follows:
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(a) Mortgagor represents that Mortgagor has the knowledge and
experience in financial and business matters that enable Mortgagor to
evaluate the merits and risks of the business transaction that is the
subject of this Mortgage and the Indenture. Mortgagor also represents
that Mortgagor is not in a significantly disparate bargaining position
in relation to Mortgagee and Trustee. Mortgagor has negotiated the
documents with Mortgagee and Trustee at arm's length and have willingly
entered into the documents.
(b) Mortgagor represents that (i) Mortgagor has been
represented by the firm of Gardere & Wynne, L.L.P. as legal counsel in
the transaction contemplated by this Mortgage and the Indenture and
(ii) such legal counsel was not directly or indirectly identified,
suggested or selected by Mortgagee and Trustee or an agent of Mortgagee
and Trustee.
(c) This Mortgage and the Indenture relate to a transaction
involving total consideration by Mortgagor of more than $100,000.00 and
does not involve the Mortgagor's residence.
Mortgagor agrees, on Mortgagor's own behalf and on behalf of Mortgagor's
permitted assigns and successors, that all of the Mortgagor's rights and
remedies under the DTPA are WAIVED AND RELEASED, including specifically, without
limitation, all rights and remedies under the DTPA resulting from or arising out
of any and all acts or practices of Mortgagee and Trustee in connection with
this transaction, whether such acts or practices occur before or after the
execution of this Mortgage.
In furtherance thereof, Mortgagor agrees that by signing this Mortgage,
Mortgagor and any permitted assigns and successors are bound by the following
waiver:
Waiver of Consumer Rights. Mortgagor waives its rights under the
Deceptive Trade Practices--Consumer Protection Act, Section 17.41 et
seq., Business & Commerce Code, a law that gives consumers special
rights and protection. After consultation with an attorney of
Mortgagor's own selection, Mortgagor voluntarily consents to this
waiver.
10.21 Final Expression. THIS MORTGAGE, THE INDENTURE, AND THE NOTES
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
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IN WITNESS WHEREOF, Mortgagor has executed or caused to be executed
this Mortgage, Deed of Trust, Assignment of Production, Security Agreement and
Financing Statement on the date and year first set forth above.
The address of the MORTGAGOR:
Mortgagor/Debtor is:
TRANSTEXAS GAS CORPORATION,
1300 North Sam Houston a Delaware corporation
Parkway East, Suite 310
Houston, Texas 77032
By:
------------------------------
Ed Donahue, Vice President and
Chief Financial Officer
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STATE OF TEXAS )
)
COUNTY OF DALLAS )
Before me, a Notary Public, on this day personally appeared Ed Donahue,
known to me to be the person and officer whose name is subscribed to the
foregoing instrument and acknowledged to me that the same was the act of
TRANSTEXAS GAS CORPORATION, and that he has executed the same on behalf of said
corporation for the purposes and consideration therein expressed, and in the
capacity therein stated.
Given under my hand and seal of office this ____ day of March, 2000.
Notary Public in and for the State of Texas
(PERSONALIZED SEAL)
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EXHIBIT 4.37
TRANSTEXAS GAS CORPORATION
SECURITY AND PLEDGE AGREEMENT
This Security and Pledge Agreement (this "Agreement") is made
and entered into as of March 15, 2000 by and between TransTexas Gas Corporation,
a Delaware corporation (the "Company"), as debtor, and Firstar Bank, N.A., in
its capacity as indenture trustee (the "Trustee") for the benefit of Holders of
TransTexas Gas Corporation"s 15% Senior Secured Notes Due 2005 (the "Holders"),
(Trustee acting as agent for the benefit of the Holders shall be called the
"Secured Party").
RECITALS
The Company, as issuer, Galveston Bay Pipeline Company and
Galveston Bay Processing Corporation, as guarantors, and the Trustee as the
indenture trustee for the benefit of the Holders have entered into that certain
Indenture dated as of March 15, 2000 (as amended, modified or supplemented from
time to time, the "Indenture");
Pursuant to and on the terms and conditions set forth in the
Indenture, Company is issuing to the Holders certain 15% senior secured notes
due 2005 in the aggregate principal amount of $200,000,000.00 (collectively, the
"Notes");
In order to secure the payment and performance in full of the
obligations of Company under the Indenture and the Notes, the parties hereto
desire to set forth their mutual understanding and certain agreements regarding
the terms and conditions of the grant of a security interest in Collateral (as
defined below);
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Company and the
Secured Party hereby agree as follows:
Section 1. Definitions.
(a) As used in this Agreement, capitalized terms not otherwise
defined herein have the meanings set forth in the Indenture, and the
following terms shall have the respective meanings set forth below
(such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Collateral" shall mean, collectively, the Pledged Property
and the Pledged Securities.
"Contract Rights" shall mean all contracts, operating
agreements, mineral purchase agreements, rights of way, easements,
surface leases, permits, licenses, pooling or unitization agreements,
pooling designations and pooling orders and all other contracts or
agreements
Security&Pledge Agmt - Indenture v.3
1
<PAGE> 2
pertaining to or affecting the Collateral or which were executed in
connection with the drilling for, producing, processing treating,
handling, storing, transporting, or marketing oil, gas or other
minerals from the Collateral or from any properties unitized or pooled
therewith, including - but not limited to - the contracts listed on
Schedule 1, Exhibit D attached hereto.
"Default" and "Event of Default" shall have the meanings
assigned to those terms in Section 7(a) of this Agreement.
"Equipment" shall mean and include, as to any Person, all of
such Person's now owned or hereafter acquired equipment (as such term
in defined in the UCC), including, without limitation, Vehicles, crew
quarters, drilling rigs, workover rigs, fracture stimulation equipment,
compressors, rolling stock and related equipment and other assets
accounted for as equipment by such Person on its financial statements,
all proceeds thereof (from insurance or otherwise), and all documents
of title, books, records, ledger cards, files, correspondence, and
computer files, tapes, disks and related data processing software that
at any time evidence or contain information relating to the foregoing.
"GAAP" means generally accepted accounting principles of the
United States of America, consistently applied.
"General Intangibles" shall mean and include any and all of
Company's now owned or hereafter acquired "general intangibles" as such
term is defined in Article 9 of the UCC, including without limitation,
all trademarks, tradenames, tradestyles, trade secrets, equipment
formulation, manufacturing procedures, quality control procedures,
product specifications, patents, patent applications, copyrights,
registrations, contract rights, choses in action, causes of action,
tort claims, payment intangibles, letter of credit rights, corporate or
other business records, inventions, designs, goodwill, claims under
guarantees, licenses, franchises, tax refunds, tax refund claims,
computer programs, computer data bases, computer program flow diagrams,
source codes, object codes and all other intangible property of every
kind and nature.
"Hydrocarbons" shall mean oil, natural gas, condensate and
natural gas liquids.
"Inventory" shall mean and include, as to any Person, such
Person's now owned or hereafter acquired inventory (as such term is
defined in the UCC), including, without limitation, casing, drill pipe
and other supplies accounted for as inventory by the Company on its
consolidated financial statements (excluding any Hydrocarbons), all
proceeds thereof (from insurance or otherwise), and all document of
title, books, records, ledger cards, files, correspondence, and
computer files, tapes, disks and related data processing software that
at any time evidence or contain information relating to the foregoing.
"Investment Property" shall mean and include all of Company's
now owned or hereafter acquired "investment property" as such term is
defined in Article 9 of the UCC.
Security&Pledge Agmt - Indenture v.3
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<PAGE> 3
"Jefferies" means Jefferies Analytical Trading Group, Inc., a
Delaware Corporation.
"Jefferies Documentation" shall mean the Mortgage, Deed of
Trust, Assignment, Security Agreement and Financing Statement,
effective December 31, 1998, made by Galveston Bay Processing
Corporation in favor of Jefferies, the Promissory Note, dated December
31, 1998 in the amount of $5,650,000, made by Company in favor of
Jefferies; and any amendments or supplements to the foregoing as of the
date hereof.
"Jefferies Lien" shall mean pledge of the stock of Galveston
Bay Processing Corporation owned by Company in favor of Jefferies as
security for Company"s obligations to Jefferies under the Jefferies
Documentation.
"Lands" shall have the meaning set forth in the Mortgage.
"Leases" shall have the meaning set forth in the Mortgage.
"Mortgage" shall mean, collectively, those certain Mortgages,
Deeds of Trust, Assignments of Production, Security and Financing
Statements executed by Company for the benefit of Secured Party to
grant a Lien on Company"s real property and/or Hydrocarbons, or any
interest therein, to secure all of the Obligations.
"Obligations" shall mean and include (i) all obligations of
Company to the Secured Party under the Notes, whether such obligations
are now existing or hereafter arising, and all renewals, extensions,
amendments, supplements and rearrangements thereof, and (ii) payment
and performance of all covenants and conditions by Company contained
herein and in the Indenture and each of the other Security Documents in
each case whether for principal, interest, prepayment premium, taxes,
costs, losses, compensation, reimbursements, fees, expenses or any
other amount payable to the Secured Party under the terms of such
documents and/or this Agreement and whether such obligations are now
existing or hereafter arising.
"Oil and Gas Leases" shall include oil, gas and mineral leases
and shall also include subleases and assignments of operating rights.
"Pipelines" shall mean the Pipeline Assets and all pipelines
owned and/or operated by Company for the gathering, transmission or distribution
of Hydrocarbons, and any interests in real property relating thereto.
"Pipeline Assets" shall mean all parts or aspects of the gas
pipeline system of Company now or hereafter situated on any of the Lands, or the
Rights-of-Way and Franchises, and all fixtures, improvements, equipment, surface
or subsurface machinery, facilities, supplies, replacement parts, vehicles of
every description, all process control computer systems and equipment or other
property of whatsoever kind or nature, including, without limitation, all
buildings,
Security&Pledge Agmt - Indenture v.3
3
<PAGE> 4
structures, machinery, gas processing plants, Pipelines, stations, substations,
compression or dehydration equipment, pumps, pumping stations, meter houses,
metering stations, regulator houses, ponds, tanks, scrapers and scraper traps,
fittings, valves, connections, cathodic or electrical protection by-passes,
regulators, drips, meters, pumps, pumping units, pumping stations, storage or
tankage facilities, engines, pipes, gates, telephone and telegraph lines,
electric power lines, poles, wires, casings, radio towers, fixtures, mechanical
equipment, electrical equipment, computer equipment and software, machine shops
and other equipment, used or useful in connection therewith; together with all
of Company's liquid hydrocarbons, carbon dioxide, natural gas liquids, refined
petroleum products and other inventory fuels, carbon, chemicals, electric energy
and other consumable materials or products manufactured, processed, generated,
produced, transmitted, stored (whether above or below ground) or purchased by
Company for sale, exchange, distribution, consumption or transmission by
Company, including, without limitation, all system gas, drip gas and line fill.
"Production Sale Contracts" shall mean, except to the extent
that the same constitute Receivables, all contracts now or hereafter in effect,
including, without limitation, any gas sales contracts, entered into by Company,
or Company's predecessors in interest, for the production, sale, purchase,
exchange or processing of Subject Minerals (as defined in the Mortgage),
including - but not limited to - any of the foregoing contracts listed on
Schedule 1, Exhibit D, and the Contract Rights related thereto.
"Pledged Securities" shall have the meaning assigned to that
term in Section 2 of this Agreement.
"Receivables" shall mean and include, as to any person, any
and all of such Person's now owned or hereafter acquired Accounts, all products
and proceeds thereof, and all books, records, ledgers cards, files,
correspondence, and computer files, tapes, disks or software that at any time
evidence or contain information relating to such Person's Accounts.
"Rights-of-Way and Franchises" shall mean all leases,
leaseholds, easements, rights-of-way, licenses, franchises, privileges, permits,
ordinances, grants, rights, consents, servitudes, surface leases or rights,
amendatory grants and interests in land for the installation, maintenance and
operation of the Pipelines or the Pipeline Assets or any portion thereof, now or
hereafter owned or held by Company, including, without limitation, those leases,
leaseholds, easements, rights-of-way, licenses, franchises, privileges, permits,
ordinances, grants, rights, consents, servitudes, surface leases or rights,
amendatory grants and interests in land applicable to the Pipelines or the
Pipeline Assets owned or held by Company and those leases, leaseholds,
easements, rights-of-way, licenses, franchises, privileges, permits, ordinances,
grants, rights, consents, servitudes, surfaces leases or rights, amendatory
grants and interests in land owned or held by Company and described in the
Mortgage.
Security&Pledge Agmt - Indenture v.3
4
<PAGE> 5
"Subject Interests" shall mean each kind and character of
right, title, interest or estate, whether now owned or hereafter acquired, which
the Company has in, under or to the Leases and all right, title, interest or
estate, whether now owned or hereafter acquired, which the Company has in and to
the Lands, together with each kind and character of right, title, interest or
estate now or hereafter vested in the Company in and to any and all overriding
royalty interests, mineral interests, leasehold interests, mineral rights,
royalty interests, net profits interests, oil payments, production payments,
carried interests and all other properties or interests of every kind or
character which relate to any of the Lands or Leases, whether such right, title,
interest or estate be under and by virtue of a Lease, a unitization or pooling
agreement, a unitization or pooling order, a mineral deed, a royalty deed, an
operating agreement, a revenue sharing agreement, a division order, a transfer
order, a farmout agreement, a fee simple conveyance or any other type of
contract, conveyance or instrument or under any other type of claim or title,
legal or equitable, recorded or unrecorded, all as the same shall be enlarged by
the discharge of any payments out of production or by the removal of any charges
or encumbrances to which any of same are subject.
"UCC" means the Uniform Commercial Code as in effect in the
State of New York.
"UCC Collateral" shall have the meaning assigned to that term
in Section 2 of this Agreement.
"Vehicles" means all trucks, automobiles, trailers and other
vehicles covered by a certificate of title.
(b) All terms used in this Agreement which are defined in the
UCC, other than those which are defined in the Indenture or
specifically defined in Section 1(a) above, shall have the same meaning
herein as in the UCC.
Section 2. Grant of Security Interest.
(a) Company hereby grants to the Secured Party, to secure the
payment and performance in full of the Obligations, a security interest
in and a lien on and so pledges and assigns to the Secured Party all of
Company's right, title and interest in, to and under any and all of the
following described property, assets and rights, in each case, wherever
located, whether now owned or hereafter acquired or arising, except to
the extent the same constitutes Inventory or Receivables, all
accessions and additions thereto, all substitutions and replacements
therefor, and all proceeds and products thereof and assigns all rights
in and to all collateral securing the following described property,
assets and rights:
(i) all Equipment;
(ii) all General Intangibles;
(iii) all Investment Property;
Security&Pledge Agmt - Indenture v.3
5
<PAGE> 6
(iv) all Subject Interests, the Subject Minerals and
Hydrocarbons;
(v) all Contract Rights and Production Sale
Contracts;
(vi) all Leases and the Lands;
(vii) all Pipelines;
(viii) all Pipeline Assets;
(ix) all Rights-of-Way and Franchises;
(x) all unitization, communitization, operating
agreements, pooling agreements and declarations of pooled
units and the properties covered and the units created thereby
(including all units formed under orders, regulations, rules
or other official acts of any federal, state or other
governmental agency providing for pooling or unitization,
spacing orders or other well permits and other instruments)
which relate to or affect all or any portion of the Subject
Interests;
(xi) all contract rights, operating rights, general
intangibles, chattel paper, documents and instruments, whether
arising under any of the foregoing or otherwise, including
without limitation, the Production Sale Contracts and all
transmission contracts or other contracts now or hereafter in
effect with respect to the Pipelines or the Pipeline Assets;
(xii) all subleases, farmout agreements, assignments
of interests, assignments of operating rights, contracts,
operating agreements, bidding agreements, advance payment
agreements, rights-of-way, surface leases, franchises,
servitudes, privileges, permits, licenses, easements,
tenements, hereditaments, improvements, appurtenances and
benefits now existing or in the future obtained and incident
and appurtenant to any of the foregoing;
(xiii) all lease records, well records, production
records and accounting and other records and files which
relate to any of the foregoing, and all maps, data bases,
manuals, information and data which relate to any of the
foregoing, including without limitation engineering,
geological and geophysical data;
(xiv) all income, revenues, rents, profits and
proceeds arising out of the gathering, transportation,
processing or sale of Hydrocarbons through the Pipelines and
other accounts, contract rights, operating rights, general
intangibles, chattel paper, documents, investment property and
instruments arising under any of the foregoing;
Security&Pledge Agmt - Indenture v.3
6
<PAGE> 7
(xv) any liens and security interests in the Subject
Interests in favor of Company securing payment of proceeds
from the sale of the Subject Minerals including, but not
limited to, those liens and security interests provided for in
Tex. Bus. & Com. Code Ann. Section 9.319 (Tex. UCC)
(Vernon 1968), as amended;
(xvi) all other rights, titles and interests of
Company in, to and under or derived from the Lands, the
Leases, the Rights-of-Way and Franchises, the Production Sale
Contracts and/or other properties described in the Mortgage;
(xvii) any property that may from time to time
hereafter, by delivery or by writing of any kind executed by
or on behalf of Company, be subjected to the lien and security
interest hereof by Company or by anyone authorized on
Company's behalf, and Secured Party is hereby authorized to
receive the same as additional security;
(xviii) all other property of every nature and kind
and wheresoever situated, now owned or hereafter acquired by
Company or to which Company is now or may hereafter be
entitled at law or in equity; and
(xix) any and all proceeds, returns, rents,
royalties, issues, profits, products, revenues and other
income (other than Inventory or Receivables) arising from or
by virtue of the sale, lease or other disposition of, or from
any condemnation, eminent domain or insurance payable with
respect to damage, loss or destruction of, the items described
in subparagraphs (i) through (xviii) above;
together with any and all increases, substitutions, replacements,
renewals, additions, amendments and accessions of, to and for all of
the foregoing property. All the aforesaid properties, rights and
interests which are hereby subjected to the lien and/or security
interest of this instrument, together with any additions thereto which
may be subjected to the lien and/or security interest of this paragraph
(a) by means of supplements hereto or otherwise shall hereinafter be
referred to as the "UCC Collateral" (UCC Collateral excludes Inventory
and Receivables).
(b) Company also pledges to the Secured Party, and grants to
the Secured Party a security interest in all of Company's right, title
and interest in, to and under any and all of the following described
property, rights and interests, in each case, wherever located, whether
now owned or hereafter acquired or arising, all accessions and
additions thereto, all substitutions and replacements therefor, and all
proceeds and products thereof (collectively, the "Pledged Securities"):
(i) all of the issued and outstanding shares of
common stock of any Subsidiary of Company organized in the
United States, whether such Subsidiary is
Security&Pledge Agmt - Indenture v.3
7
<PAGE> 8
presently existing or hereafter created or acquired
(collectively the "Pledged Subsidiaries"), including without
limitation, each of the Pledged Subsidiaries and shares of
common stock identified on Schedule 2(b) attached hereto.
(ii) all other shares of common stock or other equity
securities now or hereafter acquired by Company in any manner
issued by the Pledged Subsidiaries, and the certificates
representing such securities, and any present or future
options, warrants or other rights to subscribe for or purchase
any property described in Schedule 2(b) or any notes, bonds,
debentures or other evidences of indebtedness now or hereafter
owned or acquired by Company in any manner that (A) are at any
time convertible, exchangeable or exercisable into capital
stock or other equity securities of the Pledged Subsidiaries
or (B) have or at any time could by their terms have voting
rights with respect to any matter affecting the Pledged
Subsidiaries and all securities, certificates and instruments
representing or evidencing ownership of any of the property
described in Schedule 2(b) hereof; and
(iii) all proceeds and products of the foregoing and
distributions thereof or with respect thereto, including
without limitation dividends, distributions, cash, instruments
and other property or securities, now or hereafter at any time
or from time to time received or receivable or otherwise
distributed or distributable in respect of or in exchange for
any or all of the foregoing.
Subject to any Permitted Liens, Company has endorsed, assigned
and delivered to the Secured Party or such other Person that the
Secured Party has designated as its agent to hold for perfection
purposes all negotiable or non-negotiable instruments (including
certificated securities) and chattel paper pledged by it hereunder,
together with instruments of transfer or assignment duly executed in
blank as the Secured Party may have specified. In the event that
Company shall, after the date of this Agreement, acquire any other
negotiable or non-negotiable instruments (including certificated
securities) or chattel paper to be pledged by it hereunder, Company
shall, subject to any Permitted Liens, forthwith endorse, assign and
deliver the same to the Secured Party, accompanied by such instruments
of transfer or assignment duly executed in blank as the Secured Party
may from time to time specify. To the extent that any securities are
uncertificated, appropriate book-entry transfers reflecting the pledge
of such securities created hereby have been or, in the case of
uncertificated securities hereafter acquired by Company, will at the
time of such acquisition be, duly made for the account of the Secured
Party or one or more nominees of the Secured Party with the issuer of
such securities or other appropriate book-entry facility or financial
intermediary, with the Secured Party having at all times the right to
obtain definitive certificates (in the Secured Party's name or in the
name of one or more nominees of the Secured Party) where the issuer
customarily or otherwise issues certificates, all to be held as
Collateral hereunder. Company hereby acknowledges that the Secured
Party may, in its discretion, appoint one or more financial
institutions to act as the Secured Party's agent in holding in
custodial accounts instruments or other financial assets, including
securities, in which the Secured Party is
Security&Pledge Agmt - Indenture v.3
8
<PAGE> 9
granted a security interest hereunder, including, without limitation,
certificates of deposit and other instruments evidencing short term
obligations.
(c) Without limiting the security interest granted hereby,
Company hereby grants to Secured Party a limited license in Company's
trade names, trademarks and service marks, together with Company's
goodwill associated with such trade names, trademarks and service
marks, for purposes of allowing Secured Party to use the same in
connection with any foreclosure sale or any other disposition pursuant
to the UCC or this Agreement.
(d) The inclusion of proceeds in this Agreement does not
authorize Company to sell, dispose of or otherwise use the Collateral
in any manner not specifically authorized hereby or under the
Indenture.
(e) This Agreement secures the prompt and complete payment of
all Obligations.
Section 3. Representations and Warranties. Company represents and
warrants, as of the date hereof, to the Secured Party as follows:
(a) The chief executive office and principal place of business
of Company is located at 1300 N. Sam Houston Parkway East, Suite 310,
Houston, Harris County, Texas 77032. Any and all Collateral not
delivered to the Secured Party or its designated agent is and will
continue to be located only in the States of Texas, Louisiana, Alabama,
Mississippi and North Dakota or other states wherein the security
interests hereunder are perfected.
(b) Company is the legal and beneficial owner of all of the
Collateral free and clear of any lien, security interest, charge or
encumbrance of any kind or nature, except with respect to all
Collateral other than the Pledged Securities for the lien and security
interest created hereby and Permitted Liens and except with respect to
the Pledged Securities, the lien and security interest created hereby,
the lien and security interest granted to the Post-Confirmation Credit
Facility Agent and the Jefferies Lien, and has not made any other
pledge, assignment, mortgage, hypothecation or transfer of the
Collateral except as permitted hereunder or under the Indenture. Except
for such permitted liens, the Collateral taken as a whole is free from
any material credit, deduction, allowance, defense, dispute, setoff or
counterclaim and there is no material extension or indulgence with
respect thereto. The Pledged Securities are not subject to any put,
call, option or other right in favor of any other person whatsoever.
(c) The Pledged Securities are accurately described in
Schedule 2(b) hereto and have been duly authorized and validly issued
and are fully paid and non-assessable.
(d) This Agreement has been duly authorized, executed and
delivered by Company and creates a valid and enforceable security
interest in, and lien on, the Collateral securing the payment of the
Obligations. Upon the delivery of physical certificates
Security&Pledge Agmt - Indenture v.3
9
<PAGE> 10
evidencing the Pledged Securities to the Secured Party or its
designated agent and the making of the filings and the taking of all
other actions necessary to perfect the security interests created
hereby, including, without limitation, those actions specified in
Section 2(b) and Section 4, the security interests created by this
Agreement are duly perfected security interests subject to no equal or
prior lien, security interest or encumbrance of any kind or nature
other than the Permitted Liens.
(e) Company has the requisite corporate power and authority to
pledge the Collateral in the manner hereby done or contemplated and to
defend its title thereto against the lawful claims of all persons
whomsoever.
(f) Neither the execution and delivery of this Agreement by
Company, the performance by Company of its obligations hereunder, nor
the transactions herein contemplated will (i) violate Company's charter
or bylaws, (ii) violate the terms of any agreement, indenture,
mortgage, deed of trust, equipment lease, instrument or other document
to which Company is a party, (iii) violate any law, order, rule or
regulation applicable to Company of any court or any government,
regulatory body or administrative agency or other governmental body
having jurisdiction over Company or its properties, or (iv) result in
or require the creation or imposition of any lien (other than the lien
contemplated hereby), upon or with respect to any of the property now
owned or hereafter acquired by Company, which violation or conflict
would have a material adverse effect on the financial condition,
business, assets or liabilities of Company or on the value of the
Collateral or a material adverse effect on the security interests
hereunder.
(g) The Pledged Securities includes the issued and outstanding
shares of Common Stock of the Pledged Subsidiaries as described in
Schedule 2(b) attached hereto, and as of the date of execution hereof,
there are no outstanding options, warrants or other rights to subscribe
for or purchase any property described in Schedule 2(b) or any notes,
bonds, debentures or other evidences of indebtedness that (i) are at
any time convertible into capital stock of the Pledged Subsidiaries or
(ii) have or at any time could by their terms have voting rights with
respect to any matters affecting the Pledged Subsidiaries.
(h) No consent or approval which has not been obtained prior
to the date hereof of any other person or entity and no authorization,
approval or other action (other than delivery of physical certificates
evidencing the Pledged Securities) by, and no notice to or filing with
any governmental body (other than UCC filings), regulatory authority or
securities exchange, was or is necessary as a condition to the validity
of the pledge hereunder of the Collateral, and such pledge is effective
to vest in the Secured Party the rights of the Secured Party in the
Collateral as set forth herein. There are no restrictions on the
transferability of any of the Collateral transferred or delivered by
Company hereunder or, except for restrictions related to federal and
state securities laws governing the sale of "restricted stock" or
"control stock," with respect to the foreclosure, transfer or
disposition thereof by the Secured Party.
Security&Pledge Agmt - Indenture v.3
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<PAGE> 11
(i) As of the date hereof, Galveston Bay Processing
Corporation and Galveston Bay Pipeline Corporation are the only
Material Subsidiaries of Company.
Section 4. Covenants. During the term of this Agreement and
until all the Obligations have been fully and finally paid and
discharged in full, Company covenants and agrees with the Secured Party
that:
(a) Except as permitted by the Indenture or in the ordinary
course of business, Company will not make any compromise or settlement
with respect to the Collateral without notice to or consent of the
Secured Party.
(b) Subject to the Permitted Liens, Company shall deliver to
the Secured Party or its designated agent concurrently with the
execution of this Agreement or, to the extent acquired subsequent to
the date of execution hereof, including without limitation Pledged
Securities issued by a newly created or acquired Pledged Subsidiary,
immediately upon Company's creation or acquisition thereof: (i) all
certificates and instruments representing the Pledged Securities and a
revised Schedule 2(b), and (ii) all certificates and instruments
representing each other item of Collateral (including all certificates,
instruments and notes representing any such UCC Collateral). Any and
all Pledged Securities delivered to the Secured Party or its designated
agent shall be accompanied by undated duly executed powers in blank and
by such other instruments of transfer or documents as the Secured Party
may reasonably request. The Secured Party may hold the certificates
representing the Pledged Securities delivered to it in its own name or
in the name of its nominee, all in form and substance satisfactory to
the Secured Party.
(c) From time to time, Company shall, at its own expense,
promptly give, execute, deliver, file and/or otherwise formalize any
such notice, statement, instrument, document, agreement or other
papers, and do all such other acts and things, as may be necessary or
desirable, or as the Secured Party may reasonably request, in order to
create, evidence, preserve, perfect, validate or continue any lien or
security interest created pursuant to this Agreement or to enable the
Secured Party to exercise or enforce its rights hereunder with respect
to such lien or security interest, or otherwise further to effect the
purposes of this Agreement. Without limiting the generality of the
foregoing, Company shall, at any time or from time to time upon the
request of the Secured Party and at Company's own expense, execute,
acknowledge, witness, deliver, file and/or record such financing and
continuation statements, notices, additional assignments and other
documents or instruments (all of which shall be in form and substance
satisfactory to the Secured Party and its counsel) as the Secured Party
may from time to time reasonably request for the perfection of the
liens and security interests created hereby.
(d) Company shall promptly notify the Secured Party (i) of any
material changes in any fact or circumstance represented or warranted
by Company with respect to any
Security&Pledge Agmt - Indenture v.3
11
<PAGE> 12
material portion of the Collateral, (ii) of any material impairment of
the Collateral and (iii) of any claim, action or proceeding affecting
title to all or any of the Collateral.
(e) Except for the liens and security interests created by
this Agreement and the other Liens in the Collateral expressly
permitted by this Agreement, Company shall at its own expense defend
the Collateral against any and all liens, claims, security interests
and other encumbrances or interests, howsoever arising and shall
maintain and preserve the security interest granted hereunder with
respect to the Collateral as long as this Agreement shall remain in
full force and effect. Company shall not make any other pledge,
assignment, mortgage, hypothecation or transfer of the Collateral
except as permitted hereunder or under the Indenture.
(f) Company shall at all times keep accurate and complete
records with respect to the Collateral, including, without limitation,
records of all payments made, credit granted and proceeds received in
connection therewith.
(g) Company shall not relocate its principal place of business
or chief executive office to a county or state other than that
specified in Section 3(a) of this Agreement unless Company gives 30
days' prior written notice to the Secured Party, which notice shall
specify the county and state into which such relocation is to be made.
The Collateral, to the extent not delivered to the Secured Party
pursuant to Section 2, will be kept at those locations listed in the
Order of Furtherance of Confirmation, dated March 14, 2000, and filed
with the Court, and Company will not remove the Collateral from such
locations, without providing at least 30 days' prior written notice to
the Secured Party.
(h) Company will keep the Collateral in good order and repair,
except in situations where not to do so would not be material, and will
not use the same in violation of law or any policy of insurance
thereon. The Secured Party, or its designee, may inspect the Collateral
at any reasonable time, wherever located.
(i) The Secured Party, or its representative, shall at all
times have full and free access during normal business hours to all of
the books, correspondence and records of Company relating to the
Collateral (other than information that is privileged and confidential)
and the Secured Party and its representatives may examine the same,
make abstracts therefrom and make photocopies thereof, and Company
agrees to render to the Secured Party, at Company's cost and expense,
such clerical and other assistance as may be reasonably requested by
the Secured Party with regard thereto.
(j) Company shall not permit any of the Pledged Subsidiaries
to issue to Company or any other Person any securities of the type
required to be pledged hereunder unless such securities are promptly
pledged and delivered hereunder to the Secured Party or its designated
agent in accordance with Section 2(b).
Security&Pledge Agmt - Indenture v.3
12
<PAGE> 13
(k) If, while this Agreement is in effect, any stock dividend,
stock split, reclassification, readjustment, reorganization, merger,
consolidation, exchange offer, tender offer or other change in the
capital structure, including the creation of any subscription or other
rights relating to the Pledged Securities, is declared or made, or
proposed to be declared or made, by any of the Pledged Subsidiaries or
any other issuer of the Collateral, all substituted and additional
securities or interest issued with respect to the Collateral and
evidenced by certificates shall be endorsed in blank by Company
promptly upon receipt thereof or otherwise appropriately transferred to
the Secured Party in negotiable form, and all certificates or
instruments evidencing such securities shall be delivered to the
Secured Party to be held under the terms of this Agreement in the same
manner as, and as a part of, the Collateral. All Pledged Securities
shall be evidenced by one or more certificates. Any securities that may
be issued upon exercise of any subscription or other rights relating to
the Pledged Securities shall be endorsed in blank and delivered to the
Secured Party with any necessary powers.
Section 5. Powers of the Secured Party.
(a) Company hereby irrevocably designates and appoints the
Secured Party as its attorney-in-fact, with full power of substitution,
for the purposes of carrying out the provisions of this Agreement and
taking any action and executing any instrument, including, without
limitation, any financing statement or continuation statement, and
taking any other action to maintain the validity, perfection, priority
and enforcement of the security interest intended to be created
hereunder, that the Secured Party may reasonably deem necessary or
advisable to accomplish the purposes hereof, which appointment as
attorney-in-fact is irrevocable and coupled with an interest.
(b) Without limiting the generality of Section 5(a) hereof,
Company hereby irrevocably authorizes and empowers the Secured Party,
upon the occurrence and during the continuation of any Event of
Default, at the expense of Company, either in the Secured Party"s own
name or in the name of Company, at any time and from time to time:
(i) to ask, demand, receive, issue a receipt for,
give acquittance for, settle and compromise any and all monies
which may be or become due or payable or remain unpaid at any
time or times to Company, and any and all other property which
may be or become deliverable at any time or times to Company,
under or with respect to the Collateral;
(ii) to endorse any drafts, checks, orders or other
instruments for the payment of money payable to Company on
account of the Collateral (including any such draft, check,
order or instrument issued by any insurance company payable
jointly to Company and the Secured Party); and
Security&Pledge Agmt - Indenture v.3
13
<PAGE> 14
(iii) to settle, compromise, prosecute or defend any
action, claim or proceeding, or take any other action, all
either in its own name or in the name of Company or otherwise,
which the Secured Party may deem to be necessary or advisable
for the purpose of exercising and enforcing its powers and
rights under this Agreement or in furtherance of the purposes
hereof, including any action which by the terms of this
Agreement is to be taken by Company.
(c) Nothing in this Agreement shall be construed as requiring
or obligating the Secured Party to make any commitment or to make any
inquiry as to the nature or sufficiency of any payment received by it,
or to present or file any claim or notice, or to take any other action
with respect to any of the Collateral or any part thereof or the
amounts due or to become due in respect thereof or any property covered
thereby, or to collect or enforce the payment of any amounts assigned
to it or to which it may otherwise be entitled hereunder at any time or
times other than to account for amounts or Collateral received.
(d) The Secured Party shall be entitled at any time to file
this Agreement, or a carbon, photographic or any other reproduction of
this Agreement, as a financing statement, but the failure of the
Secured Party to do so shall not impair the validity or enforceability
of this Agreement. The Secured Party shall have no duty to comply with
any recording, filing or other legal requirements necessary to
establish or maintain the validity, priority or enforceability of, or
the Secured Party's rights in or to, any of the Collateral.
(e) In its discretion, the Secured Party may discharge taxes
and other encumbrances at any time levied or placed on any of the
Collateral, make repairs thereto and pay any necessary filing fees.
Company agrees to reimburse the Secured Party on demand for any and all
reasonable expenditures so made with interest on unpaid amounts at the
maximum rate permitted by law. The Secured Party shall have no
obligation to Company to make any such expenditures, nor shall the
making thereof relieve Company of any default.
(f) Anything herein to the contrary notwithstanding, Company
shall remain liable under each contract or agreement comprised in the
Collateral to be observed or performed by Company thereunder. The
Secured Party shall not have any obligation or liability under any such
contract or agreement by reason of or arising out of this Agreement or
the receipt by the Secured Party of any payment relating to any of the
Collateral, nor shall the Secured Party be obligated in any manner to
perform any of the obligations of Company under or pursuant to any such
contract or agreement, to make inquiry as to the nature or sufficiency
of any payment received by the Secured Party in respect of the
Collateral or as to the sufficiency of any performance by any party
under any such contract or agreement, to present or file any claim, to
take any action to enforce any performance or to collect the payment of
any amounts which may have been assigned to the Secured Party or to
which the Secured Party may be entitled at any time or times other than
to account for amounts or Collateral received, and no action taken or
omitted shall give rise to any defense, counterclaim or right of action
against the Secured Party, unless the Secured Party"s actions are taken
or omitted
Security&Pledge Agmt - Indenture v.3
14
<PAGE> 15
to be taken with gross negligence or bad faith or constitute willful
misconduct. The Secured Party"s sole duty with respect to the custody,
safe keeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the UCC or otherwise, shall be to
deal with such Collateral in the same manner as the Secured Party deals
with similar property for its own account.
(g) If an Event of Default has occurred and is continuing, the
Secured Party may at any time, at its option, transfer to itself or any
nominee any securities constituting the Pledged Securities, receive any
income thereon and hold such income as additional Collateral or apply
it to the Obligations. Regardless of whether any Obligations are due,
the Secured Party may demand, sue for, collect, or make any settlement
or compromise which it deems desirable with respect to the Collateral.
Regardless of the adequacy of Collateral or any other security for the
Obligations, any deposits or other sums at any time credited by or due
from the Secured Party to Company may at any time be applied to or set
off against any of the Obligations.
(h) If an Event of Default shall have occurred and be
continuing, Company shall, at the request of the Secured Party, notify
obligors on chattel paper and general intangibles of Company and
obligors on instruments for which Company is an obligee of the security
interest of the Secured Party in any chattel paper, general intangible
or instrument and that payment thereof is to be made directly to the
Secured Party or to any financial institution designated by the Secured
Party as the Secured Party's agent therefor, and the Secured Party may
itself, if an Event of Default shall have occurred and be continuing,
without notice to or demand upon Company, so notify said obligors.
After the making of such a request or the giving of any such
notification, Company shall hold any proceeds of collection of chattel
paper, general intangibles and instruments received by Company as
trustee for the Secured Party without commingling the same with other
funds of Company and shall turn the same over to the Secured Party in
the identical form received, together with any necessary endorsements
or assignments. The Secured Party shall apply the proceeds of
collection of chattel paper, general intangibles and instruments
received by the Secured Party to the Obligations, such proceeds to be
immediately entered after final payment in cash of the items giving
rise to them.
Section 6. Voting Rights, Dividends, Etc.
(a) Until an Event of Default shall have occurred and be
continuing:
(i) except as otherwise provided in this Agreement,
Company shall be entitled to exercise any and all voting or
consensual rights and powers, including subscription rights,
in relation to the Pledged Securities; provided, however, that
no vote shall be cast or consent, waiver or ratification given
or action taken which would materially impair the securities
or the value thereof or violate any provision of this
Agreement, the Indenture or any other ancillary document;
Security&Pledge Agmt - Indenture v.3
15
<PAGE> 16
(ii) except as otherwise provided in this Agreement,
Company shall be entitled to receive and retain any and all
dividends, distributions or other payments in respect of the
Pledged Securities and the Secured Party, upon receipt of any
of the foregoing, shall promptly pay or distribute the same to
Company, and, to the extent so permitted, any distributions
received by Company and transferred to other persons shall
pass free and clear of the lien and security interest hereof;
and
(iii) the Secured Party shall execute and deliver to
Company or cause to be executed and delivered to Company, all
such proxies, powers of attorney, dividend orders and other
instruments as Company may reasonably request for the purpose
of enabling it to exercise the voting or consensual rights and
powers which Company is entitled to exercise pursuant to the
foregoing Section 6(a)(i) or to receive the dividends,
distributions or other payments which Company is authorized to
retain pursuant to the foregoing Section 6(a)(ii).
(b) Upon the occurrence and during the continuance of an Event
of Default, all rights of Company to exercise the voting or consensual
rights and powers which Company would otherwise be entitled to exercise
pursuant to Section 6(a)(i) and to receive the dividends, distributions
and other payments which the Pledgor would otherwise be authorized to
receive and retain pursuant to Section 6(a)(ii) shall automatically
cease, and all such rights shall thereupon become vested in the Secured
Party, which shall then have the sole and exclusive right and authority
to exercise, in its sole discretion, all such voting and consensual
rights and powers and to receive and retain as Collateral all such
dividends, distributions and other payments, subject, however, to the
rights of the holders of Permitted Liens. Without limiting the
foregoing, in such event the Secured Party may exercise all voting and
corporate rights at any meeting of any corporation issuing any such
securities and any and all rights of conversion, exchange, subscription
or any other rights, privileges or options pertaining to any such
securities as if it were the absolute owner thereof, including, without
limitation, the rights to exchange at its discretion, any and all such
securities upon the merger, consolidation, reorganization,
recapitalization or other readjustment of any corporation issuing any
such securities or upon the exercise by any such issuer or the Secured
Party of any right, privilege or option pertaining to any such
securities, and, in connection therewith, to deposit and deliver any
and all securities with any committee, depository, transfer agent,
registrar or other designated agency upon such terms and conditions as
it may determine, all without liability except to account for the
property actually received by it, but the Secured Party shall have no
duty to exercise any of the aforesaid rights, privileges or options and
the Secured Party shall not be responsible for any failure to do so or
delay in so doing.
Security&Pledge Agmt - Indenture v.3
16
<PAGE> 17
Section 7. Default.
(a) It shall constitute a Default or an Event of Default under
this Agreement if a "Default" or an "Event of Default" shall occur
under the Indenture.
(b) If an Event of Default shall have occurred and is
continuing and if the Obligations are accelerated under the provisions
of the Indenture and the Security Documents, in addition to any other
rights and remedies that may be available to the Secured Party under
the UCC, the Indenture, or any other Security Documents or under
Section 5(a) or 5(b) of this Agreement or otherwise under this
Agreement or at law, the Secured Party shall also have the following
rights and powers:
(i) The Secured Party may, without being required to
give any notice except as hereinafter provided, sell the
Collateral, or any part thereof, at public or private sale,
for cash, upon credit or for future delivery and at such price
or prices as the Secured Party deems satisfactory, and the
Secured Party and/or its collateral agent may be the purchaser
of any or all of the Collateral so sold and thereafter hold
the same absolutely free from any right or claim of whatsoever
kind, and the Obligations or any portion of the Obligations
may be applied as a credit against the purchase price.
(ii) Upon any such sale, the Secured Party shall have
the right to deliver, assign and transfer to the purchaser
thereof the Collateral so sold. Each purchaser at any such
sale shall hold the property sold absolutely free from any
claim or right of whatsoever kind by or on behalf of Company,
including any equity or rights of redemption of Company, and
Company hereby specifically waives, to the full extent
permitted by applicable law, all rights of redemption, stay or
appraisal which it has or may have under any rule or law or
statute now existing or hereafter adopted.
(iii) The Secured Party shall give Company ten (10)
business days' written notice (which Company agrees is
reasonable notification within the meaning of Section 9.504 of
the UCC) of its intention to make any such public or private
sale. Such notice, in case of public sale, shall state the
time and place fixed for such sale and, in case of a private
sale, shall state the date after which such sale is to be
made.
(iv) Any such public sale shall be held at such time
or times within ordinary business hours and at such places as
the Secured Party may fix in the notices of such sale. At any
such sale the Collateral may be sold in one lot as an entirety
or in separate parcels, as the Secured Party may, in its sole
discretion, determine.
(v) The Secured Party shall not be obligated to make
any sale of the Collateral of any part thereof if it shall
determine not to do so, regardless of the fact that notice of
sale of the Collateral may have been given. The Secured Party
may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to
time by announcement at the time and place fixed for the
Security&Pledge Agmt - Indenture v.3
17
<PAGE> 18
sale, and such sale may, without further notice, be made at
any time or place to which the same shall be so adjourned.
(vi) In case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so
sold may be retained by the Secured Party until the selling
price is paid by the purchaser thereof, but the Secured Party
shall not incur any liability in case of the failure of such
purchaser to take up and pay for the Collateral so sold and,
in case of any such failure, such Collateral may again be sold
upon like notice.
Security&Pledge Agmt - Indenture v.3
18
<PAGE> 19
(vii) The Secured Party, instead of exercising the
power of sale herein conferred upon it, may proceed by a suit
or suits at law or in equity to exercise its remedies
regarding the Collateral and sell the Collateral, or any
portion thereof, under a judgment or decree of a court or
courts of competent jurisdiction.
(viii) Company agrees that if any Event of Default
shall have occurred and be continuing, then the Secured Party
shall have the right to take possession of the Collateral, and
for that purpose the Secured Party may, so far as Company can
give authority therefor, enter upon any premises on which the
Collateral may be situated and remove the same therefrom with
or without notice or process of law. Company waives any and
all rights that it may have to a judicial hearing in advance
of the enforcement of any of the Secured Party's rights
hereunder, including, without limitation, its right following
an Event of Default to take immediate possession of the
Collateral and to exercise its rights with respect thereto. To
the extent that any of the Obligations are to be paid or
performed by a person other than Company, Company waives and
agrees not to assert any rights or privileges which it may
have under Section 9-112 of the UCC.
(ix) If under mandatory requirements of applicable
law, the Secured Party shall be required to make disposition
of the Collateral within a period of time that does not permit
the giving of notice to Company as hereinbefore provided, the
Secured Party need give Company only such notice of
disposition as shall be reasonably practicable in view of such
mandatory requirements of law.
(x) The Secured Party may instruct the obligor or
obligors on any agreement, instrument or other obligation
constituting the Collateral to make any payment or render any
performance required by the terms of such agreement,
instrument or obligation directly to the Secured Party or its
designee.
(c) The Secured Party shall incur no liability as a result of
the sale of the Collateral, or any part thereof, at any private sale
other than for its own gross negligence, willful misconduct or bad
faith. Company hereby waives, to the maximum extent permitted by
applicable law, any claims against the Secured Party arising by reason
of the fact that the price at which the Collateral may have been sold
at such private sale was less than the price which might have been
obtained at a public sale or was less than the aggregate amount of the
Obligations, even if the Secured Party accepts the first offer received
and does not offer such Collateral to more than one offeree.
(d) The Secured Party shall not be obligated to pursue or
exhaust its rights and remedies against any particular Collateral or
other security for the Obligations before pursuing or enforcing its
rights and remedies against any other Collateral or other security for
the Obligations.
Security&Pledge Agmt - Indenture v.3
19
<PAGE> 20
(e) To the extent permitted by law, Company hereby waives (i)
any rights to require the Secured Party to proceed first against any
other Person, to exhaust its rights in the Collateral or other security
for the Obligations or to pursue any other right that the Secured Party
might have, (ii) with respect to the Notes, presentment and demand for
payment, protest, notice of protest and nonpayment, notice of dishonor,
notice of the intention to accelerate and notice of acceleration
(except as otherwise set forth in the Indenture), and (iii) all rights
of marshalling in respect of any and all of the Collateral.
(f) Without precluding any other methods of sale, Company
acknowledges that the sale of the Collateral shall have been made in a
commercially reasonable manner if conducted in conformity with
reasonable commercial practices of institutional lenders disposing of
similar property. The Secured Party shall not be liable for any
depreciation in the value of the Collateral.
(g) Company agrees that its obligation to deliver the
Collateral is of the essence of this Agreement and that accordingly,
upon application to a court of equity having jurisdiction, the Secured
Party shall be entitled to a decree requiring specific performance by
Company of such obligation.
(h) Remedies of the Secured Party are cumulative and the
exercise of any one or more of the remedies provided herein shall not
be construed as a waiver of any of the other remedies of the Secured
Party.
(i) If an Event of Default shall have occurred and be
continuing, the proceeds of any sale of or other realization upon all
or any part of the Collateral and any other amounts held by the Secured
Party under this Agreement shall be applied by the Secured Party as
provided in the Indenture.
Any amounts remaining after such applications and the payment
in full of the Notes with respect to the Obligations shall be remitted to
Company, its successors or assigns, or as a court of competent jurisdiction may
otherwise direct.
Section 8. General Provisions.
(a) Continuing Security Interest; Binding Effect. This
Agreement shall create a continuing security interest in the Collateral
and shall (a) remain in full force and effect until termination of the
obligations of Company under the Indenture and the indefeasible payment
in full thereafter of the Obligations; (b) be binding upon Company and
its successors and assigns; and (c) inure to the benefit of the Secured
Party and its successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c), the Secured Party may assign or
otherwise transfer any of its rights under this Agreement to any other
Person, and such Person shall thereupon become vested with all the
benefits in respect thereof granted herein or otherwise to the Secured
Party. Upon the termination of the obligations of the
Security&Pledge Agmt - Indenture v.3
20
<PAGE> 21
Secured Party under the Indenture and the indefeasible payment in full
thereafter of the Obligations, Company shall be entitled to the return,
upon its request and at its expense, of such of the Collateral as is in
the Secured Party's possession and as shall not have been sold or
otherwise disposed of pursuant to the terms hereof.
(b) Security Interest Absolute. The lien and security interest
created hereunder and Company's obligations hereunder and the Secured
Party's rights hereunder shall not be released, diminished, impaired or
adversely affected by the occurrence of any one or more of the
following events:
(i) The taking or accepting of any other security or
assurance for any or all of the Obligations;
(ii) Any release, surrender, exchange, subordination
or loss of any security or assurance at any time existing in
connection with any or all of the Obligations;
(iii) The modification of, amendment to, or waiver of
compliance with any terms of the Indenture or the Notes;
(iv) Any renewal, extension and/or rearrangement of
the payment of any or all of the Obligations or any statement,
indulgence, forbearance or compromise that may be granted or
given by the Secured Party to Company or any other Person;
(v) any neglect, delay, omission, failure or refusal
of the Secured Party to take or prosecute any action in
connection with any agreement, document or other instrument
evidencing, securing or assuring the payment of any or all of
the Obligations;
(vi) the illegality, invalidity or unenforceability
of all or any part of the Indenture or the Notes; or
(vii) any other circumstance (other than payment in
full of the Obligations) that might otherwise constitute a
defense available to, or a discharge of, Company or any party
to any document in respect of the Obligations.
(c) Amendments. This Agreement or any term hereof may be
amended or changed only by an instrument in writing executed jointly by
Company and the Secured Party and in accordance with the Indenture.
(d) Remedies Cumulative. Each right, power and remedy herein
specifically granted to the Secured Party or otherwise available to it
or now or hereafter existing in law or in equity shall be cumulative
and concurrent, and shall be in addition to every other right,
Security&Pledge Agmt - Indenture v.3
21
<PAGE> 22
power and remedy herein specifically given or now or hereafter existing
at law, in equity, or otherwise (including, without limitation, all
rights, powers and remedies granted to a secured party under the UCC),
and each such right, power and remedy, whether specifically granted
herein or otherwise existing, may be exercised at any time and from
time to time as often and in such order as may be deemed expedient by
the Secured Party in its sole and complete discretion. The provisions
of this Agreement may only be waived by an instrument in writing signed
by the Secured Party, and no failure on the part of the Secured Party
to exercise, and no delay in exercising, and no course of dealing with
respect to, any such right, power or remedy, shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the
exercise of any other right. No notice to or demand on Company
hereunder shall, of itself, entitle Company to any other or further
notice or demand in the same or similar circumstances.
(e) Assignment. Neither this Agreement nor any interest herein
or in the Collateral, or any part thereof, may be assigned by Company
without the prior written consent of the Secured Party, except as
expressly permitted herein or in the Indenture.
(f) Headings. The descriptive headings of the several sections
of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions
hereof.
(g) Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof
or affecting the validity of enforceability or such provision in any
other jurisdiction.
(h) Survival. All representations and warranties contained
herein, in the Indenture or made in writing by Company in connection
herewith or therewith, shall survive the execution and delivery of this
Agreement, the Indenture and any documents executed in connection
herewith or therewith.
(i) Counterparts and Facsimiles. This Agreement may be
executed in any number of counterparts and by different parties in
separate counterparts, each of which when so executed and delivered
shall be deemed to be an original, but all of which when taken together
shall constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Secured Party. Any signature
delivered by fax shall be deemed an original signature hereto.
(j) Waiver. To the extent permitted by applicable law Company
hereby waives promptness, diligence, notice of acceptance and any other
notice with respect to any of the Indenture obligations and this
Agreement and any requirement that the Secured Party protect, secure,
perfect or insure any security interest or any property subject thereto
or exhaust any
Security&Pledge Agmt - Indenture v.3
22
<PAGE> 23
right or take any action against Company or any other person or entity;
provided however, that the Secured Party shall in any event take such
care in the handling of any Collateral in its possession as it takes
with respect to its own property of a similar nature in its possession.
(k) Notices. Any notices or other communications required or
permitted hereunder shall be made in the manner provided in the
Indenture.
(l) Conflicting Terms. In the event of any conflict or
inconsistency between the terms, covenants, conditions and provisions
set forth in this Agreement and the terms, covenants, conditions and
provisions set forth in the Indenture, the terms, covenants, conditions
and provisions of the Indenture shall prevail.
(m) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW EXCEPT SECTION 5-1401 OF THE
NEW YORK GENERAL OBLIGATIONS LAW. THE COMPANY HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE
BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT
SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT
OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID
COURTS. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION
THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM
THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. THE COMPANY IRREVOCABLY
CONSENTS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE
COMPANY AT ITS SAID ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS
AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE
SECURED PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY
IN ANY OTHER JURISDICTION.
IN WITNESS WHEREOF, Company and the Secured Party have
executed this Agreement as of the date first above written.
Security&Pledge Agmt - Indenture v.3
23
<PAGE> 24
TRANSTEXAS GAS CORPORATION
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
FIRSTAR BANK, N.A., as TRUSTEE
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
Security&Pledge Agmt - Indenture v.3
24
<PAGE> 1
EXHIBIT 4.38
- -------------------------------------------------------------------------------
OIL & GAS REVOLVING CREDIT
AND
TERM LOAN AGREEMENT
- -------------------------------------------------------------------------------
GMAC COMMERCIAL CREDIT LLC
(AS A LENDER AND AS AGENT)
- -------------------------------------------------------------------------------
WITH
- -------------------------------------------------------------------------------
TRANSTEXAS GAS CORPORATION
(BORROWER)
AND
GALVESTON BAY PIPELINE COMPANY
AND
GALVESTON BAY PROCESSING CORPORATION
(GUARANTORS)
- -------------------------------------------------------------------------------
as of March 15, 2000
- -------------------------------------------------------------------------------
<PAGE> 2
OIL & GAS REVOLVING CREDIT
AND TERM LOAN AGREEMENT
Oil & Gas Revolving Credit and Term Loan Agreement dated as of March
15, 2000 among TRANSTEXAS GAS CORPORATION, a corporation organized under the
laws of the State of Delaware ("Borrower"), the Guarantors (as hereafter
defined) which are now or which become a party hereto, the financial
institutions which are now or which become a party hereto (collectively, the
"Lenders" and individually a "Lender") and GMAC COMMERCIAL CREDIT LLC
("GMACCC"), a limited liability company organized under the laws of the State
of New York, as agent for the Lenders (GMACCC, in such capacity, the "Agent").
IN CONSIDERATION of the mutual covenants and undertakings herein
contained, Borrower, Lenders and Agent hereby agree as follows:
I. DEFINITIONS.
1.1. Accounting Terms. As used in this Agreement, the Note, or any
certificate, report or Ancillary Document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP; provided,
however, whenever such accounting terms are used for the purposes of
determining compliance with financial covenants in this Agreement, such
accounting terms shall be defined in accordance with GAAP applied in
preparation of the audited financial statements of Borrower for the fiscal year
ended January 31, 1999.
1.2. General Terms. For purposes of this Agreement the following terms
shall have the following meanings:
"Accounts" means "accounts," as that term is defined in
Article 9 of the Uniform Commercial Code as in effect in the State of New York,
together with the proceeds and products thereof.
"Adjusted Consolidated Net Income" of any Person for any
period means the net income (loss) of such Person and its consolidated
Subsidiaries for such period, determined in accordance with GAAP, excluding
(without duplication) (i) all extraordinary gains (but not losses), (ii) the
net income, if positive, of any other Person, other than a consolidated
Subsidiary, in which such Person or any of its consolidated Subsidiaries has an
interest, except to the extent of the amount of any dividends or distributions
actually paid in cash to such Person or a consolidated Subsidiary of such
Person during such period, (iii) the net income, if positive, of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition, and (iv) the net income, if positive, of any Subsidiary of
such Person to the extent that the declaration or payment of dividends or
similar distributions is not at the time permitted by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute,
rule, or governmental regulation applicable to such Subsidiary.
"Adjusted Consolidated Tangible Assets" means (without
duplication), as of the date of determination, (A) the sum of (i) discounted
future net cash flows from proved oil and
<PAGE> 3
gas reserves of Borrower and its Subsidiaries, calculated in accordance with
SEC guidelines (before any state or federal income tax), as estimated in a
Proved Reserve Report as of a date no earlier than Borrower's most recent
fiscal year end (or, if such Proved Reserve Report is unavailable, or if the
date of determination is after the end of the first fiscal quarter of the most
recent fiscal year of Borrower, as estimated by Borrower engineers on the same
basis as of a date no earlier than the end of the most recent fiscal quarter,
which estimates shall be confirmed in writing by a report by nationally
recognized independent petroleum engineers in accordance with SEC guidelines in
the event of a Material Change), (ii) the Net Working Capital of Borrower on a
date no earlier than the date of Borrower's latest consolidated annual or
quarterly financial statements, and (iii) with respect to all other tangible
assets (which are deemed to include mineral lease-hold interests) of Borrower
and its Subsidiaries, the net book value of such other tangible assets on a
date no earlier than the date of Borrower's latest consolidated annual or
quarterly financial statements, minus (B) minority interests and, to the extent
not otherwise taken into account in determining Adjusted Consolidated Tangible
Assets, any gas balancing liabilities of Borrower and its Subsidiaries. In
addition to, but without duplication of the foregoing, for purposes of this
definition, "Adjusted Consolidated Tangible Assets" shall be calculated after
giving effect, on a pro forma basis, to (1) any Permitted Investment, on or
before the date of the transaction giving rise to the need to calculate
Adjusted Consolidated Tangible Assets (the "Assets Transaction Date"), in any
other Person that, as a result of such investment, becomes a Subsidiary of
Borrower, (2) the acquisition, on or before the Assets Transaction Date (by
merger, consolidation, or purchase of stock or assets), of any business or
assets, including, without limitation, Permitted Investments, and (3) any sales
or other dispositions of assets (other than sales of Hydrocarbons or other
mineral products in the ordinary course of business) occurring on or prior to
the Assets Transaction Date. For purposes of calculating the ratio of
Borrower's Adjusted Consolidated Tangible Assets to total consolidated Debt of
Borrower and its Subsidiaries, Debt of a Subsidiary that is not a wholly-owned
Subsidiary of Borrower (which Debt is non-recourse to Borrower or any of its
other Subsidiaries or any of their assets) shall be included only to the extent
of Borrower's pro rata ownership interest in such Subsidiary.
"Adjusted Net Assets" of a Guarantor means the lesser of (a)
the amount by which the Guarantor's property, at a fair valuation, exceeds the
sum of its debts (including unliquidated or contingent debts), (b) the amount
by which the present fair salable value of the Guarantor's assets exceeds the
amount that will be required to pay its probable liability on its existing
debts as they become absolute and matured, (c) the amount by which the
Guarantor's assets exceed the maximum amount that would constitute unreasonably
small capital for its business, or (d) the amount by which the Guarantor's
assets exceed the amount that such Guarantor should reasonably retain to pay
its debts (including unliquidated or contingent debts) as they mature.
"Advances" means and includes the Revolving Advances, Swingline
Loans and the Term Loan.
"Advance Rates" means the advance rates with respect to
Eligible Hydrocarbon Reserves set forth in the definition of Borrowing Base.
"Affiliate" means, with respect to any specified Person, (i)
any other Person directly or indirectly controlling or controlled by, or under
direct or indirect common control with, such specified Person, or (ii) any
director or controlling shareholder of such other Person or
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(iii) any officer of such specified Person or such other Person. For purposes
of this definition, the term "control" means (a) the power to direct the
management and policies of a Person, directly or through one or more
intermediaries, whether through the ownership of voting securities, by
contract, or otherwise, or (b) without limiting the foregoing, the beneficial
ownership of 10% or more of the voting power of the voting common equity of
such Person (on a fully diluted basis) or of warrants or other rights to
acquire such equity (regardless of whether presently exercisable).
"Affiliate Transaction" means, with respect to any Person,
any transaction or series of related transactions with any Affiliate of such
Person (including, without limitation: (i) the sale, lease, transfer or other
disposition of properties, assets or securities to such Affiliate, (ii) the
purchase or lease of any property, assets or securities from such Affiliate
(iii) an Investment in such Affiliate and (iv) entering into or amending any
contract or agreement with or for the benefit of any such Affiliate.
"Agent" has the meaning set forth in the preamble to this
Agreement and shall include its successors and assigns.
"Agent Reserve Update Report" has the meaning set forth in
Section 2.1 hereof.
"Alternate Base Rate" means, for any day, a rate per annum
equal to the higher of (i) the Prime Rate in effect on such day and (ii) 1/2 of
1% plus the Federal Funds Rate in effect on such day.
"Ancillary Documents" means the Security Documents, the Notes
and any and all other agreements, instruments and documents, including, without
limitation, guaranties, pledges, powers of attorney, consents, and all other
writings heretofore, now or hereafter executed by Borrower or any Subsidiary
and delivered to Agent or any Lender in respect of the transactions
contemplated by this Agreement.
"Asset Sale" means any direct or indirect conveyance, sale,
transfer or other disposition, in one transaction or a series of related
transactions, of any of the properties, businesses or assets of Borrower or any
Subsidiary of Borrower, whether owned on the Closing Date or thereafter
acquired; provided, however, that "Asset Sale" shall not include (i) any
disposition of Inventory in the ordinary course of business or Receivables in
accordance with the Receivables Facility, (ii) any pledge or disposition of
assets (if such pledge or disposition would otherwise constitute an Asset Sale)
to the extent and only to the extent that it results in the creation of a
Permitted Lien (other than the creation of a Permitted Lien in connection with
a Drilling Production Payment or a Drilling Program, which in either case shall
be treated as an Asset Sale hereunder), (iii) any issuance or disposition of
securities that is made pursuant to and in accordance with the Plan of
Reorganization or a Plan Order, or (iv) the Davis Transactions.
"Attributable Debt" in respect of a Sale and Leaseback
Transaction means, at the time of determination, the present value (discounted
at the rate of interest implicit in such transaction, determined in accordance
with GAAP, or, in the event that such rate of interest is not reasonably
determinable, discounted at the rate of interest of 15%) of the obligation of
the lessee for net rental payments during the remaining term of the lease
included in such Sale and
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<PAGE> 5
Leaseback Transaction (including any period for which such lease has been
extended or may, at the option of the lessor, be extended).
"Bank" shall mean The Bank of New York and any successor thereto.
"Board of Directors" means, with respect to any Person, the board
of directors of such Person or any committee of the board of directors of such
Person authorized, with respect to any particular matter, to exercise the power
of the board of directors of such Person.
"Board Resolution" means, with respect to any Person, a duly
adopted resolution of the Board of Directors of such Person.
"Bondholder Lenders" shall have the meaning set forth in Section
8.1(k).
"Borrower" means TransTexas Gas Corporation, a Delaware
corporation, and all permitted successors and assigns.
"Borrower Entity(ies)" means, individually or collectively,
Borrower and each of its Subsidiaries.
"Borrower's Account" has the meaning set forth in Section 2.9.
"Borrowing Base" means, as of any date of determination, an
amount equal to (x) fifty percent (50%) of (i) the PV10 of Eligible Hydrocarbon
Reserves as per the most recent Proved Reserves Report, minus (ii) the then
outstanding balance of Production Payments relating to wells comprising part of
the most recent Proved Reserves Report or, if more recent, the latest Borrowing
Base Certificate minus (y) such reserves as Agent may deem proper and necessary
from time to time, in each case without duplication.
"Borrowing Base Certificate" means a certificate duly executed by
an authorized officer of Borrower appropriately completed and in substantially
the form of Exhibit 1.2(A).
"Business Day" means any day other than a day on which commercial
banks in New York are authorized or required by law to close.
"Capital Expenditures" of a Person means expenditures (whether
paid in cash or accrued as a liability) by such Person or any of its
Subsidiaries that, in conformity with GAAP, are or would be included in
"capital expenditures," "additions to property, plant, or equipment" or
comparable items in the consolidated financial statements of such Person
consistent with prior accounting practices.
"Capital Lease" as applied to any Person, means any lease of any
property (whether real, personal, or mixed) by that Person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"Capital Stock" means, with respect to any Person, any capital
stock of such Person and shares, interests, participations, or other ownership
interests (however designated) of such Person and any rights (other than debt
securities convertible into corporate stock), warrants
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<PAGE> 6
or options to purchase any of the foregoing, including without limitation, each
class of common stock and preferred stock of such Person, if such Person is a
corporation, and each general or limited partnership interest or other equity
interest of such Person, if such Person is a partnership.
"Capitalized Lease Obligation" means obligations under a lease
that are required to be capitalized for financial reporting purposes in
accordance with GAAP, and the amount of Debt represented by such obligations
shall be the capitalized amount of such obligations, as determined in
accordance with GAAP.
"Cash Equivalents" means (a) Dollars, (b) securities issued or
directly and fully guaranteed or insured by the United States government or any
agency or instrumentality thereof having maturities of not more than one year
from the date of acquisition, (c) certificates of deposit with maturities of
one year or less from the date of acquisition, bankers' acceptances with
maturities not exceeding one year, and overnight bank deposits, in each case,
with any Eligible Institution, (d) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in
clauses (b) and (c) entered into with any Eligible Institution, (e) commercial
paper rated "P-1," "A-1" or the equivalent thereof by Moody's Investors
Service, Inc. or Standard & Poor's Ratings Group, respectively, and in each
case maturing within one year after the date of acquisition, (f) shares of
money market funds that invest solely in Dollars and securities of the types
described in clauses (a) through (e) above, (g) demand and time deposits and
certificates of deposit with any commercial bank organized in the United States
not meeting the qualifications specified in clause (c) above or an Eligible
Institution, provided, however, that such deposits and certificates support
bonds, letters of credit and other similar types of obligations incurred are in
the ordinary course of business, (h) deposits, including deposits denominated
in foreign currency, with any Eligible Institution; provided, however, that all
such deposits do not exceed $10 million in the aggregate at any one time, and
(i) demand or fully insured time deposits used in the ordinary course of
business with commercial banks insured by the Federal Deposit Insurance
Corporation.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Sections 9601 et
seq.
"Change of Control" means the occurrence of the following event:
during any period of three consecutive years or less beginning at or after
11:59 p.m., New York, New York time on the Closing Date, individuals who at the
beginning of such period constituted the Board of Directors of Borrower
(together with any new directors (a) whose election by such Board of Directors
during such period or whose nomination by such Board of Directors, for election
by the stockholders of Borrower during such period, was made or approved by a
vote of not less than 60% of the directors of Borrower then still in office who
were either directors at the beginning of such period or whose election or
nomination for election during such period was previously so approved, or (b)
in the case of the Class B Director, elected during such period by the holders
of the Class B Common Stock voting separately as a class in such election)
cease for any reason to constitute a majority of the Board of Directors of
Borrower then in office.
"Charges" shall mean all taxes, charges, fees, imposts, levies or
other assessments, including, without limitation, all net income, gross income,
gross receipts, sales, use, ad valorem, value added, transfer, franchise,
profits, inventory, capital stock, license,
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withholding, payroll, employment, social security, unemployment, excise,
severance, stamp, occupation and property taxes, custom duties, fees,
assessments, liens, claims and charges of any kind whatsoever, together with
any interest and any penalties, additions to tax or additional amounts, imposed
by any taxing or other authority, domestic or foreign (including, without
limitation, the Pension Benefit Guaranty Corporation or any environmental
agency or superfund), upon the Collateral, Borrower or any of its Affiliates.
"Class B Common Stock" means the Class B Common Stock, par value
$0.01 per share, of Borrower.
"Class B Director" means the Person elected to the Board of
Directors of Borrower by the holders of the Class B Common Stock voting
separately as a class in such election.
"Closing Date" means the date upon which the conditions precedent
set forth in Article VIII have been satisfied.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time and the regulations promulgated thereunder.
"Collateral" means and includes all property and interests in
property of Borrower and its Subsidiaries, now owned or hereafter acquired,
upon which a Lien is created in favor of Agent, for its benefit and for the pro
rata benefit of the Lenders in accordance with the Security Documents.
"Commitment" of any Lender means its obligation to make Advances
in the amount set forth below such Lender's name on the signature page hereof,
as same may be adjusted upon any assignment by a Lender pursuant to Sections
17.3(b) and 17.16 hereof.
"Commitment Percentage" of any Lender means the quotient of such
Lender's Commitment divided by the aggregate Commitments, as same may be
adjusted upon any assignment by a Lender pursuant to Sections 17.3(b) and 17.16
hereof.
"Commitment Transfer Supplement" means a document in the form of
Exhibit 17.3 hereto, properly completed, by which the Purchasing Lender
purchases the interest of a Lender under this Agreement.
"Confirmation Order" means the order pursuant to Section 1129 of
the Bankruptcy Code confirming Borrower's Plan of Reorganization entered by the
court in the Borrower's case on February 7, 2000.
"Consents" means all filings and all licenses, permits, consents,
approvals, authorizations, qualifications and orders of any Governmental Body
and other third parties, domestic or foreign, necessary to carry on Borrower's
business, including, without limitation, any Consents required under all
applicable federal, state or other applicable law.
"Consolidated Coverage Ratio" means for any period, the ratio of
(i) the sum of Consolidated EBITDA of Borrower for such period, plus the net
proceeds received by Borrower
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<PAGE> 8
and its consolidated Subsidiaries in respect of Indebtedness for borrowed money
(other than Indebtedness under this Agreement or the Receivables Facility )
incurred during such period, plus, without duplication, the net proceeds
received by Borrower and its consolidated Subsidiaries from asset sales (other
than sales of Inventory and Hydrocarbons in the ordinary course of business)
consummated during such period, to (ii) the sum of Consolidated Interest
Expense of Borrower for such period, plus Capital Expenditures of Borrower
during such period, plus required principal payments by Borrower and its
consolidated Subsidiaries on Indebtedness for borrowed money (other than
Indebtedness under this Agreement or the Receivables Facility) during such
period, plus cash dividends.
"Consolidated EBITDA" of any Person for any period, unless
otherwise defined herein, means (a) the Consolidated Net Income of such Person
for such period, plus (b) the sum, without duplication (and only to the extent
such amounts are deducted from net revenues in determining such Consolidated
Net Income), of (i) the provision for income taxes for such period, for such
Person and its consolidated Subsidiaries, (ii) depreciation, depletion, and
amortization of such Person and its consolidated Subsidiaries for such period,
and (iii) Consolidated Fixed Charges of such Person for such period, determined
in each case, on a consolidated basis for such Person and its consolidated
Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" on any date (the
"Transaction Date") means, with respect to any Person, the ratio, on a pro
forma basis, of (i) the aggregate amount of Consolidated EBITDA of such Person
(attributable to continuing operations and businesses and exclusive of the
amounts attributable to operations and businesses discontinued or disposed of,
on a pro forma basis as if such operations and businesses were discontinued or
disposed of on the first day of the Reference Period) for the Reference Period
to (ii) the aggregate Consolidated Fixed Charges of such Person (exclusive of
amounts attributable to discontinued operations and businesses on a pro forma
basis as if such operations and businesses were discontinued or disposed of on
the first day of the Reference Period, but only to the extent that the
obligations giving rise to such Consolidated Fixed Charges would no longer be
obligations contributing to such Person's Consolidated Fixed Charges subsequent
to the Transaction Date) during the Reference Period; provided, however, that
for purposes of such computation, in calculating Consolidated EBITDA and
Consolidated Fixed Charges, (a) the transaction giving rise to the need to
calculate the Consolidated Fixed Charge Coverage Ratio shall be assumed to have
occurred on the first day of the Reference Period (b) the incurrence of any
Debt or issuance of Disqualified Capital Stock during the Reference Period or
subsequent thereto and on or prior to the Transaction Date shall be assumed to
have occurred on the first day of such Reference Period, (c) Consolidated
Interest Expense attributable to any Debt (whether existing or being incurred)
bearing a floating interest rate shall be computed as if the rate in effect on
the Transaction Date had been the applicable rate for the entire period, unless
such Person or any of its Subsidiaries is a party to a Swap Obligation (that
remains in effect for the 12-month period after the Transaction Date) that has
the effect of fixing the interest rate on the date of computation, in which
case such rate (whether higher or lower) shall be used, and (d) if Borrower or
any Subsidiary of Borrower has repaid, repurchased, defeased or otherwise
discharged any Debt or Disqualified Capital Stock since the beginning of the
period measured by the four full fiscal quarters ended immediately before the
Transaction Date or if any Debt is to be repaid, repurchased, defeased or
otherwise discharged (in each case other than Debt incurred under any revolving
credit facility unless such Debt has been permanently repaid and has not been
replaced) on the Transaction Date, EBITDA and Consolidated Fixed Charges for
such
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period shall be calculated on a pro forma basis as if such discharge had
occurred on the first day of such period and as if Borrower or such Subsidiary
has not earned the interest income which has actually accrued during such
period in respect of cash or Cash Equivalents used to repay, repurchase,
defease or otherwise discharge such Debt.
"Consolidated Fixed Charges" of any Person for any period means
(without duplication) the sum of (i) Consolidated Interest Expense of such
Person for such period, (ii) dividend requirements of such Person and its
consolidated Subsidiaries (whether in cash or otherwise (except dividends
payable solely in shares of Qualified Capital Stock)) with respect to Preferred
Stock paid, accrued, or scheduled to be paid or accrued during such period, in
each case to the extent attributable to such period and excluding items
eliminated in consolidation, (iii) one-third of the Consolidated Operating
Lease Obligations for such period, and (iv) fees paid, accrued, or scheduled to
be paid or accrued during such period by such Person and its Subsidiaries in
respect of performance bonds or other guarantees of payment. For purposes of
clause (ii) above, dividend requirements shall be increased to an amount
representing the pre-tax earnings that would be required to cover such dividend
requirements; accordingly, the increased amount shall be equal to a fraction,
the numerator of which is such dividend requirements and the denominator of
which is 1 minus the applicable actual combined effective Federal, state, local
and foreign income tax rate of such Person and its Subsidiaries (expressed as a
decimal), on a consolidated basis, for the fiscal year immediately preceding
the date of the transaction giving rise to the need to calculate Consolidated
Fixed Charges.
"Consolidated Interest Expense" of any Person means, for any
period, the aggregate interest (without duplication), whether expensed or
capitalized, paid, accrued, or scheduled to be paid or accrued during such
period in respect of all Debt of such Person and its consolidated Subsidiaries
(including (i) amortization of deferred financing costs and original issue
discount and non-cash interest payments or accruals, (ii) the interest portion
of all deferred payment obligations, calculated in accordance with the
effective interest method, and (iii) all commissions, discounts, other fees,
and charges owed with respect to letters of credit and banker's acceptance
financing and costs associated with Swap Obligations, in each case to the
extent attributable to such period determined on a consolidated basis in
accordance with GAAP). For purposes of this definition, (x) interest on a
Capitalized Lease Obligation shall be deemed to accrue at an interest rate
reasonably determined to be the rate of interest implicit in such Capitalized
Lease Obligation in accordance with GAAP (including Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board), and
(y) Consolidated Interest Expense attributable to any Debt represented by the
guarantee by such Person or a Subsidiary of such Person other than with respect
to Debt of such Person or a Subsidiary of such Person shall be deemed to be the
interest expense attributable to the item guaranteed.
"Consolidated Net Income" of any Person for any period means the
net income (loss) of such Person and its consolidated Subsidiaries for such
period, determined in accordance with GAAP, plus asset impairment charges, less
(without duplication) (i) all extraordinary, unusual and nonrecurring gains
(but not losses), (ii) the net income, if positive, of any other Person, other
than a consolidated Subsidiary, in which such Person or any of its consolidated
subsidiaries has an interest, except to the extent of the amount of any
dividends or distributions actually paid in cash to such Person or a
consolidated Subsidiary of such Person during such period, but not in excess of
such Person's pro rata share of such other Person's aggregate net
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income earned during such period or earned during the immediately preceding
period and not distributed during such period, (iii) the net income, if
positive, of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition, and (iv) the net income, if
positive, of any Subsidiary of such Person to the extent that the declaration
or payment of dividends or similar distributions is not at the time permitted
by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule, or governmental regulation applicable
to such Subsidiary.
"Consolidated Operating Lease Obligations" means, for any period,
the aggregate amount of all obligations for rent paid or accrued under all
Operating Leases of Borrower and its Subsidiaries as lessee (net of sublease
income), all as determined on a consolidated basis in conformity with GAAP.
"Contract Rate" means, as applicable, the Revolving Interest Rate
and the Term Loan Rate.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with Borrower, are treated as a single employer
under Section 414 of the Code.
"Coverage Shortfall" has the meaning set forth in Section 2.1
hereof.
"Davis Transactions" shall mean the transfer and conveyance by
Borrower of certain properties to Davis Petroleum Corp. and any related
transactions, all as approved by the Order of the Bankruptcy Court dated
November 30, 1999, in case No. 99-21550-C-11, in the United States Bankruptcy
Court for the Southern District of Texas, Corpus Christi Division
"Debt" means, with respect to any Person, without duplication
(i) all liabilities contingent or otherwise, of such Person (a) for borrowed
money (whether or not the recourse of the lender is to the whole of the assets
of such Person or only to a portion thereof), (b) evidenced by bonds, notes,
debentures, or similar instruments or letters of credit or representing the
balance deferred and unpaid of the purchase price of any property acquired by
such Person or services received by such Person (other than long-term service
or supply contracts which require minimum periodic payments), (c) evidenced by
bankers' acceptances or similar instruments issued or accepted by banks or Swap
Obligations, (d) for the payment of money relating to a Capitalized Lease
Obligation, and (e) the Attributable Debt associated with any Sale and
Leaseback Transaction; (ii) reimbursement obligations of such Person with
respect to letters of credit; (iii) all liabilities of others of the kind
described in the preceding clause (i) or (ii) that such Person has guaranteed
or that is otherwise its legal liability (to the extent of such guaranty or
other legal liability) other than for endorsements, with recourse, of
negotiable instruments in the ordinary course of business; (iv) all obligations
secured by a Lien (other than Permitted Liens, except to the extent the
obligations secured by such Permitted Liens are otherwise included in clause
(i), (ii) or (iii) of this definition and are obligations of such Person) to
which the property or assets (including, without limitation, leasehold
interests and any other tangible or intangible property rights) of such Person
are subject, regardless of whether the obligations secured thereby shall have
been assumed by or shall otherwise be such Person's legal liability (but, if
such obligations are not assumed by such Person or are not otherwise such
Person's legal liability, the amount of such Debt shall be deemed to be limited
to the fair market value of such property or
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assets determined as of the end of the preceding fiscal quarter); and (v) any
and all deferrals, renewals, extensions, refinancings, and refundings (whether
direct or indirect) of, or amendments, modifications, or supplements to, any
liability of the kind described in any of the preceding clauses (i) through
(iv) regardless of whether between or among the same parties; provided,
however, that, notwithstanding the foregoing, "Debt" shall include obligations
related to Drilling Production Payments, whether denominated as
Dollar-Denominated Production Payments or Volumetric Production Payments, but
shall not include Dollar-Denominated Production Payments or Volumetric
Production Payments related to Drilling Programs.
"Dedication Percentage" means:
(a) fifty percent (50%) from 9:00 a.m. on March 1, 2000 until
9:00 a.m., Texas time, on September 1, 2000;
(b) sixty-two percent (62%) from 9:00 a.m., Texas time, on
September 1 until 9:00 a.m., Texas time, on March 1, 2001; and
(c) seventy percent (70%) from and after 9:00 a.m., Texas time,
on March 1, 2001.
"Default" means an event which, with the giving of notice or
passage of time or both, would constitute an Event of Default.
"Default Rate" has the meaning set forth in Section 3.1 hereof.
"Defaulting Lender" has the meaning set forth in Section 2.14(a)
hereof.
"Disqualified Capital Stock" means, with respect to any Person,
any Capital Stock of such Person or its Subsidiaries that, by its terms or by
the terms of any security into which it is convertible or exchangeable, is, or
upon the happening of an event or the passage of time would be, required to be
redeemed or repurchased by such Person or its Subsidiaries, including at the
option of the holder, in whole or in part, or has, or upon the happening of an
event or passage of time would have, a redemption or similar payment due, on or
prior to the maturity date of the Indenture Notes.
"Documents" means, collectively, this Agreement and the Ancillary
Documents.
"Dollars" and the sign "$" means lawful money of the United
States of America.
"Dollar-Denominated Production Payments" means production payment
obligations recorded as liabilities in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"Drilling Production Payment" means a Dollar-Denominated
Production Payment or a Volumetric Production Payment conveyed to a third party
in accordance with the provisions of Sections 6.2 and 6.3.
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"Drilling Program" means any current or future arrangement
between Borrower or any Subsidiary of Borrower and another Person pursuant to
which (i) such Person agrees, or has, prior to the Closing Date, agreed, to
drill, or perform operations to enhance recovery from, a well or wells on
mineral interests, owned by Borrower or such Subsidiary and (ii) Borrower or
such Subsidiary agrees, or has, prior to the Closing Date, agreed, to convey or
assign to such Person an interest in such well or wells in accordance with
clause (l)(1) of the definition of "Permitted Liens."
"Effective Date" means the effective date of the Final Order
approving the Plan of Reorganization.
"Eligible Hydrocarbon Reserves" means Hydrocarbon Reserves of
Borrower: (a) in which Borrower has defensible and indefeasible title and as to
which Agent has a first priority perfected lien and security interest (subject
only to Permitted Prior Liens described in clauses (a), (g) and (h) of the
definition of Permitted Prior Liens), and as to which only Permitted Liens
exist, and (b) which are set forth in the most recent Proved Reserves Report
delivered to Agent or such other reserve report prepared by an independent
petroleum reserve engineer acceptable to Agent and as adjusted in the most
recent Borrowing Base Certificate.
"Eligible Institution" means a commercial banking institution
that has combined capital and surplus of not less than $500 million and that is
rated "A" (or higher) according to Moody's Investors Service, Inc. or Standard
& Poor's Ratings Group at the time as of which any investment or rollover
therein is made.
"Environmental Complaint" has the meaning set forth in Section
5.9(c) hereof.
"Environmental Laws" means, if and to the extent applicable under
the circumstances at the time in question, all federal, state and local
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, guidelines, interpretations,
decisions, orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.
"Equipment" means and includes, as to any Person, all of such
Person's now owned or hereafter acquired Vehicles, drilling rigs, workover
rigs, fracture stimulation equipment, well site compressors, rolling stock and
related equipment and other assets accounted for as equipment by such Person on
its financial statements, all proceeds thereof (from insurance or otherwise),
and all documents of title, books, records, ledger cards, files,
correspondence, and computer files, tapes, disks and related data processing
software that at any time evidence or contain information relating to the
foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time and the rules and regulations promulgated
thereunder.
"ERISA Plan" means any employee benefit plan within the meaning
of Section 3(3) of ERISA, maintained for employees of Borrower or any member of
the Controlled Group
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or any such ERISA Plan to which Borrower or any member of the Controlled Group
is required to contribute on behalf of any of its employees.
"Event of Default" means the occurrence and continuance of any of
the events set forth in Article X hereof.
"Excess Cash Flow" means with respect to any period, the sum of
(i) Consolidated Net Income of Borrower and its consolidated Subsidiaries, plus
(ii) all depletion, depreciation, amortization and non cash dividends of
Borrower and its consolidated Subsidiaries minus (iii) principal payments of
any term loan debt (including (x) Production Payments during such period and
(y) mandatory repayments of Revolving Advances resulting from a Coverage
Shortfall during such period which amounts could not be reborrowed by Borrower
during such Period) for such period minus (iv) Capital Expenditures of Borrower
and its consolidated subsidiaries for such period (excluding the financed
portions thereof).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC thereunder.
"Exchange Assets" means assets acquired by Borrower or any
Subsidiary of Borrower in exchange for assets of Borrower or such Subsidiary,
respectively, in connection with an Asset Sale, which acquired assets include
proved reserves with a value that, together with the cash or Cash Equivalents
received therefor by Borrower or any of its Subsidiaries, is equal to or
greater than the value of the proved reserves included in the assets disposed
of by Borrower or such Subsidiary in connection with such Asset Sale; provided,
however, that during any fiscal year Borrower or any of its Subsidiaries can
collectively acquire assets (other than proved reserves, cash or Cash
Equivalents) with a fair market value of up to $20 million in exchange for
assets of Borrower or such Subsidiaries that include proved reserves, and such
assets acquired by Borrower or such Subsidiaries shall constitute "Exchange
Assets" hereunder.
"Existing DIP Facility" has the meaning set forth in Section
2.11(a) of this Agreement.
"Existing Agreements" means the Services Agreement.
"Federal Funds Rate" means, for any day, the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day which is a Business Day, the average of quotations for such day on such
transactions received by the Bank from three Federal funds brokers of
recognized standing selected by the Bank.
"Final Order" shall mean an order of the Bankruptcy Court that is
in effect and is not stayed, and as to which the time to appeal, petition for
certiorari, or move for reargument or rehearing has expired and as to which no
appeal, petition for certiorari, or other proceedings for reargument or
rehearing shall then be pending or as to which any right to appeal, petition
for certiorari, reargue, or rehear shall have been waived in writing in form
and substance satisfactory to the Agent, or in the event that an appeal, writ
of certiorari, or reargument or rehearing thereof
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<PAGE> 14
has been sought, such order of the Bankruptcy Court shall have been affirmed by
the highest court to which such order was appealed, or certiorari, reargument
or rehearing has been denied, and the time to take any further appeal, petition
for certiorari or move for reargument or rehearing shall have expired.
"First Lien Debt" means any Debt or other obligation secured by a
Lien described in one or more of clauses (a) through (o) of this definition,
including, in each case, any refinancings thereof:
(a) pledges of assets or deposits of cash or Cash
Equivalents to secure (1) the performance of bids, trade contracts
(other than borrowed money), leases, statutory obligations, surety
bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business (or to secure
reimbursement obligations or letters of credit in support of such
bonds) in an aggregate amount not in excess of 5% of the SEC PV10
indicated on Borrower's most recent Reserve Report at the time such
pledges or deposits are made, (2) appeal or supercedes bonds (or to
secure reimbursement obligations or letters of credit in support of
such bonds) in an amount not to exceed $10 million at any one time
outstanding, or (3) pledges or deposits made in the ordinary course of
business in connection with worker's compensation, unemployment
insurance, and other types of social security legislation, property
insurance and liability insurance;
(b) Liens encumbering customary initial deposits and
margin deposits of cash or Cash Equivalents securing Swap Obligations
or Permitted Hedging Transactions and Liens encumbering contract
rights under Permitted Hedging Transactions;
(c) Liens granted on Equipment to the extent granted to
secure Debt incurred pursuant to Section 6.3 hereof;
(d) Liens granted in connection with the Presale of Gas,
provided, however, that all of the proceeds from such Presale of Gas
shall be applied to repay the outstanding Obligations;
(e) Liens created on or Production Payments granted with
respect to undivided interests in, acreage drilled or to be drilled
pursuant to Drilling Programs, on Hydrocarbons produced therefrom and
on the proceeds of such Hydrocarbons to secure or to provide provision
for payment of the Borrower's obligations under such Drilling
Programs, provided, however, that (1) the number of wells included in
such program commenced in any fiscal year does not exceed 30 per
fiscal year (plus the number of wells included in programs commenced
in prior years but not yet completed), (2) such obligations are
limited to a percentage of production from such wells, (3) such Liens
survive only until the Person to whom such Lien was granted has
received production with a value equal to the costs, expenses and fees
related to property and services provided or paid for by such Person
plus an agreed-upon interest component, and (4) such Liens secure
obligations that are nonrecourse to each of Borrower or its
Subsidiaries;
(f) any extension, renewal, or replacement of Liens
created or existing pursuant to any of clauses (a) through (e) or (g)
through (i) of this definition, provided,
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<PAGE> 15
however, that such Liens would have otherwise been permitted under
such clauses, and provided further, that the Liens permitted by this
clause (i) do not secure any additional Debt or encumber any
additional property;
(g) Liens constituting or securing (1) Royalty Payment
Obligations referred to in clause (iii) of the definition of such term
and (2) Drilling Production Payments or;
(h) Liens on the proceeds of any property securing First
Lien Debt or on deposit accounts containing only such proceeds and
which at no time contains or contained proceeds of Receivables;
(i) Liens (including extensions and renewals thereof) on
real or personal property, acquired after the Closing Date ("New
Property"); provided, however, that (1) such Lien is created solely
for the purpose of securing Debt incurred to finance the cost
(including the cost of improvements or construction) of New Property
subject thereto and such Lien is created prior to or within six months
after the later of the acquisition, the completion of construction, or
the commencement of full operation of such New Property, (2) the
principal amount of the Debt secured by such Lien does not exceed 100%
of such cost including costs and fees related to the financing
thereof, and (3) any such Lien shall not extend to or cover any
property or assets other than such item of New Property, any
improvements on such New Property and any throughput, capacity or
similar agreements related to the operation of such New Property.
"GAAP" means generally accepted accounting principles in the
United States of America in effect from time to time.
"Galveston Bay Pipeline" means Galveston Bay Pipeline Company, a
subsidiary of Borrower.
"Galveston Bay Processing" means Galveston Bay Processing
Corporation, a subsidiary of Borrower.
"GB Facility Asset Sale" means:
(a) With respect to Galveston Bay Pipeline, the sale of
all or substantially all of the assets (but which assets shall be
exclusive of Inventory and Receivables) of Galveston Bay Pipeline
other than a Sale and Leaseback Transaction resulting in a Capital
Lease which constitutes, as to Galveston Bay Pipeline, a GB Financing
Document; and
(b) With respect to Galveston Bay Processing, the sale
of all or substantially all of the assets (but which assets shall be
exclusive of Inventory and Receivables) of Galveston Bay Processing
other than a Sale and Leaseback Transaction resulting in a Capital
Lease which constitutes, as to Galveston Bay Processing, a GB
Financing Document.
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<PAGE> 16
"GB Facility Financing" means:
(a) With respect to Galveston Bay Pipeline, (i) the
incurrence of Debt by, including the renewal or extension of Debt
previously incurred by, Galveston Bay Pipeline that is secured by a
mortgage or deed of trust constituting, with respect to Galveston Bay
Pipeline, a GB Financing Document, (ii) a Sale and Leaseback
Transaction resulting in a Capital Lease which constitutes, as to
Galveston Bay Pipeline, a GB Financing Document; and
(b) With respect to Galveston Bay Processing, (i) the
incurrence of Debt by, including the renewal or extension of Debt
previously incurred by, Galveston Bay Processing that is secured by a
mortgage or deed of trust constituting, with respect to Galveston Bay
Processing, a GB Financing Document, (ii) a Sale and Leaseback
Transaction resulting in a Capital Lease which constitutes, as to
Galveston Bay Pipeline, a GB Financing Document.
"GB Financing Beneficiary" means, with respect to a GB Financing
Documents, the mortgagee, beneficiary, secured party or lessor
thereunder, as the case may be.
"GB Financing Document" means:
(a) With respect to Galveston Bay Pipeline, (i) a
mortgage or deed of trust pursuant to which Galveston Bay Pipeline
encumbers all or substantially all of its rights, titles and interests
in and to all or substantially all of the GB Pipeline Facility for the
purpose of securing Debt of Galveston Bay Processing, or (ii) a
Capital Lease to which Galveston Bay Pipeline is party as lessee
executed by Galveston Bay Pipeline in connection with the closing of a
Sale and Leaseback transaction pursuant to which all or substantially
all of Galveston Bay Pipeline's rights, titles and interests in and to
all or substantially all of the GB Pipeline Facility are conveyed and
concurrently leased back by Galveston Bay Pipeline; and
(b) With respect to Galveston Bay Processing, (i) a
mortgage or deed of trust pursuant to which Galveston Bay Processing
encumbers all or substantially all of its rights, titles and interests
in and to all or substantially all of the GB Processing Facility for
the purpose of securing Debt of Galveston Bay Processing, or (ii) a
Capital Lease to which Galveston Bay Processing is party as lessee
executed by Galveston Bay Processing in connection with the closing of
a Sale and Leaseback transaction pursuant to which all or
substantially all of Galveston Bay Processing's rights, titles and
interests in and to all or substantially all of the GB Processing
Facility are conveyed and concurrently leased back by Galveston Bay
Processing.
"GB Nondisturbance and Attornment Agreement" means a
nondisturbance and attornment agreement in recordable form, duly executed and
acknowledged by the appropriate GB financing Beneficiary for the benefit of
Borrower and of Agent, relative to GB/TransTexas Pipeline Agreement or a
GB/TransTexas Processing Agreement, as the case may be, and to such appropriate
GB Financing Beneficiary's GB Financing Document, and containing provisions,
with respect to each GB/TransTexas Pipeline Agreement or GB/TransTexas
Processing Agreement in question, comparable in substance to the provisions
contained in the Jefferies Nondisturbance and Attornment Agreement.
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<PAGE> 17
"GB Pipeline Facility" means the dual 16 inch O.D. (gas) and 8
inch O.D. (oil) transmission pipelines, co-owned, as of the date of this
Agreement, by Galveston Bay Pipeline and Davis Petroleum Pipeline L.L.C., that
extend from Lot 12, Block 139 of the San Leon Townsite, Amos Edwards League
Survey, Abstract 10, Galveston County, Texas, to the Eagle Point Platform
(co-owned, as of the date of this Agreement, by Borrower and Davis Petroleum
Corp.) in State Tract 331, Galveston Bay, Texas, including the real property,
interests in real property, and the personal property, plant and equipment
associated with such pipelines.
"GB Processing Facility" means the property, plant and equipment
comprising the hydrocarbon processing facility owned and operated by Galveston
Bay Processing at Winnie, Texas (including the real property and interests in
real property, situated in Winnie, Jefferson County, Texas, associated with
such facility).
"GB/TransTexas Processing Agreement" means each of (a) the
Amended Natural Gas Treating and Condensate Handling Agreement, dated March 16,
2000, between Borrower and Galveston Bay Processing, as amended, and (b) each
other agreement in effect at the time in question between Borrower and
Galveston Bay Processing relating to the processing of Hydrocarbons by
Galveston Bay Processing at the GB Processing Facility.
"GB/TransTexas Pipeline Agreement" means each of (a) the Amended
Transportation Agreement dated as of March 16, 2000, between Borrower and
Galveston Bay Pipeline, as amended, and (b) each other agreement in effect at
the time in question between Borrower and Galveston Bay Pipeline relating to
the transportation of Hydrocarbons by Galveston Bay Pipeline through the GB
Pipeline Facility.
"Gillespie Price Method" shall have the meaning set forth in the
definition of Valuation Amount.
"GMACCC" has the meaning set forth in the preamble to this
Agreement and shall include its successors and assigns.
"Governmental Body" means any nation or government, any state or
other political subdivision thereof or any entity exercising the legislative,
judicial, regulatory or administrative functions of or pertaining to a
government.
"Guarantor" means (i) each Material Subsidiary of Borrower
joining in the execution of this Agreement for the purposes of evidencing its
Guaranty and of agreeing to be bound by the terms of this Agreement, (ii) each
Material Subsidiary of Borrower that becomes (or is required to become) a
guarantor of the Obligations of Borrower under this Agreement in accordance
with Article XVI, and (iii) each Material Subsidiary of Borrower executing a
joinder agreement in which such Material Subsidiary agrees to become and be a
guarantor of the Obligations and to be bound by the terms of this Agreement.
"Guaranty" means the guaranty of the Obligations made by each
Guarantor in favor of Agent for its benefit and for the ratable benefit of
Lenders as provided in Article XVI of this Agreement.
"Hazardous Discharge" has the meaning set forth in Section
5.10(d) hereof.
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<PAGE> 18
"Hazardous Substance" means, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or toxic substances
or related materials as defined in CERCLA, the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA or any
other applicable Environmental Law and in the regulations adopted pursuant
thereto.
"Hazardous Wastes" means all waste materials subject to
regulation under RCRA or applicable state law, and any other applicable Federal
and state laws now in force or hereafter enacted relating to hazardous waste
disposal.
"Headquarters Facility" means the real property (including the
improvements thereon, the fixtures, other than trade fixtures, affixed or
attached thereto, and the personal property used in connection with the
operation thereof) owned by Borrower and located at 1300 North Sam Houston
Parkway East, Houston, Texas.
"Hedging Subsidiary" means a Subsidiary of Borrower engaged
solely in the business of facilitating Permitted Hedging Transactions with
Borrower or any of its subsidiaries.
"Hedging Transaction" means non-speculative transactions in
futures, forwards, swaps or option contracts (including both physical and
financial settlement transactions) engaged in by Borrower or any of its
Subsidiaries as part of its normal business operations as a risk management
strategy or hedge against adverse changes in market conditions in the oil and
natural gas industry.
"Hydrocarbon Reserves" means and includes, as to any Person, any
and all of such Person's now owned or hereafter acquired Hydrocarbon reserves
in place.
"Hydrocarbons" means oil, natural gas, condensate and natural gas
liquids, each as such terms are used in the Proved Reserves Report.
"Indenture" means the Indenture dated as of the date hereof by
Borrower, as Issuer, and Firstar Bank, N.A., as Trustee, pursuant to which the
Indenture Notes were issued as the same may be amended, supplemented or
modified from time to time.
"Indenture Notes" means the $200,000,000 of Senior Secured Notes
due 2004 issued pursuant to the Indenture.
"Insurance Proceeds" means the interest in and to all proceeds
(net of costs of collection, including attorney's fees) which now or hereafter
may be paid under any insurance policies now or hereafter obtained by or on
behalf of Borrower or any Guarantor in connection with any assets thereof,
together with interest payable thereon and the right to collect and receive the
same, including, without limitation, proceeds of casualty insurance, title
insurance, business interruption insurance and any other insurance now or
hereafter maintained with respect to such assets.
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"Intercreditor Agreement" means the intercreditor agreement dated
as of the date hereof by and among Agent, the Trustee, Receivables Lender and
Borrower.
"Interest Rate or Currency Agreement" of any Person means any
forward contract, futures contract, swap, option or other financial agreement
or arrangement (including, without limitation, caps, floors, collars, puts and
similar agreements) relating to, or the value of which is dependent upon,
interest rates or currency exchange rates.
"Inventory" means and includes all of Borrower's, and each of
Borrower's Subsidiaries', now owned or hereafter acquired inventory (as such
term is defined in the Uniform Commercial Code), including, without limitation,
casing, drill pipe and other supplies accounted for as inventory by Borrower on
its consolidated financial statements (excluding any Hydrocarbons), all
proceeds thereof (from insurance or otherwise), and all documents of title,
books, records, ledger cards, files, correspondence, and computer files, tapes,
disks and related data processing software that at any time evidence or contain
information relating to the foregoing.
"Investment" by any Person in any other Person means (without
duplication) (a) the acquisition (whether for cash, property, services,
securities or otherwise) of Capital Stock, bonds, notes, debentures,
partnership or other ownership interests or other securities issued by such
other Person or any agreement to make any such acquisition; (b) the making by
such Person of any deposit with, or advance, loan or other extension of credit
to, such other Person (including the purchase of property from another Person
subject to an understanding or agreement, contingent or otherwise, to resell
such property to such other Person and (without duplication) any amount
committed to be advanced, loaned or extended to such other Person; (c) the
entering into of any guarantee (other than any Guaranty hereunder) of, or other
credit support or contingent obligation with respect to, Debt or other
liability of such other Person; (d) the entering into of any Swap Obligation
with such other Person; or (e) the making of any capital contribution by such
Person to such other Person.
"Investment Grade Rating" means, with respect to any Person or
issue of debt securities or preferred stock, a rating in one of the four
highest letter rating categories (without regard to "+" or "-" or other
modifiers) by any rating agency or if any such rating agency has ceased using
letter rating categories or the four highest of such letter rating categories
are not considered to represent "investment grade" ratings, then the comparable
"investment grade" ratings (as designated by any such rating agency).
"Jefferies" means Jefferies Analytical Trading Group, Inc.
"Jefferies Nondisturbance and Attornment Agreement" means the
Nondisturbance and Attornment Agreement dated on or about March 15, 2000, among
Jefferies, Borrower, Galveston Bay Processing, Agent and the Trustee, as
amended.
"Junior Preferred Stock" means Borrower's junior preferred stock,
$1.00 par value.
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<PAGE> 20
"Lender" and "Lenders" has the meaning ascribed to such term in
the preamble to this Agreement, and shall include each Person which is a
permitted Participant, successor or assign of any Lender.
"Lien" means any mortgage, deed of trust, lien, pledge, charge,
security interest, collateral assignment or other encumbrance for security
purposes of any kind, regardless of whether filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement and any lease deemed to constitute a security interest and
any option or other agreement to give any security interest).
"Loan Year" means each period of 12 consecutive months commencing
on the Closing Date and ending on the day prior to each anniversary thereof.
"M&M Claims" means Liens of mechanics and materialmen on the
Collateral.
"Material Adverse Effect" means a material adverse effect on (i)
the condition, operations, assets, business or prospects of the Borrower or any
Guarantor, (ii) Borrower's ability to pay the Obligations in accordance with
the terms thereof, (iii) the value of the Collateral, or the Liens on the
Collateral or the priority of such Liens, or (iv) the practical realization of
the benefits of Agent's and Lenders' rights and remedies under this Agreement
and the Ancillary Documents.
"Material Change" means an increase or decrease of more than 10%
since the then most recent Proved Reserve Report in the discounted future net
cash flows (excluding changes that result from changes in prices) from proved
oil and gas reserves of Borrower and its consolidated Subsidiaries (before any
state or federal income tax); provided, however, that the following will be
excluded from the Material Change calculation: (i) any acquisitions since the
then most recent Proved Reserve Report of oil and gas reserves that have been
estimated by independent petroleum engineers and on which a report or reports
have been prepared by such independent petroleum engineers within 12 months of
the acquisition, (ii) any reserves added since the then most recent Proved
Reserve Report attributable to the drilling or recompletion of wells not
included in previous reserve estimates, and (iii) any disposition of properties
existing on the date of then most recent Proved Reserve Report that have been
disposed of.
"Material Subsidiary" means, at any particular time, any
Subsidiary that, together with its Subsidiaries, owns assets valued at $100,000
or more.
"Maximum Loan Amount" means $52,500,000 less repayments of the
Term Loan.
"Maximum Revolving Advance Amount" shall mean $30,000,000
(inclusive of outstanding Swingline Loans).
"Maximum Swingline Loan Amount" means at any time the lesser of
(i) $1,500,000 and (ii) the Maximum Revolving Advance Amount at such time less
the outstanding balance of Revolving Advances at such time.
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"Mortgage" means each mortgage, deed of trust, trust deed, deed
to secure debt, assignment, assignment of production, security agreement,
financing statement or similar document, however styled, executed by Borrower,
or any other Person, in favor of Agent for the ratable benefit of Agent and
Lenders primarily for the purpose of creating or granting a Lien on Real
Property and/or Hydrocarbons, or any interests therein, to secure all or any
part of the Obligations.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Sections 3(37) and 4001 (a)(3) of ERISA.
"Net Cash Proceeds" means an amount equal to the aggregate amount
of cash received by Borrower and its Subsidiaries in respect of an Asset Sale,
less the sum of (i) all reasonable out-of-pocket fees, commissions, and other
expenses incurred in connection with such Asset Sale, including the amount
(estimated in good faith by Borrower) of income, franchise, sales and other
applicable taxes to be paid, payable or accrued by Borrower or any Subsidiary
of Borrower (in each case as estimated in good faith by Borrower or such
Subsidiary without giving effect to tax attributes unrelated to such Asset
Sale) in connection with such Asset Sale, and (ii) the aggregate amount of cash
so received which is used to retire any then existing Debt of Borrower or its
Subsidiaries (other than the Obligations), as the case may be, which is
required by the terms of such Debt to be repaid in connection with such Asset
Sale.
"Net GB Financing Proceeds" means an amount equal to the
aggregate amount of cash received by Galveston Bay Pipeline or Galveston Bay
Processing, as the case may be, in respect of a GB Facility Financing to which
Galveston Bay Pipeline or Galveston Bay Processing, as the case may be, is a
party, less the sum of (i) all reasonable out-of-pocket fees, commissions, and
other expenses incurred in connection with such GB Facility Financing,
including the amount (estimated in good faith by Borrower) of income,
franchise, sales and other applicable taxes to be paid, payable or accrued by
Borrower or by Galveston Bay Pipeline or Galveston Bay Processing, as the case
may be (in each case as estimated in good faith by Borrower or by Galveston Bay
Pipeline or Galveston Bay Processing, as the case may be, without giving effect
to tax attributes unrelated to such GB Facility Financing), in connection with
such GB Facility Financing, (ii) the aggregate amount of cash so received which
is used to retire any then existing Debt of Galveston Bay Pipeline or Galveston
Bay Processing (other than the Obligations), as the case may be, which is
required by the terms of such Debt to be repaid in connection with such GB
Facility Financing, (iii) the aggregate amount of cash so received which is
used to retire any then existing Debt (other than the Obligations) that is
secured by assets of Galveston Bay Pipeline or Galveston Bay Processing, as the
case may be, and (iv) the aggregate amount of cash so received which is used to
retire indebtedness of Borrower in respect of Allowed Priority Tax Claims under
the Plan, Allowed Claims of prepetition secured creditors in class 2 under the
Plan, and Allowed Claims of prepetition secured creditors in classes 5 and 6B
under the Plan.
"Net Proceeds" means (a) in the case of any sale by a Person of
Qualified Capital Stock, the aggregate net cash proceeds received by such
Person from the sale of Qualified Capital Stock (other than to a Subsidiary)
after payment of reasonable out-of-pocket expenses, commissions and discounts
incurred in connection therewith, and (b) in the case of any exchange,
exercise, conversion or surrender of any outstanding securities or Debt of such
Person for or into shares of Qualified Capital Stock of such Person, the net
book value of such
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<PAGE> 22
outstanding securities as adjusted on the books of such Person or Debt of such
Person to the extent recorded in accordance with GAAP, in each case, on the
date of such exchange, exercise, conversion or surrender (plus any additional
amount required to be paid by the holder of such Debt or securities to such
Person upon such exchange, exercise, conversion or surrender and less (i) any
and all payments made to the holders of such Debt or securities and (ii) all
other expenses incurred by such Person in connection therewith, in each case,
in so far as such payments or expenses are incident to such exchange, exercise,
conversion, or surrender).
"Net Working Capital" of any Person means (i) all current assets
of such Person and its consolidated Subsidiaries, minus (ii) all current
liabilities of such Person and its consolidated Subsidiaries other than the
current portion of long term debt, each item to be determined in conformity
with GAAP.
"Net Worth" of any Person means, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly or
annual consolidated balance sheet of such Person and its Subsidiaries (which
shall be as of a date not more than 90 days prior to the date of such
computation), less any amounts included therein attributable to Disqualified
Capital Stock or any equity security convertible into or exchangeable for Debt,
the cost of treasury stock (not otherwise deducted from stockholder's equity),
and the principal amount of any promissory notes receivable from the sale of
the Capital Stock of such Person or any of its Subsidiaries, each item to be
determined in conformity with GAAP.
"New Property" has the meaning specified in clause (s) in the
definition of the term "Permitted Liens" set forth in Section 1.2.
"Nominee" means any Person who has or holds any right, title or
interest in any oil and gas or mineral lease as a nominee for Borrower or any
of its Subsidiaries.
"Nominee Property" means any property, lease, interest or other
asset with respect to which any Person has or holds any right, title or
interest as a Nominee.
"Non-Officer Affiliate" means, as to any specified Person, any
Affiliate of such Person that is not an Officer Affiliate of such Person.
"Note" or "Notes" means, individually or collectively, the Term
Note, the Revolving Credit Note and the Swingline Note.
"NYMEX Spot Price Method" has the meaning set forth in the
definition "Valuation Amount".
"Obligations" means and includes any and all of Borrower's Debt
and/or liabilities to Agent or the Lenders, of every kind, nature and
description, direct or indirect, secured or unsecured, joint, several, joint
and several, absolute or contingent, due or to become due, now existing or
hereafter arising, contractual or tortious, liquidated or unliquidated, arising
under or out of or in connection with this Agreement, the Ancillary Documents
or under any other agreement between Agent or the Lenders and Borrower
delivered or given in connection therewith or herewith and all obligations of
Borrower to Agent or the Lenders to perform acts or refrain from taking any
action hereunder or thereunder.
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"Officer Affiliate" means, as to any specified Person, any other
Person who is an Affiliate of such specified Person by reason of such other
Person's inclusion within the class of Persons described in clause (iii) of the
definition of the term "Affiliate" set forth in this Section 1.2, whether or
not such other Person is included within either or both of the classes of
Persons described in clauses (i) and (ii) of the definition of the term
"Affiliate" set forth in this Section 1.2, and any Affiliate of such other
Person (other than Borrower and Borrower's Subsidiaries).
"Operating Lease" means, as applied to any Person, any lease of
any property (whether real, personal or mixed) by that Person as lessee which
is not a Capital Lease or a lease of a mineral interest.
"Overadvance" means the amount by which the sum of the
outstanding balance of Revolving Advances and Swingline Loans exceeds the
lesser of (x) the Maximum Revolving Advance Amount or (y) the Borrowing Base.
"Parent" of any Person means a corporation or other entity
owning, directly or indirectly at least 50% of the shares of stock or other
ownership interests having ordinary voting power to elect a majority of the
directors of the Person, or other Persons performing similar functions for any
such Person.
"Participant" has the meaning set forth in Section 15.3(b) of
this Agreement.
"Payment Office" means initially 1290 Avenue of the Americas, New
York, New York 10104; thereafter, such other office of Agent, if any, which it
may designate by notice to Borrower and each Lender to be the Payment Office.
"Permitted Hedging Transactions" means non-speculative
transactions in futures, forwards, swaps or option contracts (including both
physical and financial settlement transactions) engaged in by Borrower or its
Subsidiaries as part of their normal business operations as a risk-management
strategy or hedge against adverse changes in the prices of natural gas,
condensate, or oil; provided, however, that such transactions do not, on a
monthly basis, relate to more than 90% of Borrower Entities' average net
hydrocarbon production (mcfe) per month for the most recent 3-month period
measured at the time of such incurrence; and, provided, further, that, at the
time of such transaction (i) the counterparty to any such transaction is an
Eligible Institution or a Person that has an Investment Grade Rating, or (ii)
such counterparty's obligation pursuant to such transaction is unconditionally
guaranteed in full by, or secured by a letter of credit issued by, an Eligible
Institution or a Person that has an Investment Grade Rating.
"Permitted Investment" means, when used with reference to
Borrower and its Subsidiaries:
(i) trade credit extended to Persons in the ordinary course of
business;
(ii) purchases of Cash Equivalents;
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(iii) Investments by Borrower or its wholly owned Subsidiaries in
wholly owned Subsidiaries of Borrower;
(iv) Swap Obligations;
(v) the receipt of Capital Stock in lieu of cash in connection
with the settlement of litigation;
(vi) advances to officers and employees in connection with the
performance of their duties in the ordinary course of business in an amount not
to exceed $500,000 in the aggregate outstanding at any time;
(vii) margin deposits in connection with Permitted Hedging
Transactions;
(viii) Investments and expenditures made in the ordinary course
of business by Borrower and its Subsidiaries, and of a nature that, at the time
of expenditure, is customary in the oil and gas business as a means of actively
exploiting, exploring for, acquiring, developing, processing, gathering,
marketing or transporting oil or gas through agreements, transactions,
interests or arrangements which permit a Person to share risks or costs, comply
with regulatory requirements regarding local ownership or satisfy other
objectives customarily achieved through the conduct of the oil and gas business
jointly with third parties, including, without limitation, (a) ownership
interests in oil and gas properties or gathering systems and (b) Investments
and expenditures in the form of or pursuant to operating agreements, processing
agreements, farm-in agreements, farm-out agreements, development agreements,
area of mutual interest agreements, unitization agreements, pooling
arrangements, joint bidding agreements, service contracts, joint venture
agreements, partnership agreements (whether general or limited), subscription
agreements, stock purchase agreements and other similar agreements with third
parties; provided, however, that in the case of any joint venture engaged in
processing, gathering, marketing or transporting oil or gas, (1) all Debt of
such joint venture that would not otherwise constitute Debt of one of Borrower
Entities shall be deemed Debt of Borrower in proportion to its direct or
indirect ownership interest in such joint venture, and (2) such joint venture
shall be reasonably anticipated, at the time of Investment, to enhance the
value of the reserves of Borrower Entities or marketability of production from
such reserves;
(ix) the Guaranty and any guaranty by Borrower or any Subsidiary
of Borrower that is permitted under Section 6.3(e);
(x) deposits permitted by the definition of Permitted Liens or
any extension, renewal, or replacement of any of them,
(xi) an Investment in Capital Stock resulting from an Asset Sale
pursuant to Section 6.2,
(xii) any Guaranty by Borrower of the obligations of any wholly
owned Subsidiary of Borrower to the extent such obligations so guaranteed (A)
do not constitute Debt unless and only to the extent such Debt is otherwise
permitted under Section 6.3, and (B) except to the extent such obligations
constitute Debt otherwise permitted under Section 6.3, such
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<PAGE> 25
obligations are of the type customarily incurred by such wholly owned
Subsidiary in favor of third parties in the ordinary course of conducting its
Related Business, or
(xiii) other Investments, provided, however, that such
Investments do not exceed $1 million in the aggregate at any time.
"Permitted Liens" means:
(a) Liens imposed by Governmental Bodies for taxes,
assessments, or other Charges (i) not yet due or (ii) which are being contested
in good faith and by appropriate proceedings, if (1) adequate reserves with
respect thereto are maintained on the books of any of the Borrower Entities in
accordance with GAAP and (2) such Liens (other than with respect to Permitted
Prior Liens) do not prime the Liens of Agent on the Collateral;
(b) statutory Liens of landlords, carriers.
warehousemen, mechanics, materialmen, repairmen, mineral interest owners, or
other like Liens arising by operation of law in the ordinary course of
business, provided, however, that (1) the underlying obligations are not
overdue for a period of more than 45 days, or (2) such Liens are being
contested in good faith and by appropriate proceedings and adequate reserves
with respect thereto are maintained on the books of any of Borrower Entities in
accordance with GAAP;
(c) pledges of assets or deposits of cash or Cash
Equivalents to secure (1) the performance of bids, trade contracts (other than
borrowed money), leases, statutory obligations, surety bonds, performance bonds
and other obligations of a like nature incurred in the ordinary course of
business (or to secure reimbursement obligations or letters of credit in
support of such bonds) in an aggregate amount not in excess of 5% of the PV10
indicated on Borrower's most recent Proved Reserve Report at the time such
pledges or deposits are made, (2) appeal or supercedeas bonds (or to secure
reimbursement obligations or letters of credit in support of such bonds) in an
amount not to exceed $10 million at any one time outstanding, or (3) pledges or
deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance, and other types of social security
legislation, property insurance and liability insurance;
(d) Liens encumbering customary initial deposits and
margin deposits securing Swap Obligations or Permitted Hedging Transactions and
Liens encumbering contract rights under Permitted Hedging Transactions;
(e) pledges of assets to secure margin obligations,
settlement obligations, reimbursement obligations or letters of credit in
connection with Permitted Hedging Transactions; provided, however, that, at the
time such pledge is made (or, if such pledge secures future Permitted Hedging
Transactions, at the time any such Permitted Hedging Transaction is entered
into), the maximum aggregate exposure under such Permitted Hedging Transactions
does not exceed the greater of (1) $10 million or (2) 5% of the PV10 indicated
on Borrower's then most recent Proved Reserves Report;
(f) easements, rights-of-way, zoning, similar
restrictions and other similar encumbrances or title defects incurred in the
ordinary course of business which, in the aggregate, are not material in
amount, and which do not in any case materially detract from the
24
<PAGE> 26
value of the property subject thereto (as such property is used by any of
Borrower or any of its Subsidiaries) or materially interfere with the ordinary
conduct of the business of any of Borrower or any of its Subsidiaries;
(g) Liens arising by operation of law in connection with
judgments, only to the extent, for an amount and for a period not resulting in
an Event of Default with respect thereto;
(h) (1) Liens securing Debt or other obligations not in
excess of $3 million, (2) Liens existing on the Closing Date, and (3) Liens
existing on the Closing Date encumbering assets owned by Galveston Bay
Processing or Galveston Bay Pipeline or created after the Closing Date to
secure a GB Facility Financing;
(i) Liens securing (1) Allowed Priority Tax Claims under
the Plan, (2) Allowed Claims in classes 2, 5, 6A or 6B under the Plan, (3) Debt
incurred pursuant to Section 6.3(j), or (4) refinancing Debt incurred pursuant
to Section 6.3(f) with respect to Liens described in subsections (1), (2) or
(3) of this clause (i);
(j) Liens granted on (1) Equipment to the extent granted
to secure Debt incurred pursuant to Section 6.3 or (2) Inventory, Receivables
or Hydrocarbons which are subordinated to the Liens in favor of Agent (or
subordinated to the Liens of the Receivables Lender under the Receivables
Facility) in a manner satisfactory to Agent under this Agreement and GMACCC
under the Receivables Facility, as the case may be;
(k) Liens granted in connection with the Presale of Gas;
(l) Liens created on or Production Payments granted with
respect to undivided interests in, acreage drilled or to be drilled pursuant to
Drilling Programs, on Hydrocarbons produced therefrom and on the proceeds of
such Hydrocarbons to secure or to provide provision for payment of the Borrowed
Obligations under such Drilling Programs, provided, however, that (1) the
number of wells included in such program commenced in any fiscal year does not
exceed 30 per fiscal year (plus the number of wells included in programs
commenced in prior years but not yet completed), (2) such obligations are
limited to a percentage of production from such wells, (3) such Liens survive
only until the Person to whom such Lien was granted has received production
with a value equal to the costs, expenses and fees related to property and
services provided or paid for by such Person plus an agreed-upon interest
component, and (4) such Liens secure obligations that are nonrecourse to each
of Borrower or its Subsidiaries;
(m) Liens on the assets of any entity existing at the
time such assets are acquired by any of Borrower Entities, whether by merger,
consolidation, purchase of assets or otherwise so long as such Liens (1) are
not created, incurred or assumed in contemplation of such assets being acquired
by any of Borrower Entities and (2) do not extend to any other assets of any of
Borrower or its Subsidiaries;
(n) any extension, renewal, or replacement of Liens
created pursuant to any of clauses (a) through (g), (h) 3, (k) through (m), or
(q) through (s) of this definition, provided, however, that such Liens would
have otherwise been permitted under such clauses, and
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<PAGE> 27
provided further, that the Liens permitted by this clause (n) do not secure any
additional Debt or encumber any additional property;
(o) Liens constituting or securing (1) Royalty Payment
Obligations and (2) Drilling Production Payments;
(p) Liens on the assets of any of the Borrower Entities
in favor of another Borrower Entity;
(q) Liens on the proceeds of any property subject to a
Permitted Lien (other than Net GB Financing Proceeds that are received directly
by Borrower or that are distributed to the Company by Galveston Bay Pipeline or
Galveston Bay Property, as the case may be) or on deposit accounts containing
any such proceeds;
(r) Liens on the proceeds of any property that is not
Collateral;
(s) Liens (including extensions and renewals thereof) on
real or personal property, acquired after the Closing Date ("New Property");
provided, however, that (1) such Lien is created solely for the purpose of
securing Debt incurred to finance the cost (including the cost of improvements
or construction) of New Property subject thereto and such Lien is created prior
to or within six months after the later of the acquisition, the completion of
construction, or the commencement of full operation of such New Property, (2)
the principal amount of the Debt secured by such Lien does not exceed 100% of
such cost including costs and fees related to the financing thereof, and (3)
any such Lien shall not extend to or cover any property or assets other than
such item of New Property, any improvements on such New Property and any
throughput, capacity or similar agreements related to the operation of such New
Property;
(t) Liens securing obligations under the Indenture and
the Indenture Notes, provided that such Liens are expressly subordinated to the
Liens securing the Obligations;
(u) Liens under the Security Documents;
(v) Liens securing the Receivables Facility; and
(w) Liens (including extensions and renewals thereof) on
the Headquarters Facility, provided, however, that (1) such Liens are created
solely for the purpose of securing Debt Incurred by Borrower concurrently with
the creation of such Liens, (2) the principal amount of the Debt secured by
such Liens at the time of Incurrence does not exceed 100% of the Appraised
Value of the Headquarters Facility as determined by an Appraisal dated not more
than six (6) months prior to the date on which such Liens are created, and (3)
any such Lien shall not extend to or cover any property or assets other than
the Headquarters Facility and any leases and rents derived from the ownership
and operation of the Headquarters Facility.
"Permitted Prior Liens" means:
(a) Liens imposed by Governmental Bodies for taxes,
assessments, or other Charges consisting of ad valorem taxes, severance taxes
and well usage taxes not yet due
26
<PAGE> 28
or which are being contested in good faith and by appropriate proceedings, if
adequate reserves with respect thereto are maintained on the books of any of
the Borrower Entities in accordance with GAAP;
(b) statutory Liens of landlords, carriers,
warehousemen, mechanics, materialmen, repairmen, mineral interest owners, or
other like Liens arising by operation of law in the ordinary course of
business, provided, however, that (1) the underlying obligations are not
overdue for a period of more than 45 days, or (2) such Liens are being
contested in good faith and by appropriate proceedings and adequate reserves
with respect thereto are maintained on the books of any of Borrower Entities in
accordance with GAAP; provided, further, that (except with respect to Mechanics
or Materialmens liens) no further action must be taken by the holders of such
liens in order to obtain priority over the liens of Agent or the Collateral;
(c) pledges or deposits of cash or Cash Equivalents to
secure (1) the performance of bids, trade contracts (other than borrowed
money), leases, statutory obligations, surety bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of business
(or to secure reimbursement obligations or letters of credit in support of such
bonds) in an aggregate amount not in excess of 5% of the PV10 indicated on
Borrower's most recent Proved Reserve Report at the time such pledges or
deposits are made, (2) appeal or supercedeas bonds (or to secure reimbursement
obligations or letters of credit in support of such bonds) in an amount not to
exceed $10 million at any one time outstanding, or (3) pledges or deposits made
in the ordinary course of business in connection with worker's compensation,
unemployment insurance, and other types of social security legislation,
property insurance and liability insurance;
(d) Liens encumbering customary initial deposits and
margin deposits of cash or Cash Equivalents securing Swap Obligations or
Permitted Hedging Transactions and Liens encumbering contract rights under
Permitted Hedging Transactions;
(e) easements, rights-of-way, zoning, similar
restrictions and other similar encumbrances or title defects incurred in the
ordinary course of business which, in the aggregate, are not material in
amount, and which do not in any case materially detract from the value of the
property subject thereto (as such property is used by any of Borrower or any of
its Subsidiaries) or materially interfere with the ordinary conduct of the
business of any of Borrower or any of its Subsidiaries;
(f) Liens securing Allowed Priority Tax Claims, Allowed
Claims under Classes 2 and 5 under the Plan and other Liens given priority
under the Plan and existing on the Closing Date;
(g) Liens on the assets of any entity existing at the
time such assets are acquired by any of the Borrower Entities, whether by
merger, consolidation, purchase of assets or otherwise so long as such Liens
(1) are not created, incurred or assumed in contemplation of such assets being
acquired by any of Borrower Entities and (2) do not extend to any other assets
of any of Borrower or its Subsidiaries;
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(h) Liens constituting or securing Royalty Payment
Obligations to the extent such Liens exist and are perfected at the time the
Collateral is acquired by Borrower and such acquisition occurs after the date
hereof;
(i) Liens on the proceeds of any property subject to a
Permitted Prior Lien to the extent the holder of such Lien has done all acts
necessary to maintain its priority claim to such proceeds;
(j) Liens on the proceeds of any property that is not
Collateral;
(k) Liens (including extensions and renewals thereof) on
real or personal property, acquired after the Closing Date ("New Property");
provided, however, that (1) such Lien is created solely for the purpose of
securing Debt incurred to finance the cost (including the cost of improvements
or construction) of New Property subject thereto and such Lien is created prior
to or within six months after the later of the acquisition, the completion of
construction, or the commencement of full operation of such New Property, (2)
the principal amount of the Debt secured by such Lien does not exceed 100% of
such cost including costs and fees related to the financing thereof, and (3)
any such Lien shall not extend to or cover any property or assets other than
such item of New Property, any improvements on such New Property and any
throughput, capacity or similar agreements related to the operation of such New
Property and (4) the holder of such Lien has done all acts necessary to
maintain its priority claim with respect to such Lien;
(l) Liens securing the Receivables Facility;
(m) Liens with respect to which Agent has released or
subordinated the Lien of the Security Documents in accordance with the terms of
this Agreement; and
(n) any extension, renewal, or replacement of Permitted
Prior Liens, provided, however, that such Liens would have otherwise been
Permitted Prior Liens, and provided further, that the Liens described by this
clause (n) do not secure any additional Debt or encumber any additional
property and the holder of such Lien has done all acts necessary to maintain
its priority claim with respect to such Lien.
"Person" means any individual, sole proprietorship,
partnership, corporation, business trust, joint stock company, trust,
unincorporated organization, association, limited liability company,
institution, public benefit corporation, joint venture, entity or government
(whether Federal, state, county, city, municipal or otherwise, including any
instrumentality, division, agency, body or department thereof).
"Plan of Reorganization" or "Plan" means Borrower's Second
Amended Modified and Restated Plan of Reorganization under Chapter 11 of the
Bankruptcy Code, dated January 25, 2000, in Case No. 99-21550-C-11, in the
United States Bankruptcy Court for the Southern District of Texas, Corpus
Christi Division.
"Preferred Stock" means, with respect to any Person, any
class or classes (however designated) of Capital Stock of such Person that is
preferred as to the payment of
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dividends, or as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of such Person over shares of Capital
Stock of any other class of such corporation.
"Prepayment Date" has the meaning set forth in Section 13.1
hereof.
"Presale of Gas" means any advance payment agreement or other
arrangement pursuant to which Borrower or any Guarantor, having received full
payment of the purchase price for a specified quantity of Hydrocarbons prior to
the first scheduled date of delivery, is required to deliver, in one or more
installments subsequent to the date of such agreement or arrangement, such
quantity of Hydrocarbons to the purchaser of such Hydrocarbons pursuant to and
during the term of such agreement or arrangement; provided, however, that the
term "Presale of Gas" shall not include (i) any such agreement or other
arrangement covering deliveries of Hydrocarbons for a period not exceeding
three calendar months and pursuant to which Borrower or such Guarantor has
received full payment of the purchase price within 120 days of the last
scheduled date of delivery, (ii) a transaction to the extent and only to the
extent that it results in the creation of any Permitted Lien under clauses (l)
or (o) of the definition of "Permitted Liens," (iii) Permitted Hedging
Transactions, or (iv) an Asset Sale involving Hydrocarbon Reserves.
"Prime Rate" means the prime commercial lending rate of the
Bank as publicly announced to be in effect from time to time, such rate to be
adjusted automatically, without notice, on the effective date of any change in
such rate. This rate of interest is determined from time to time by the Bank as
a means of pricing some loans to its customers and is neither tied to any
external rate of interest or index nor does it necessarily reflect the lowest
rate of interest actually charged by the Bank to any particular class or
category of customers of the Bank.
"Production Payments" means Dollar Denominated Production
Payments and Volumetric Production Payments.
"Pro Forma Balance Sheet" has the meaning set forth in
Section 4.5(a) hereof.
"Pro Forma Financial Statements" has the meaning set forth in
Section 4.5(b) hereof.
"Projections" has the meaning set forth in Section 4.5(b)
hereof.
"Proved Reserves Report" means a report prepared by an
independent petroleum reserve engineer acceptable to Agent with respect to
proved Hydrocarbon Reserves.
"Purchasing Lender" has the meaning set forth in Section 15.3
hereof.
"PV10" means the Valuation Amount at a 10% discount rate.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"RCRA" means the Resource Conservation and Recovery Act, 42
U.S.C. Sections 6901 et seq., as same may be amended from time to time.
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"Real Property" means all of Borrower's right, title and
interest in and to the owned and leased real property.
"Receivables" means and includes, as to any Person, any and
all of such Person's now owned or hereafter acquired Accounts, all products and
proceeds thereof, and all books, records, ledger cards, files, correspondence,
and computer files, tapes, disks or software that at any time evidence or
contain information relating to such Person's Accounts.
"Receivables Facility" means that certain Third Amended and
Restated Accounts Receivables Management Agreement and Security Agreement dated
as of the date hereof by and between GMACCC and Borrower.
"Receivables Lender" means GMACCC, as the lender under the
Receivables Facility.
"Reference Period" with regard to any Person means the four
full fiscal quarters of such Person ended on or immediately preceding any date
upon which any determination is to be made pursuant to the terms of this
Agreement.
"Refinancing Debt" has the meaning specified in Section 6.3.
"Related Business" means (i) the exploration for, acquisition
of, development of, production, transportation, gathering, and processing (in
connection with natural gas and natural gas liquids only) of, crude oil,
natural gas, condensate, and natural gas liquids; provided, however, that the
Related Business shall not include any refining or distilling of Hydrocarbons
other than processing and fractionating natural gas and natural gas liquids,
(ii) the drilling and energy services business and pipeline services business,
(iii) owning and operating a Hedging Subsidiary, or (iv) owning or operating
facilities designed for separation, dehydration, treatment, stabilization,
processing or storage of Hydrocarbons and related operations.
"Release" has the meaning set forth in Section 4.7(c)(i)
hereof.
"Release Request" means a written request of Borrower in the
form of an officer's certificate delivered pursuant to Section 6.15.
"Reportable Event" means a reportable event described in
Section 4043(b) of ERISA or of the regulations promulgated thereunder.
"Required Lenders" means Lenders holding at least sixty-six
and two-thirds percent (66 2/3%) of the Advances and if no Advances are
outstanding then Lenders holding sixty-six and two thirds percent (66 2/3%) of
the aggregate Commitments.
"Restricted Investment" means any direct or indirect
Investment by Borrower or any Subsidiary of Borrower other than a Permitted
Investment.
"Restricted Payment" means, with respect to any Person, (i)
any Restricted Investment, (ii) any dividend or other distribution on shares of
Capital Stock of such Person or any Subsidiary of such Person, (iii) any
payment on account of the purchase, redemption, or
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<PAGE> 32
other acquisition or retirement for value of any shares of Capital Stock of
such Person, and (iv) any defeasance, redemption, repurchase, or other
acquisition or retirement for value, or any payment in respect of any amendment
in anticipation of or in connection with any such retirement, acquisition, or
defeasance, in whole or in part, of any Subordinated Debt, directly or
indirectly, of such Person or a Subsidiary of such Person prior to the
scheduled maturity or prior to any scheduled repayment of principal in respect
of such Subordinated Debt; provided, however, that the term "Restricted
Payment" does not include (i) any dividend, distribution, or other payment on
shares of Capital Stock of a Person solely in shares of Qualified Capital Stock
of such Person that is at least as junior in ranking as the Capital Stock on
which such dividend, distribution, or other payment is to be made, (ii) any
defeasance, redemption, repurchase or other acquisition or retirement for value
of Capital Stock of a Person payable in or from any combination of (A) shares
of Qualified Capital Stock of such Person and (B) the Net Proceeds of a
concurrent sale of Qualified Capital Stock of such Person, in each case to the
extent such Qualified Capital Stock is at least as junior in ranking as the
Capital Stock retired, (iii) any dividends made pursuant to the certificates of
designation of the Senior Preferred Stock and the Junior Preferred Stock, (iv)
any dividend, distribution, or other payment to Borrower from any of its
Subsidiaries, (v) any defeasance, redemption, repurchase, or other acquisition
or retirement for value, in whole or in part, of any Subordinated Debt of such
Person payable in or from any combination of (A) shares of Qualified Capital
Stock of such Person and (B) the Net Proceeds of a concurrent sale of Qualified
Capital Stock, or both, (vi) any payments or distributions made pursuant to and
in accordance with the Plan, or (vii) the redemption, purchase, retirement or
other acquisition of any Debt, including any premium paid thereon, with the
proceeds of any refinancing Debt permitted to be incurred pursuant to Section
6.3(f).
"Revolving Advances" means Advances made pursuant to Section
2.1 hereof.
"Revolving Credit Note" means, collectively, the promissory
notes in favor of each Lender referred to in Section 2.1 hereof.
"Revolving Interest Rate" means an interest rate per annum
equal to 13 1/2% per annum.
"Royalty Payment Obligations" means (i) royalties, overriding
royalties (including those granted in connection with Drilling Programs),
revenue interests, net revenue interests, net profit interests, and
reversionary interests, (ii) the interests of others in pooling or unitization
agreements, production sales contracts and operating agreements, (iii) Liens
arising under, in connection with or related to farm-out, farm-in, joint
operating, pooling, unitization or area of mutual interest agreements or other
similar or customary arrangements, agreements or interests, and (iv) similar
burdens on the property of Borrower or any Subsidiary of Borrower; each as
incurred in the ordinary course of business and to the extent such burdens are
limited in recourse to (x) the properties subject to such interests or
agreements, (y) the Hydrocarbons produced from such properties, and (z) the
proceeds of such Hydrocarbons.
"Sale and Leaseback Transaction" means an arrangement
relating to property owned on the Closing Date or thereafter acquired whereby
Borrower or a Subsidiary of Borrower transfers such property to a Person and
leases it back from such Person.
"SEC" means the Securities and Exchange Commission.
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"SEC Method" has the meaning set forth in the definition
"Valuation Amount".
"Security Agreement" means each Security and Pledge
Agreement, dated as of the Closing Date, between Borrower and the Agent for its
benefit and for the ratable benefit of Lenders, as same may be amended from
time to time.
"Security Documents" means each Mortgage, each Security
Agreement and all other security agreements, pledge agreements, mortgages,
deeds of trust, collateral assignments and other agreements or conveyances at
any time delivered to Agent to secure all or any part of the Obligations of
Borrower pursuant to this Agreement, any one or more of the Security Documents,
and/or the Notes.
"Security Interests" means the Liens on the Collateral
created by the Security Documents in favor of the Agent for the benefit of the
Lenders.
"Senior Preferred Stock" means Borrower's senior preferred
stock, $1.00 par value.
"Settlement Date" has the meaning set forth in Section
2.11(c)(ii).
"Subordinated Debt" means Debt which is subordinated and
junior in right of payment to the Obligations in a manner satisfactory to
Agent.
"Subsidiary" with respect to any Person, means (i) a
corporation with respect to which such Person or its Subsidiaries owns,
directly or indirectly, at least fifty percent of such corporation's Capital
Stock with voting power, under ordinary circumstances, to elect directors, or
(ii) a partnership in which such Person or a subsidiary of such Person is, at
the time, a general partner of such partnership and has more than 50% of the
total voting power of partnership interests entitled (without regard to the
occurrence of any contingency) to vote in the election of managers thereof, or
(iii) any other Person (other than a corporation or a partnership) in which
such Person, one or more Subsidiaries of such Person, or such Person and one or
more Subsidiaries of such Person, directly or indirectly, at the date of
determination thereof has (x) more than a fifty percent ownership interest, or
(y) the power to elect or direct the election of a majority of the directors or
other governing body of such other Person; provided, however, that a joint
venture an investment in which would constitute a Permitted Investment under
clause (ix) of the definition thereof shall not be deemed a Subsidiary.
"Swap Obligation" of any Person means any Interest Rate or
Currency Agreement entered into with one or more financial institutions or one
or more futures exchanges in the ordinary course of business and not for
purposes of speculation that is designed to protect such Person against
fluctuations in (x) interest rates with respect to Debt incurred and which
shall have a notional amount no greater than 105% of the principal amount of
the Debt being hedged thereby, or (y) currency exchange rate fluctuations.
"Swingline Lender" means GMACCC, or if GMACCC shall resign as
Swingline Lender, another Lender selected by Agent and reasonably acceptable to
Borrower.
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"Swingline Loan" means each advance made by Swingline Lender
pursuant to Section 2.5.
"Swingline Note" means the promissory note of Borrower in
form and substance acceptable to Agent, issued to evidence the Swingline Loan.
"TCW/Southern" means Southern Producer Services, L.P., TCW
Portfolio No. 1555 DR V Sub-Custody Partnership, L.P. and TCW DR VI Investment
Partnership, L.P., together with their successors and assigns as owners of the
TCW/Southern Production Payment.
"TCW/Southern Mandatory Offered Wells" means all of the
following wells that are drilled during the period beginning one day prior to
the date hereof and ending on and including March 31, 2001:
(a) each well not already subject to the
TCW/Southern Production Payment that either (i) has a bottom hole location that
is within 1500 feet of any lands and depths that are at such time subject to
the TCW/Southern Production Payment, or (ii) penetrates a geological reservoir
in communication with a zone either produced or able to be produced from any
well that is at such time subject to the TCW/Southern Production Payment,
provided that with respect to the Obenhaus No. 1 Gas Unit in Wharton County,
Texas, any TCW/Southern Mandatory Offered Wells shall be limited to wells
located on such unit, and
(b) each other well with its bottom hole
location in State Tracts 308, 329, 330, 331, 332, 351, 352 and 353 in Galveston
County, Texas, the adjacent acreage in the City of San Leon, Texas that was
originally made subject to the TCW/Southern Production Payment, and any other
acreage that is now or hereafter included in any production unit with any of
the foregoing acreage.
References herein to each well described in the foregoing paragraph (a) shall
include the associated drilling unit of at least 80 acres, and references
herein to each well described in the foregoing paragraph (b) shall include the
associated drilling unit of at least 160 acres.
"TCW/Southern Order" means the Order of the Bankruptcy Court
dated February 2, 2000, in case No. 99-21550-C-11, in the United States
Bankruptcy Court for the Southern District of Texas, Corpus Christi Division,
approving the TCW/Southern Production Payment Transaction.
"TCW/Southern Production Payment" means the Drilling
Production Payment conveyed as contemplated by the TCW/Southern Order and as
part of the TCW/Southern Production Payment Transaction by Borrower to
TCW/Southern pursuant to that certain Production Payment Conveyance dated on or
about the date hereof as from time to time supplemented and amended.
"Term" means the Closing Date through March 14, 2005, as same
may be extended in accordance with the provisions of Section 13.1 hereof.
"Term Loan" means the Advances made pursuant to Section 2.4
hereof.
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"Term Loan Rate" means an interest rate per annum equal to
14%.
"Term Note" means, collectively, the promissory notes in
favor of each Lender referred to in Section 2.5 hereof.
"Termination Event" means (i) a Reportable Event with respect
to any ERISA Plan or Multiemployer Plan; (ii) the withdrawal of either Borrower
or any member of the Controlled Group from a ERISA Plan or Multiemployer Plan
during a plan year in which such entity was a "substantial employer" as defined
in Section 4001(a)(2) of ERISA; (iii) the providing of notice of intent to
terminate a ERISA Plan in a distress termination described in Section 4041(c)
of ERISA; (iv) the institution by the PBGC of proceedings to terminate a ERISA
Plan or Multiemployer Plan; (v) any event or condition (a) which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any ERISA Plan or Multiemployer Plan,
or (b) that may result in termination of a Multiemployer Plan pursuant to
Section 4041A of ERISA; or (vi) the partial or complete withdrawal within the
meaning of Sections 4203 and 4205 of ERISA, of either Borrower or any member of
the Controlled Group from a Multiemployer Plan.
"Transactions" has the meaning set forth in Section 4.5
hereof.
"Trustee" means Firstar Bank, N.A., as the Trustee under the
Indenture.
"Undrawn Availability" at a particular date means an amount
equal to (a) the lesser of (i) the Borrowing Base or (ii) the Maximum Revolving
Advance Amount, minus (b) the sum of (i) the outstanding amount of Advances
(other than the Term Loan) plus (ii) fees and expenses for which Borrower is
liable but which have not been paid or charged to Borrower's Account plus (iii)
any Coverage Shortfall.
"Valuation Amount" means, as of the date of calculation, the
value of future revenues from proved Hydrocarbon Reserves calculated on one of
the following price assumptions (i) the trailing twelve month average of prices
for oil, condensate and gas as calculated at the end of the month immediately
preceding the date of calculation (the "SEC Method"), (ii) the closing NYMEX
spot price (as adjusted) for the prompt month for oil, condensate and gas as of
the date of calculation held constant ("NYMEX Spot Price Method"), or (iii) the
price of oil, condensate and gas for projected reserves as and when extracted
during the next five (5) years employed by the engineering firm of Cawley,
Gillespie & Associates in its report dated as of November 1, 1999, as updated
and adjusted in a manner acceptable to Agent (the "Gillespie Price Method");
provided, however, with respect to Oil & Gas Reserves which are subject to
either hedging or purchase contracts with fixed prices, the applicable contract
price shall be utilized in determining the Valuation Amount. For purposes of
calculating the Borrowing Base on the Closing Date, the Gillespie Price Method
shall be utilized. In connection with subsequent determinations of the
Valuation Amount, the Borrower shall utilize whichever of the foregoing methods
Agent determines in its sole and absolute discretion is appropriate under the
circumstances; provided; that, unless Agent gives ten days notice to the
Borrower to the contrary, the SEC Method shall be presumed to be appropriate
(subject to the above proviso).
"Vehicles" means all trucks, automobiles, trailers and other
vehicles covered by a certificate of title.
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"Volumetric Production Payments" means production payment
obligations recorded as deferred revenue in accordance with GAAP, together with
all undertakings and obligations in connection therewith.
"Voting Stock" means Capital Stock of a Person having
generally the right to vote in the election of directors of such Person.
"Week" means the time period commencing with the opening of
business on a Wednesday and ending on the end of business the following
Tuesday.
"Weighted Average Life" means, as of the date of
determination, with respect to any debt instrument, the quotient obtained by
dividing (i) the sum of the products of the numbers of years from the date of
determination to the dates of each successive scheduled principal payment of
such debt instrument multiplied by the amount of such principal payment by (ii)
the sum of all such principal payments.
1.3. Uniform Commercial Code Terms. All terms used herein and defined
in the Uniform Commercial Code as adopted in the State of New York shall have
the meaning given therein unless otherwise defined herein.
1.4. Certain Matters of Construction. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular section, paragraph or subdivision. Any pronoun
used shall be deemed to cover all genders. Wherever appropriate in the context,
terms used herein in the singular also include the plural and vice versa. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. All references to any
instruments or agreements to which Agent is a party, including, without
limitation, references to any of the Ancillary Documents, shall include any and
all modifications or amendments thereto and any and all extensions or renewals
thereof.
II. ADVANCES, PAYMENTS.
2.1. Revolving Advances. Subject to the terms and conditions set forth
in this Agreement (including, without limitation, the provision of Section 7.16
regarding the rights of Bondholder Lenders and their tranferees who elect to
refuse to make Advances after the Closing Date), each Lender, severally and not
jointly, will make Revolving Advances to Borrower in aggregate amounts
outstanding at any time not greater than such Lender's Commitment Percentage of
the lesser of (x) the Maximum Revolving Advance Amount or (y) the Borrowing
Base. Notwithstanding the foregoing, if at any time (a) the PV10 of proved
developed Hydrocarbon Reserves, excluding Hydrocarbon Reserves attributable to
wells subject to Production Payments, to the extent of the Dedication
Percentage applicable to the Hydrocarbon Reserves at such wells (so that, for
example, if the Dedication Percentage is 70%, only 30% of the Hydrocarbon
Reserves attributable to Borrower's interest in such wells shall be included in
the calculation of the PV10 and Hydrocarbon Reserves for purposes of this
test), shall be less than 100% of the sum of outstanding Advances or (b) the
PV10 of total proved developed producing reserves (including wells subject to
Production Payments, but excluding any PV10
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attributable to the interest of the entity to whom the Production Payments are
owed) shall be less than 100% of the sum of outstanding Advances, then the
amount of such difference (a "Coverage Shortfall") shall be due and owing upon
the date required for delivery of the next scheduled Borrowing Base
Certificate, if such Borrowing Base Certificate indicates the existence of a
Coverage Shortfall. Agent may, in its discretion and at Borrower's expense,
require the independent engineer which prepared the most recent Proved Reserves
Report to redetermine the Borrowing Base more often than specified herein if
there is a decrease in Hydrocarbon prices or production rates to a sustained
low level or other market factors arising that may adversely affect the value
of the Collateral and, if such independent engineer fails to do so in a timely
manner, Agent may retain a second independent engineer of its own choosing to
redetermine the Borrowing Base (each such update an "Agent Reserve Update
Report"). The Revolving Advances shall be evidenced by secured promissory notes
(collectively, the "Revolving Credit Note") substantially in the form attached
hereto as Exhibit 2.1 executed in favor of each Lender in accordance with such
Lender's Commitment. Upon the request of any Lender whose Commitment may
increase upon any upward adjustment in such Lender's Commitment in accordance
with the terms hereof, Borrower hereof agrees to deliver replacement Notes to
such Lenders.
2.2. Procedure for Borrowing Revolving Advances. Borrower shall notify
Agent prior to 12:00 p.m. (New York City time) on a Business Day of its request
to incur, effective three (3) Business Days after receipt by Agent of such
notification (the "Advance Effective Date"), a Revolving Advance hereunder.
Should any amount required to be paid as interest hereunder, or as fees or
other charges under this Agreement or any other agreement with Agent or
Lenders, or with respect to any other Obligation, become due, which, with
respect to such deemed Advances, shall be the Advance Effective Date, same
shall be deemed a request for a Revolving Advance as of the date such payment
is due, in the amount required to pay in full such interest, fee, charge or
Obligation under this Agreement or any other agreement with Agent or Lenders,
and such request shall be irrevocable. To the extent the Obligations
outstanding after giving effect to any such deemed request results in an
Overadvance, such Overadvance may be charged, at the option of Agent, to the
Receivables Facility in an amount not to exceed the availability thereunder,
and such amount shall be deemed an obligation of Borrower under the Receivables
Facility. Agent and Lenders will not make any Advance pursuant to any notice
from Borrower unless Agent has received the most recent Borrowing Base
Certificate required pursuant to Section 9.2 hereof.
2.3. Disbursement of Advance Proceeds. All Advances shall be disbursed
from whichever office or other place Agent may designate from time to time and,
together with any and all other Obligations of Borrower to Agent or Lenders,
shall be charged to Borrower's Account on Agent's books. During the Term,
Borrower may use the Revolving Advances by borrowing, prepaying and
reborrowing, all in accordance with the terms and conditions of this Agreement.
The proceeds of each Revolving Advance requested by Borrower or deemed to have
been requested by Borrower under Section 2.2 hereof shall, with respect to
requested Revolving Advances to the extent the Lenders make such Revolving
Advances, be made available to Borrower on the Advance Effective Date by way of
credit to Borrower's operating account at Bank, or such other bank as Borrower
may designate following notification to Agent, in immediately available federal
funds or other immediately available funds or, with respect to Revolving
Advances deemed to have been requested, be disbursed to Agent on the Advance
Effective Date to be applied to the outstanding Obligations giving rise to such
deemed request.
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2.4. Term Loan. Subject to the terms and conditions of this Agreement,
each Lender, severally and not jointly, will make a Term Loan to Borrower in
the sum equal to such Lender's Commitment Percentage of $22,500,000. The Term
Loan shall be advanced on the Closing Date and shall be, with respect to
principal, payable in twenty (20) equal consecutive quarterly installments of
$56,250 each, commencing July 1, 2000 and on the first day of each October,
January, April and July thereafter with a final installment of the unpaid
principal balance of the Term Loan at the end of the Term. The Term Loan shall
be subject to acceleration upon the occurrence of an Event of Default under
this Agreement or termination of this Agreement and shall be evidenced by and
subject to the terms and conditions set forth in secured promissory notes
(collectively, the "Term Note") attached hereto as Exhibit 2.4 executed in
favor of each Lender in accordance with such Lender's Commitment.
2.5. Swingline Loans.
(i) Agent, in its sole and absolute discretion,
may convert any request by Borrower for a Revolving Advance in excess of the
Borrowing Base into a request for an Advance under the Swingline Loan.
Aggregate outstanding Swingline Loans shall not exceed, at any time, the
Maximum Swingline Loan Amount. Borrower shall repay the aggregate principal
balance of each Swingline Loan within five (5) Business Days after the creation
thereof. Agent agrees to notify Lenders of each Lender's share of the
obligation to make a Revolving Advance to repay the Swingline Loan (or portion
thereof).
(ii) Each of the Lenders hereby unconditionally
and irrevocably agrees to fund to Agent for the benefit of Swingline Lender, in
lawful money of the United States and in same day funds, not later than 12:00
p.m. New York City time on the Business Day immediately following the Business
Day of such Lender's receipt of notice from Agent, such Lender's share of a
Revolving Advance (which Revolving Advance shall be deemed to be requested by
Borrower) in the principal amount of such portion of the Swingline Loan which
is required to be paid to Swingline Lender under this Section 2.5 (regardless
of whether the conditions precedent thereto set forth in this Agreement are
then satisfied and whether or not Borrower has provided a notice of borrowing
under Section 2.2 and whether or not any Default or Event of Default exists or
all or any of the Advances have been accelerated, but subject to the other
provisions of this Section 2.5). The proceeds of any such Revolving Advance
shall be immediately paid over to Agent for the benefit of Swingline Lender for
application to the Swingline Loan.
(iii) In the event that an Event of Default shall
occur and either (i) such Event of Default is of the type described in Section
10.7 hereof or (ii) no further Revolving Advances are being made under this
Agreement, so long as any such Event of Default is continuing, then, each of
the Lenders (other than Swingline Lender) shall be deemed to have irrevocably,
unconditionally and immediately purchased from Swingline Lender such Lender's
pro rata share of the Swingline Loan outstanding as of the date of the
occurrence of such Event of Default. Each Lender shall effect such purchase by
making available an amount equal to its participation on the date of such
purchase in Dollars in immediately available funds to Agent for the benefit of
Swingline Lender. In the event any Lender fails to make available to Swingline
Lender when due the amount of such Lender's participation in the Swingline
Loan, Swingline Lender shall be entitled to recover such amount on demand from
such Lender together with interest at the Federal Funds Rate. Each such
purchase by a Lender shall be made without recourse to Swingline Lender,
without representation or warranty of any kind, and shall be
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effected and evidenced pursuant to documents reasonably acceptable to Swingline
Lender. The obligations of the Lenders under this Section 2.5 shall be
absolute, irrevocable and unconditional, shall be made under all circumstances
and shall not be affected, reduced or impaired for any reason whatsoever.
2.6. Maximum Advances. Except as otherwise provided herein, the
aggregate balance of Revolving Advances outstanding at any time shall not
exceed the lesser of (a) the Maximum Revolving Advance Amount or (b) the
Borrowing Base.
2.7. Repayment of Advances.
(a) The Revolving Advances shall be due and payable in full
on the last day of the Term subject to earlier prepayment as herein provided.
The Term Loan shall be due and payable as provided in Section 2.4 hereof and in
the Term Note. Swingline Loans shall be due and payable as provided in Section
2.5 hereof and in the Swingline Note.
(b) All payments of principal, interest and other amounts
payable hereunder, or under any of the related agreements shall be made to
Agent at the Payment Office not later than 1:00 P.M. (New York Time) on the due
date therefor in lawful money of the United States of America in federal funds
or other funds immediately available to Agent. Agent shall have the right to
effectuate payment on any and all Obligations due and owing hereunder by
charging Borrower's Account or by making Advances or charging the Receivables
Facility as provided in Section 2.2 hereof.
(c) Borrower shall pay principal, interest, and all other
amounts payable hereunder, or under any Ancillary Documents, without any
deduction whatsoever, including, but not limited to, any deduction for any
setoff or counterclaim.
2.8. Repayment of Excess Advances. The aggregate balance of any type
Advances outstanding at any time in excess of the maximum amount of such
Advances permitted hereunder shall be immediately due and payable without the
necessity of any demand, at the Payment Office, whether or not a Default or
Event of Default has occurred.
2.9. Statement of Account. Agent shall maintain, in accordance with
its customary procedures, a loan account ("Borrower's Account") in the name of
Borrower in which shall be recorded the date and amount of each Advance made by
Agent or Lenders and the date and amount of each payment in respect thereof;
provided, however, the failure by Agent to record the date and amount of any
Advance shall not adversely affect Agent or any Lender. Each month, Agent shall
send to Borrower and each Lender a statement showing the accounting for the
Advances made, payments made or credited in respect thereof, and other
transactions between Lenders and Borrower, during such month. The monthly
statements shall be deemed correct and binding upon Borrower in the absence of
manifest error and shall constitute an account stated between Lenders and
Borrower unless Agent receives a written statement of Borrower's specific
exceptions thereto within thirty (30) days after such statement is received by
Borrower. The records of Agent with respect to the Borrower's Account shall be
prima facie evidence of the amounts of Advances and other charges thereto and
of payments applicable thereto.
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2.10. Additional Payments. Any sums expended by Agent or any Lender
due to Borrower's failure to perform or comply with its obligations under this
Agreement or any Ancillary Document including, without limitation, Borrower's
obligations under Section 5.1 hereof, may be charged to Borrower's Account as a
Revolving Advance and added to the Obligations.
2.11. Manner of Borrowing and Payment.
(a) Each borrowing of Revolving Advances and Swingline Loans
shall be advanced according to the Commitment Percentages of the Lenders. The
Term Loan shall be advanced according to the Commitment Percentages of the
Lenders. Notwithstanding the foregoing, in accordance with the Plan of
Reorganization, $20,000,000 of outstanding Debt of Borrower to Credit Suisse
First Boston Management Corporation, as administrative agent for itself and
certain other financial institutions under that certain Credit Agreement dated
April 27, 1999 (the "Existing DIP Facility") shall be assumed and made part of
the Advances made on of the Closing Date.
(b) Each payment (including each prepayment) by Borrower on
account of the principal of and interest on the Revolving Credit Notes, shall
be applied to the Revolving Advances pro rata according to the Commitment
Percentages of the Lenders. Each payment (including each prepayment) by
Borrower on account of the principal of and interest on the Term Notes, shall
be applied to the Term Loan pro rata according to the Commitment Percentages of
the Lenders. Except as expressly provided herein, all payments (including
prepayments) to be made by Borrower on account of principal, interest and fees
shall be made without set-off or counterclaim and shall be made to Agent on
behalf of the Lenders to the Payment Office, in each case on or prior to 1:00
P.M., New York time, in Dollars and in immediately available funds.
(c) (i) Notwithstanding anything to the contrary contained in
Sections 2.11(a) and (b) hereof (but subject to the provisions of Section
7.16), commencing with the first Business Day following the Closing Date, each
borrowing of Revolving Advances shall be advanced by Agent only after Agent has
received each Lender's Commitment Percentage of the Revolving Advance requested
by Borrower and each payment by Borrower on account of Revolving Advances shall
be applied first to those Swingline Loans or Revolving Advances made by Agent.
Each of the Lenders hereby unconditionally and irrevocably agrees to fund to
Agent, in lawful money of the United States and in same day funds, not later
than 12:00 p.m. New York City time on the Business Day immediately following
the Business Day of such Lender's receipt of notice from Agent, such Lender's
Commitment Percentage of a Revolving Advance request by Borrower.
(ii) All regularly scheduled payments of principal or
interest on Advances, if received prior to 1:00 p.m., New York time, shall be
remitted the same day to the Lenders in the amount of each Lender's pro rata
share, and if such payments are received after 1:00 p.m., New York time, Agent
shall remit to each Lender its pro rata share of such payment on the next
Business Day. With respect to all other payments, on the second (2nd) Business
Day of each calendar week, or more frequently as aggregate cumulative payments
in excess of $1,000,000 are received with respect to the Advances (other than
Swing Line Loan) (each, a "Settlement Date"), Agent will advise each Lender by
telephone, or telecopy of the amount of such Lender's Commitment Percentage of
principal, interest and fees paid for the benefit of Lenders with respect
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to each applicable Advance. Provided that such Lender has made all payments
required to be made by it and purchased all participations required to be
purchased by it under this Agreement and the other Ancillary Documents as of
such Settlement Date, Agent will pay to each Lender with funds in an amount
equal to its Commitment Percentage of the amount of such repayment. Such
payments shall be made by wire transfer to such Lender's account not later than
1:00 p.m. (2:00 p.m. New York time) on the next Business Day following each
Settlement Date.
(iii) Each Lender shall be entitled to earn
interest at the applicable Contract Rate on outstanding Advances which it has
funded and until such Lender has received its share of any repayment of such
Advances, such Lender shall receive interest at the Contract Rate.
(iv) Promptly following the first day of each
month, Agent shall submit to each Lender a detailed certificate with respect to
all payments received from or on behalf of Borrower and Advances made by each
Lender and/or Agent during the immediately preceding month. Such certificate of
Agent shall be conclusive in the absence of manifest error.
(d) If any Lender or Participant (a "benefited Lender") shall
at any time receive any payment of all or part of its Advances, or interest
thereon, or receive any Collateral in respect thereof (whether voluntarily or
involuntarily or by set-off) in a greater proportion than any such payment to
and Collateral received by any other Lender, if any, in respect of such other
Lender's Advances, or interest thereon, and such greater proportionate payment
or receipt of Collateral is not expressly permitted hereunder, such benefited
Lender shall purchase for cash from the other Lenders a participation in such
portion of each such other Lender's Advances, or shall provide such other
Lender with the benefits of any such Collateral, or the proceeds thereof, as
shall be necessary to cause such benefited Lender to share the excess payment
or benefits of such Collateral or proceeds ratably with each of the Lenders;
provided, however, that if all or any portion of such excess payment or
benefits is thereafter recovered from such benefited Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the extent
of such recovery, but without interest. Each Lender so purchasing a portion of
another Lender's Advances may exercise all rights of payment (including,
without limitation, rights of set-off) with respect to such portion as fully as
if such Lender were the direct holder of such portion.
2.12. Mandatory Prepayment from Excess Cash Flow. Borrower shall
prepay the outstanding amount of the Term Loan in an amount equal to 50% of
Excess Cash Flow for each fiscal year commencing with fiscal year 2001, payable
upon delivery of the financial statements to Agent referred to in and required
by Section 9.7 for such fiscal year but in any event not later than one hundred
five (105) days after the end of each such fiscal year, which amount shall be
applied to the outstanding principal installments on the Term Loan in the
inverse order of the maturities thereof. In the event that the financial
statement is not so delivered, then a calculation based upon estimated amounts
shall be made by Agent upon which calculation Borrower shall make the
prepayment required by this Section 2.12, subject to adjustment when the
financial statement is delivered to Agent as required hereby. The calculation
made by Agent shall not be deemed a waiver of any rights Agent or Lenders may
have as a result of the failure by Borrower to deliver such financial
statement.
2.13. Use of Proceeds. All Advances (other than Swingline Loans) shall
be made in accordance with the Commitment Percentage of the Lenders and
Borrower shall apply the
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proceeds of such Advances to (i) to fund distributions under, and comply with
certain requirements of, the Plan of Reorganization and (ii) to provide for its
working capital needs.
2.14. Defaulting Lender.
(a) Notwithstanding anything to the contrary contained
herein, in the event any Lender (x) has refused (which refusal constitutes a
breach by such Lender of its obligations under this Agreement) to make
available its portion of any Advance or (y) notifies either Agent or Borrower
that it does not intend to make available its portion of any Advance (if the
actual refusal would constitute a breach by such Lender of its obligations
under this Agreement) (each, a "Lender Default"), all rights and obligations
hereunder of such Lender (a "Defaulting Lender") as to which a Lender Default
is in effect and of the other parties hereto shall be modified to the extent of
the express provisions of this Section 2.14 while such Lender Default remains
in effect.
(b) Advances shall be incurred pro rata from Lenders which
are not Defaulting Lenders (the "Non-Defaulting Lenders") based on their
respective Commitment Percentages applied to the total amount of the Requested
Advance, and no Commitment Percentage of any Lender or any pro rata share of
any Advances required to be advanced by any Lender shall be increased as a
result of such Lender Default. Amounts received in respect of principal of any
type of Advances shall be applied to reduce the applicable Advances of each
Lender pro rata based on the aggregate of the outstanding Advances of that type
of all Lenders at the time of such application; provided, that, such amount
shall not be applied to any Advances of a Defaulting Lender at any time when,
and to the extent that, the aggregate amount of Advances of any Non-Defaulting
Lender exceeds such Non-Defaulting Lender's Commitment Percentage of all
Advances then outstanding.
(c) A Defaulting Lender shall not be entitled to give
instructions to Agent or to approve, disapprove, consent to or vote on any
matters relating to this Agreement and the Ancillary Documents. All amendments,
waivers and other modifications of this Agreement and the Ancillary Documents
may be made without regard to a Defaulting Lender and, for purposes of the
definition of "Required Lenders", a Defaulting Lender shall be deemed not to be
a Lender and not to have Advances outstanding.
(d) Other than as expressly set forth in this Section 2.14,
the rights and obligations of a Defaulting Lender (including the obligation to
indemnify Agent) and the other parties hereto shall remain unchanged. Nothing
in this Section 2.14 shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Ancillary Documents, shall alter such
obligations, shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which Borrower, Agent or any Lender
may have against any Defaulting Lender as a result of any default by such
Defaulting Lender hereunder.
(e) In the event a Defaulting Lender retroactively cures to
the satisfaction of Agent the breach which caused a Lender to become a
Defaulting Lender, such Defaulting Lender shall no longer be a Defaulting
Lender and shall be treated as a Lender under this Agreement.
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III. INTEREST AND FEES.
3.1. Interest. Interest on Advances shall be payable in arrears on the
last day of each month. Interest charges shall be computed on the actual
principal amount of Advances outstanding during the month at a rate per annum
equal to the applicable Contract Rate. Upon and after the occurrence of an
Event of Default, and during the continuation thereof, the Obligations shall
bear interest at the applicable Contract Rate plus two (2%) percent per annum
(the "Default Rate"), provided, however, upon the occurrence of an Event of
Default described in Section 10.5, the Default Rate shall not be imposed until
thirty (30) days from the occurrence of such Event of Default, assuming such
Event of Default is continuing as of the end of such thirty (30) day period.
3.2. (a) Structuring Fee. Upon the execution of this Agreement,
Borrower shall pay to Agent a structuring fee of $573,750. The structuring fee
shall be earned in full on the Closing Date and shall not be subject to rebate
or proration for any reason whatsoever.
(b) Origination Fee. Upon the execution of this Agreement,
Borrower shall pay to Agent an origination fee equal to (i) $300,000 with
respect to Revolving Advances and (ii) $225,000 with respect to the Term Loan.
The origination fee shall be earned in full on the Closing Date and shall not
be subject to rebate or proration for any reason whatsoever.
(c) Facility Fee. If, for any quarter during the Term, the
average daily unpaid balance of the Revolving Advances for each day of such
quarter does not equal the Maximum Revolving Advance Amount, then Borrower
shall pay to Agent for the ratable benefit of the Lenders a fee at a rate equal
to one quarter of one percent (.25%) per annum on the amount by which the
Maximum Revolving Advance Amount exceeds such average daily unpaid balance (the
"Unused Portion"); provided, however, the facility fee on GMACC's Commitment
Percentage of Unused Portion shall equal three-eighths of one percent (3/8%).
Such fee shall be payable to Agent in arrears on the last day of each quarter
and on the last day of the Term.
(d) Administration Fee. Upon the execution of this Agreement
and on each anniversary date hereof, Borrower shall pay Agent, for its own
account and not for the benefit of Lenders, an administration fee of $48,000.
Except as set forth in Section 14.3(b) hereof, the administration fee shall be
deemed earned in full on the date when same is due and payable hereunder and
shall not be subject to rebate or proration upon termination of this Agreement
for any reason.
3.3. Collateral Monitoring Fee. Subject to Section 5.10 of this
Agreement and as set forth below, Borrower shall pay to Agent on the first day
of each month following any month in which Agent performs any collateral
monitoring - namely any field examination, collateral analysis or other
business analysis, the need for which is to be determined by Agent and which
monitoring is undertaken by Agent or for Agent's benefit - a collateral
monitoring fee in an amount per day equal to Agent's then standard rates and
commissions for each person employed to perform such monitoring plus all costs
and disbursements incurred by Agent in the performance of such examination or
analysis; provided, however, the maximum aggregate amount that Agent may charge
for the foregoing collateral monitoring fee during any calendar year,
commencing with calendar year 2000, shall equal $25,000 provided that there
shall be no such maximum amount during any calendar year in which an Event of
Default has occurred or if the results of any field examination are deemed
unsatisfactory in Agent's reasonable discretion.
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3.4. Computation of Interest and Fees. Interest and fees hereunder
shall be computed on the basis of a year of 365/6 days and for the actual
number of days elapsed. If any payment to be made hereunder becomes due and
payable on a day other than a Business Day, the due date thereof shall be
extended to the next succeeding Business Day and interest thereon shall be
payable at the applicable Contract Rate during such extension.
3.5. Maximum Charges. In no event whatsoever shall interest and other
charges charged hereunder exceed the highest rate permissible under law which a
court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that Agent or any Lender has received interest
and other charges hereunder in excess of the highest rate permissible hereto,
such excess amount shall be first applied to any unpaid principal balance owed
by Borrower, and if the then remaining excess amount is greater than the
previously unpaid principal balance, the Lenders shall promptly refund such
excess amount to Borrower and the provisions hereof shall be deemed amended to
provide for such permissible rate.
3.6. Increased Costs. In the event that any applicable law, treaty or
governmental regulation, or any change therein or in the interpretation or
application thereof, or compliance by any Lender (for purposes of this Section
3.6, the term "Lender" shall include Agent or any Lender and any corporation or
bank controlling Agent or any Lender) with any request or directive (whether or
not having the force of law) from any central bank or other financial, monetary
or other authority, shall:
(a) subject Agent or any Lender to any tax of any kind
whatsoever with respect to this Agreement or change the basis of taxation of
payments to Agent or any Lender of principal, fees, interest or any other
amount payable hereunder or under any Ancillary Documents (except for changes
in the rate of tax on the overall net income of Agent or any Lender by the
jurisdiction in which it maintains its principal office);
(b) impose, modify or hold applicable any reserve, special
deposit, assessment or similar requirement against assets held by, or deposits
in or for the account of, advances or loans by, or other credit extended by,
any office of Agent or any Lender, including (without limitation) pursuant to
Regulation D of the Board of Governors of the Federal Reserve System; or
(c) impose on Agent or any Lender any other condition with
respect to this Agreement, any Ancillary Documents; and the result of any of
the foregoing is to increase the cost to Agent or any Lender of making,
renewing or maintaining its Advances hereunder by an amount that Agent or such
Lender deems to be material or to reduce the amount of any payment (whether of
principal, interest or otherwise) in respect of any of the Advances by an
amount that Agent or such Lender deems to be material, then, in any case
Borrower shall promptly pay Agent or such Lender, upon its demand, such
additional amount as will compensate Agent or such Lender for such additional
cost or such reduction, as the case may be. Agent or such Lender shall certify
the amount of such additional cost or reduced amount to Borrower, and such
certification shall be conclusive absent manifest error.
(d) If Lenders are owed such additional amount or amounts at
any one time pursuant to this Section 3.6 in excess of three-fourths of one
percent (3/4 of 1%) of the average daily balance of Advances for the preceding
30 days, then the Borrower shall have the right to
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terminate this Agreement, subject to the terms and provisions of Section 13.1
of this Agreement; provided, however, (i) no such termination shall be
effective until Borrower has paid all of the Obligations (except as set forth
in clause (ii) below) in immediately available funds and (ii) Borrower shall
not be obligated to pay to Lenders any early termination fee described in
Section 13.1 of this Agreement.
3.7. Capital Adequacy.
(a) In the event that Agent or any Lender shall have
determined that any applicable law, rule, regulation or guideline regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Body, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by Agent or any Lender (for purposes of this Section 3.7, the term "Lender"
shall include Agent or any Lender and any corporation or bank controlling Agent
or any Lender) with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on Agent or any Lender's capital as a consequence of its obligations hereunder
to a level below that which Agent or such Lender could have achieved but for
such adoption, change or compliance (taking into consideration Agent's and each
Lender's policies with respect to capital adequacy) by an amount deemed by
Agent or any Lender to be material, then, from time to time, Borrower shall pay
upon demand to Agent or such Lender such additional amount or amounts as will
compensate Agent or such Lender for such reduction. In determining such amount
or amounts, Agent or such Lender may use any reasonable averaging or
attribution methods. The protection of this Section 3.7 shall be available to
Agent and each Lender regardless of any possible contention of invalidity or
inapplicability with respect to the applicable law, regulation or condition.
(b) A certificate of Agent or such Lender setting forth such
amount or amounts as shall be necessary to compensate Agent or such Lender with
respect to Section 3.7(a) hereof when delivered to Borrower shall be conclusive
absent manifest error.
(c) If Agent or any Lender is owed such additional amounts or
amounts at any one time pursuant to Section 3.7(a) hereof in excess of
three-fourths of one percent (3/4 of 1%) of the average daily balance of
Advances for the preceding 30 days, then the Borrower shall have the right to
terminate this Agreement, subject to the terms and provisions of Section 13.1
of this Agreement; provided, however, (i) no such termination shall be
effective until Borrower has paid all of the Obligations (except as set forth
in clause (ii) below) in immediately available funds and (ii) Borrower shall
not be obligated to pay to Lenders any early termination fee described in
Section 13.1 of this Agreement.
IV. REPRESENTATIONS AND WARRANTIES.
Borrower and each Guarantor, represents and warrants as follows:
4.1. Authority. Borrower and each Guarantor has full power, authority
and legal right to enter into this Agreement and the Ancillary Documents to
which it is a party and to perform all Obligations hereunder and thereunder.
The execution, delivery and performance of this
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Agreement and of the Ancillary Documents (a) are within Borrower's and each
Guarantor's corporate powers, have been duly authorized, are not in
contravention of law or the terms of Borrower's or any Guarantor's by-laws,
certificate of incorporation or other applicable documents relating to
Borrower's or any Guarantor's formation or to the conduct of Borrower's or any
Guarantor's business or of any material agreement or undertaking to which
Borrower or any Guarantor is a party or by which Borrower or any Guarantor is
bound, and (b) will not conflict with nor result in any breach in any of the
provisions of or constitute a default under or result in the creation of any
Lien except Permitted Liens upon any asset of Borrower or any Guarantor under
the provisions of any material agreement, charter document, instrument, by-law,
or other instrument to which Borrower or any Guarantor is a party or by which
it or its property may be bound.
4.2. Formation and Qualification. (a) Each of Borrower and each
Guarantor is duly incorporated and in good standing under the laws of the state
of its incorporation and is qualified to do business and is in good standing in
every other state or jurisdiction in which qualification and good standing are
necessary for Borrower and each Guarantor to conduct its business and own its
property except where the failure to so qualify could not reasonably be
expected to have a Material Adverse Effect. Borrower has delivered to Agent
true and complete copies of its and each of its Guarantor's certificate of
incorporation and by-laws and will promptly notify Agent of any amendment or
changes thereto.
(b) The only Material Subsidiaries of Borrower are listed on
Schedule 4.2(b).
4.3. Survival of Representations and Warranties. All representations
and warranties of Borrower contained in this Agreement and the Ancillary
Documents shall be true at the time of Borrower's execution of this Agreement
and the Ancillary Documents, and shall survive the execution, delivery and
acceptance thereof by the parties thereto and the closing of the transactions
described therein or related thereto.
4.4. Tax Returns. Borrower's and each Guarantor's federal tax
identification number is set forth on Schedule 4.4. Borrower and each Guarantor
have filed all federal, state and local tax returns and other reports they are
required by law to file and, giving effect to the Plan and the Confirmation
Order, have paid all taxes, assessments, fees and other governmental charges
that are due and payable. Except as listed on Schedule 4.4, Federal, state and
local income tax returns of Borrower and each Guarantor have been examined and
reported upon by the appropriate taxing authority or closed by applicable
statute and satisfied for all years prior to and including the year ending July
31, 1999. The provision for taxes on the books of Borrower and each Guarantor
are adequate for all years not closed by applicable statutes, and for its
current fiscal year, and Borrower has no knowledge of any deficiency or
additional assessment in connection therewith not provided for on its books or
the books of any of its Subsidiaries. Other than with respect to prepetition
taxes no tax Lien has been filed and, to the knowledge of Borrower, no claim is
being asserted, with respect to any such tax, fee or other charge.
4.5. Financial Statements.
(a) The pro forma balance sheet of Borrower and its Subsidiaries
on a consolidated basis (the "Pro Forma Balance Sheet") furnished to Agent on
the Closing Date (i) reflects the consummation of the transactions contemplated
by the Plan of Reorganization and
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under this Agreement (the "Transactions"), (ii) is accurate, complete and
correct, (iii) fairly reflects the financial condition of Borrower and its
Subsidiaries on a consolidated basis as of the Closing Date after giving effect
to the Transactions, and (iv) has been prepared in accordance with GAAP,
consistently applied. The Pro Forma Balance Sheet of Borrower and its
Subsidiaries on a consolidated basis has been certified as accurate, complete
and correct in all material respects by the President and Chief Financial
Officer of Borrower. All financial statements referred to in this subsection
4.5(a), including the related schedules and notes thereto, have been prepared,
in accordance with GAAP, except as may be disclosed in such financial
statements.
(b) The twelve-month cash flow projections of Borrower and its
Subsidiaries on a consolidated basis and its projected balance sheets as of the
Closing Date, copies of which are annexed hereto as Exhibit 4.5(b) (the
"Projections") were prepared under the supervision of the Chief Financial
Officer of Borrower, are based on underlying assumptions which provide a
reasonable basis for the projections contained therein and reflect Borrower's
judgment, based on present circumstances, of the expected conditions and course
of action for the projected period. The cash flow Projections together with the
Pro Forma Balance Sheet, are referred to as the "Pro Forma Financial
Statements".
4.6. Corporate Name. Neither Borrower nor any Guarantor has been known
by any other corporate name in the past five years except as set forth on
Schedule 4.6, nor has Borrower or any Guarantor been the surviving corporation
of a merger or consolidation or acquired all or substantially all of the assets
of any Person during the preceding five (5) years.
4.7. O.S.H.A. and Environmental Compliance.
(a) Except as disclosed on Schedule 4.7, each of Borrower and each
of its Subsidiaries has duly complied in all material respects with, and its
facilities, business, assets, property, leaseholds and Equipment are in
compliance in all material respects with, the applicable provisions of the
Federal Occupational Safety and Health Act, the Environmental Protection Act,
RCRA and all other Environmental Laws; there are no outstanding citations,
notices or orders of material non-compliance issued to Borrower or any of its
Subsidiaries or relating to its business, assets, property, leaseholds or
Equipment under any such laws, rules or regulations.
(b) Except as disclosed on Schedule 4.7, each of Borrower and each
of its Subsidiaries has been issued or has made application for all required
federal, state and local licenses, certificates or permits relating to all
applicable Environmental Laws.
(c) Except as disclosed on Schedule 4.7, (i) there are no visible
signs of releases, spills, discharges, leaks or disposal (collectively referred
to as "Releases") of a reportable quantity of Hazardous Substances at, upon,
under or within any Real Property or any premises leased by Borrower or any of
its Subsidiaries other than as are in compliance in all material respects with
all applicable Environmental Laws; (ii) there are no underground storage tanks
or polychlorinated biphenyls on the Real Property or any premises leased by
Borrower or any of its Subsidiaries; (iii) neither the Real Property nor any
premises leased by Borrower or any of its Subsidiaries has ever been used by
Borrower or any Subsidiary of Borrower or, to Borrower's knowledge, by any other
Person as a treatment, storage or disposal facility of
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Hazardous Waste in violation of any applicable Environmental Laws; and (iv) no
Hazardous Substances are present on the Real Property or any other premises
leased by Borrower or any of its Subsidiaries, excepting such quantities as are
handled in accordance with all applicable manufacturer's instructions and
governmental regulations and in proper storage containers and as are necessary
for the operation of the Related Businesses of Borrower or any of its
Subsidiaries or of its tenants.
4.8. Solvency; No Litigation, Violation, Debt or Default.
(a) Upon the Effective Date, Borrower and each of its Subsidiaries
will be solvent, able to pay its debts as they mature, have capital sufficient
to carry on its business and all businesses in which it is about to engage, and
(i) upon the Effective Date, the fair present saleable value of the assets,
calculated on a going concern basis, of Borrower and its Subsidiaries on a
consolidated basis is in excess of the amount of the liabilities of Borrower and
its Subsidiaries on a consolidated basis and (ii) subsequent to the Closing
Date, the fair saleable value of its assets (calculated on a going concern
basis) will be in excess of the amount of its liabilities.
(b) Neither Borrower nor any Guarantor has (i) any pending or
threatened litigation, arbitration, actions or proceedings which could
reasonably be expected to have a Material Adverse Effect, except as disclosed on
Schedule 4.8(b)(i) and (ii) Debt other than the Obligations and indebtedness
contemplated in the Plan of Reorganization, except as disclosed on Schedule
4.8(b)(ii).
(c) Neither Borrower nor any Guarantor is in violation of any
applicable statute, regulation or ordinance in any respect which could
reasonably be expected to have a Material Adverse Effect on Borrower or such
Guarantor, nor is Borrower or any Guarantor in violation of any order of any
court, Governmental Body or arbitration board or tribunal.
(d) Neither Borrower nor any member of the Controlled Group
maintains or contributes to any ERISA Plan other than those listed on Schedule
4.8(d) hereto. Except as set forth in Schedule 4.8(d), (i) no ERISA Plan has
incurred any "accumulated funding deficiency," as defined in Section 302(a)(2)
of ERISA and Section 412(a) of the Code, whether or not waived, and Borrower and
each member of the Controlled Group has met all applicable minimum funding
requirements under Section 302 of ERISA in respect of each ERISA Plan, (ii) each
ERISA Plan which is intended to be a qualified plan under Section 401(a) of the
Code as currently in effect has been determined by the Internal Revenue Service
to be qualified under Section 401(a) of the Code and the trust related thereto
is exempt from federal income tax under Section 501(a) of the Code, (iii)
neither Borrower nor any member of the Controlled Group has incurred any
liability to the PBGC other than for the payment of premiums, and there are no
premium payments which have become due which are unpaid, (iv) no ERISA Plan has
been terminated by the plan administrator thereof or by the PBGC, and there is
no occurrence which would cause the PBGC to institute proceedings under Title IV
of ERISA to terminate any ERISA Plan, (v) at this time, the current value of the
assets of each ERISA Plan exceeds the present value of the accrued benefits and
other liabilities of such ERISA Plan and neither Borrower nor any member of the
Controlled Group knows of any facts or circumstances which would materially
change the value of such assets and accrued benefits and other liabilities, (vi)
neither Borrower nor any member of the Controlled Group has breached any of the
responsibilities,
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obligations or duties imposed on it by ERISA with respect to any ERISA Plan,
(vii) neither Borrower nor any member of a Controlled Group has incurred any
liability for any excise tax arising under Section 4972 or 4980B of the Code,
and no fact exists which could give rise to any such liability, (viii) neither
Borrower nor any member of the Controlled Group nor any fiduciary of, nor any
trustee to, any ERISA Plan, has engaged in a "prohibited transaction" described
in Section 406 of the ERISA or Section 4975 of the Code nor taken any action
which would constitute or result in a Termination Event with respect to any
such ERISA Plan which is subject to ERISA, (ix) Borrower and each member of the
Controlled Group has made all contributions due and payable with respect to
each ERISA Plan, (x) there exists no event described in Section 4043(b) of
ERISA, for which the thirty (30) day notice period contained in 29 CFR Section
2615.3 has not been waived, (xi) neither Borrower nor any member of the
Controlled Group has any fiduciary responsibility for investments with respect
to any plan existing for the benefit of persons other than employees or former
employees of Borrower and any member of the Controlled Group, and (xii) neither
Borrower nor any member of the Controlled Group has withdrawn, completely or
partially, from any Multiemployer Plan so as to incur liability under the
Multiemployer Pension Plan Amendments Act of 1980.
4.9. Patents, Trademarks, Copyrights and Licenses. All patents, patent
applications, trademarks, trademark applications, service marks, service mark
applications, copyrights, copyright applications, design rights, tradenames,
assumed names, trade secrets and licenses owned or utilized by Borrower and its
Subsidiaries are set forth on Schedule 4.9, are valid and have been duly
registered or filed with all appropriate governmental authorities and
constitute all of the intellectual property rights which are necessary for the
operation of its business; to Borrower's knowledge, there is no objection to or
pending challenge to the validity of any such patent, trademark, copyright,
design right, tradename, trade secret or license and Borrower is not aware of
any grounds for any challenge, except as set forth in Schedule 4.9 hereto. Each
patent, patent application, patent license, trademark, trademark application,
trademark license, service mark, service mark application, service mark
license, design right, copyright, copyright application and copyright license
owned or held by Borrower and each Guarantor and all trade secrets used by
Borrower and each Guarantor consists of original material or property developed
by Borrower or such Guarantor or was lawfully acquired by Borrower or such
Guarantor from the proper and lawful owner thereof. Each of such items has been
maintained so as to preserve the value thereof from the date of creation or
acquisition thereof.
4.10. Licenses and Permits. Except as set forth in Schedule 4.10, each
of Borrower and each of its Subsidiaries (a) is in compliance with and (b) has
procured and is now in possession of, all material licenses or permits required
by any applicable federal, state or local law or regulation for the operation
of its business in each jurisdiction wherein it is now conducting or proposes
to conduct business except where the failure to procure such licenses or
permits could reasonably be expected to have a Material Adverse Effect.
4.11. Default of Debt. Neither Borrower nor any of its Subsidiaries is
in default in the payment of the principal of or interest on any Debt or under
any instrument or agreement under or subject to which any Debt has been issued
and no event has occurred under the provisions of any such instrument or
agreement which with or without the lapse of time or the giving of notice, or
both, constitutes or would constitute an event of default thereunder.
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4.12. No Default. Neither Borrower nor any of it Subsidiaries is in
default in the payment or performance of any of its contractual obligations the
nonpayment or nonperformance of which could reasonably be expected to have a
Material Adverse Effect and no Default or Event of Default has occurred and is
continuing.
4.13. No Burdensome Restrictions. Neither Borrower nor any of it
Subsidiaries is party to any contract or agreement the performance of which
could reasonably be expected to have a Material Adverse Effect. Neither
Borrower nor any of it Subsidiaries has agreed or consented to cause or permit
in the future (upon the happening of a contingency or otherwise) any of its
property, whether now owned or hereafter acquired, to be subject to a Lien
which is not a Permitted Lien.
4.14. No Labor Disputes. Neither Borrower nor any of it Subsidiaries
is involved in any labor dispute; there are no strikes or walkouts or union
organization of any of Borrower's or any Guarantor's employees threatened or in
existence and no labor contract is scheduled to expire during the Term other
than as set forth on Schedule 4.14 hereto.
4.15. Margin Regulations. Neither Borrower nor any of it Subsidiaries
is engaged, nor will it engage, principally or as one of its important
activities, in the business of extending credit for the purpose of "purchasing"
or "carrying" any "margin stock" within the respective meanings of each of the
quoted terms under Regulation U of the Board of Governors of the Federal
Reserve System as now and from time to time hereafter in effect. No part of the
proceeds of any Advance will be used for "purchasing" or "carrying" "margin
stock" as defined in Regulation U of such Board of Governors.
4.16. Investment Company Act. Neither Borrower nor any of it
Subsidiaries is an "investment company" registered or required to be registered
under the Investment Company Act of 1940, as amended, nor is it controlled by
such a company.
4.17. Disclosure. No representation or warranty made by Borrower in
this Agreement or in any financial statement, report, certificate or any
Ancillary Document furnished in connection herewith or therewith contains any
untrue statement of a material fact or omits to state any material fact
necessary to make the statements herein or therein not misleading. There is no
fact known to Borrower or which reasonably should be known to Borrower which
Borrower has not disclosed to Agent in writing with respect to the transactions
contemplated by this Agreement which could reasonably be expected to have a
Material Adverse Effect.
4.18. Delivery of Indenture Documentation. Agent has received complete
copies of the Indenture (including all exhibits, schedules and disclosure
letters referred to therein or delivered pursuant thereto, if any) and all
amendments thereto, waivers relating thereto and other side letters or
agreements affecting the terms thereof. None of such documents and agreements
has been amended or supplemented, nor have any of the provisions thereof been
waived, except pursuant to a written agreement or instrument which has
heretofore been delivered to Agent.
4.19. Swaps. Neither Borrower nor any of it Subsidiaries is a party
to, nor will it be a party to, any swap agreement whereby Borrower or any such
Guarantor has agreed or will agree to swap interest rates or currencies unless
same provides that damages upon termination
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following an event of default thereunder are payable on an unlimited "two-way
basis" without regard to fault on the part of either party.
4.20. Conflicting Agreements; Governmental Approvals. Except as
disclosed on Schedule 4.20, no provision of any material mortgage, indenture,
contract, agreement, judgment, decree or order binding on Borrower or any
Guarantor or affecting the Collateral conflicts with, or requires any Consent
which has not already been obtained to, or would in any way prevent the
execution, delivery or performance of, the terms of this Agreement or the
Ancillary Documents. Other than the Confirmation Order no approval or consent
of any regulatory or administrative commission or authority, or of any other
Governmental Body, is necessary to authorize the execution and delivery of this
Agreement and that no such approval or consent is necessary to authorize the
observance or performance by Borrower of the covenants herein contained.
4.21. Application of Certain Laws and Regulations. Neither Borrower
nor any Subsidiary of Borrower is subject to any statute, rule or regulation
which regulates the incurrence of any Debt.
4.22. Business and Property of Borrower; Title. Upon and after the
Closing Date, neither Borrower nor any of it Subsidiaries propose to engage in
any business other than a Related Business. On the Closing Date, each of
Borrower and each of its Subsidiaries will own all the property and possess all
of the rights and Consents necessary for the conduct of the business of
Borrower and such Guarantor. Each of the Borrower and its Subsidiaries has good
and indefeasible title in fee simple to, or a valid leasehold interest in
(subject to exceptions noted in the title opinions delivered to Agent), all its
Real Property, and good title to, or a valid leasehold interest in, all its
other property, and none of such property is subject to any Lien except as
permitted by Section 6.4.
4.23. Security Interests. As of the Closing Date, the Agent for the
ratable benefit of the Lenders shall have a legal, valid and enforceable, first
priority (subject to Permitted Prior Liens) perfected security interest in all
right, title and interest of the Borrower in the "Collateral" described in the
Security Documents.
4.24. Insurance. The Borrower and its Subsidiaries have with respect
to its properties and business, insurance covering the risks, in the amounts,
with the deductible or other retention amounts, and with the carriers, listed
on Schedule 4.24, which insurance meets the requirements of Section 5.4 hereof
as of the Closing Date.
4.25. Plan of Reorganization. The Agent has received the Confirmation
Orders and the Confirmation Orders have become Final Orders, unless receipt of
the Final Order has been waived with the consent of the Required Lenders. All
other conditions precedent to the confirmation and effectiveness of the Plan of
Reorganization have been satisfied or waived and the Effective Date has
occurred.
4.26. Indenture Qualification. As of the date on which this
representation and warranty is made, the offering and issuance of the Indenture
Notes pursuant to the Plan of Reorganization are exempt from registration under
Section 5 of the Securities Act and the Indenture is qualified under the Trust
Indenture Act of 1939, as amended.
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4.27. Location of Borrower. Borrower's and each Guarantor's chief
executive office is located at 1300 North Sam Houston Parkway East, Houston,
Texas.
4.2. Representations, Warranties and Covenants Concerning the
Mortgages. Borrower hereby makes all of the additional representations,
warranties and covenants set forth on Exhibit 4.27 of this Agreement.
V. AFFIRMATIVE COVENANTS.
Borrower and each Guarantor shall, and shall cause each of their
respective Subsidiaries to, until payment in full of the Obligations and
termination of this Agreement:
5.1. Payment of Obligations. Duly and punctually pay the principal of
and interest on all of the Obligations, including each and every obligation
owing under the Notes as the same shall become due and payable under the Notes
and in accordance with the terms of this Agreement and pay to Agent on demand
all usual and customary fees and expenses which Agent incurs in connection with
the forwarding of Advance proceeds. Agent may, without making demand, charge
the account of Borrower for all such fees and expenses.
5.2. Corporate Existence. Borrower and each Guarantor shall do or
cause to be done all things necessary to preserve and keep in full force and
effect their respective corporate existence in accordance with the respective
organizational documents of each of them and the rights (charter and statutory)
and corporate franchises of Borrower and each Guarantor; provided, however,
that neither Borrower nor any Guarantor shall be required to preserve, with
respect to itself, any right of franchise, and with respect to any of its
Subsidiaries, any such existence, right or franchise, if (a) the Board of
Directors of Borrower or such Guarantor shall determine that the preservation
thereof is no longer desirable in the conduct of the business of Borrower or
such Guarantor and (b) the loss thereof is not disadvantageous in any material
respect to Agent and Lenders.
5.3. Payment of Taxes and Other Claims. The Borrower and each
Guarantor shall pay or discharge or cause to be paid or discharged, before the
same shall become delinquent all taxes, assessments and governmental charges
(including withholding taxes and any penalties, interest and additions to
taxes) levied or imposed upon Borrower or such Guarantor or any of their
respective properties and assets; provided, however, that Borrower shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment or charge whose amount, applicability or validity is being contested
in good faith by appropriate proceedings and for which disputed amounts
adequate reserves have been established in accordance with GAAP and so long as
such taxes (other than ad valorem and severance taxes), assessments or charges
do not prime Agent's Lien on the Collateral.
5.4. Maintenance of Properties and Insurance.
(a) Each of Borrower and each Guarantor shall cause the properties
used or useful to the conduct of their respective businesses to be maintained
and kept in good condition, repair and working order (reasonable wear and tear
excepted) and supplied with all necessary equipment and shall cause to be made
all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in its reasonable judgement may be necessary, so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times.
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(b) Each of Borrower and each Guarantor shall provide, or
shall cause to be provided, for itself and each of its Subsidiaries, insurance
(including appropriate self-insurance) against loss or damage of the kinds that
in its reasonable, good faith opinion, are adequate and appropriate for the
conduct of its business and the business of such Subsidiaries in a prudent
manner, with reputable insurers or with the government of the United States of
America or an agency or instrumentality thereof, in such amounts, with such
deductibles, and by such methods as is customary, in its reasonable, good faith
opinion, and adequate and appropriate for the conduct of Borrower's and such
Guarantor's business in a prudent manner for companies engaged in a similar
business. In addition, all such insurance shall be payable to Agent as loss
payee, as its interests may appear, under a "standard" or "Texas" loss payee
clause. Without limiting the foregoing, each of Borrower and each Guarantor
shall (i) keep all of its physical property insured with hazard insurance on an
"all risks" basis, with broad form flood and earthquake coverages, with a full
replacement cost endorsement and an "agreed amount" clause in an amount equal
to 100% of the full replacement cost of such property, (ii) maintain all such
workers' compensation or similar insurance as may be required by law, and (iii)
maintain, in amounts and with deductibles equal to those generally maintained
by businesses engaged in similar activities in similar geographic areas,
general public liability insurance against claims of bodily injury, death or
property damage occurring on, in or about the properties of Borrower and each
Guarantor. Whether or not an Event of Default exists, Agent will make available
to Borrower insurance proceeds covering properties subject to the TCW/Southern
Production Payment for the purpose of permitting Borrower to use such funds for
the repair of such properties and Borrower shall use such funds to diligently
repair such properties as promptly as possible. The balance of any proceeds
remaining after application to repair shall be remitted to Agent to be applied
to the Obligations.
All policies of insurance shall provide for at least ten
days' prior written cancellation notice to Agent. In the event of failure by
Borrower and any Guarantor or provide and maintain insurance as described
herein; provided, however, Agent may, at its option, provide such insurance and
charge the amount thereof to Borrower and Guarantors. The Borrower and each
Guarantor shall furnish Agent with certificates of insurance and policies
evidencing compliance with the foregoing insurance provision.
(c) Borrower and each Guarantor will explore, develop and
maintain (or cause to be explored, developed and maintained) the leases, wells,
units and acreage to which the mineral interests pertain in a prudent manner,
and as may be reasonably necessary for the prudent and economical operation of
(and in an effort to maximize the production capacity of) such leases, wells,
units and acreage in accordance with reasonable and customary industry
standards for similar owners of mineral interests.
(d) Borrower and each Guarantor will act prudently and in
accordance with customary industry standards in managing or operating its
assets, properties, business and investments. Borrower and each Guarantor will
keep in good working order and condition, ordinary wear and tear excepted, all
of its assets and properties which are necessary to the conduct of its
business, including, without limitation, all wells and equipment necessary or
useful in the operation of the Hydrocarbon Reserves.
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5.5. Compliance with Laws; Violations. Borrower will comply in all
material respects at all times with all Laws applicable to the Collateral, and
shall promptly notify Agent in writing of any violation of any law, statute,
regulation or ordinance of any Governmental Body, or of any agency thereof,
applicable to Borrower which could reasonably be expected to have a Material
Adverse Effect.
5.6. Execution of Supplemental Instruments. Execute and deliver to
Agent from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Agent may request, in order that the
full intent of this Agreement may be carried into effect.
5.7. Payment of Debt. Pay, discharge or otherwise satisfy at or
before maturity (subject, where applicable, to specified grace periods and, in
the case of the trade payables, to normal payment practices) all its
obligations and liabilities of whatever nature, except when the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and Borrower and each Guarantor shall have provided for such
reserves as Agent may reasonably deem proper and necessary, subject at all
times to any applicable subordination arrangement in favor of Lenders.
5.8. Standards of Financial Statements. Cause all financial
statements referred to in Sections 9.6, 9.11 and 9.12 as to which GAAP is
applicable to be complete and correct in all material respects (subject, in the
case of interim financial statements, to normal and recurring year-end audit
adjustments) and to be prepared in reasonable detail and in accordance with
GAAP applied consistently throughout the periods reflected therein (except as
concurred in by such reporting accountants or officer, as the case may be, and
disclosed therein).
5.9. Environmental Matters. (a) Borrower and each Guarantor shall
ensure and shall cause each of its Subsidiaries to ensure that the Real
Property remains in compliance in all material respects with all applicable
Environmental Laws.
(b) Each of Borrower and each Guarantor will do all things
necessary to systematically assure and monitor continued compliance in all
material respects with all applicable Environmental Laws, including periodic
reviews of such compliance.
(c) In the event any of Borrower or any Guarantor, gives or
receives notice of any material release or threat of release of a reportable
quantity of any Hazardous Substances on its Real Property (any such event being
hereinafter referred to as a "Hazardous Discharge") or receives any notice of
material violation, request for information or notification that it is
potentially responsible for investigation or cleanup of environmental
conditions on its Real Property, demand letter or complaint, order, citation,
or other written notice with regard to any material Hazardous Discharge or
material violation of any Environmental Laws affecting its Real Property or its
interest therein (any of the foregoing is referred to herein as an
"Environmental Complaint") from any Governmental Body, then Borrower shall
within five (5) Business Days, give written notice of same to the Agent
detailing facts and circumstances of which Borrower or such Subsidiary is aware
giving rise to the Hazardous Discharge or Environmental Complaint and
periodically inform Agent of the status of the matter. Such information is to
be provided to allow Agent to protect its security interest in the Collateral
for the benefit of Lenders and is not intended to create nor shall it create
any obligation upon the Agent or any Lender with respect thereto.
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(d) Each of Borrower and each Guarantor shall respond
promptly to any Hazardous Discharge or Environmental Complaint applicable to it
and take all necessary action in order to safeguard the health of any Person
and to avoid subjecting the Collateral to any claim or Lien other than a
Permitted Lien.
(e) Borrower and each Guarantor shall each jointly and
severally defend and indemnify the Agent and each Lender, its officers,
directors, employees and agents and hold the Agent and each Lender, its
officers, directors, employees and agents harmless from and against all loss,
liability, damage and expense, claims, costs, fines and penalties, including
attorney's fees, suffered or incurred by the Agent or any Lender, its officers,
directors, employees and agents under or on account of any violation by
Borrower or any Guarantor of any Environmental Laws, including, without
limitation, the assertion of any Lien thereunder other than Permitted Liens,
with respect to any Hazardous Discharge, the presence of any Hazardous
Substances in violation of applicable Environmental Laws affecting Borrower's
or such Guarantor's property, whether or not the same originates or emerges
from Borrower's or such Guarantor's property or any contiguous real estate,
including any loss of value of the Collateral as a result of the foregoing,
except to the extent such loss, liability, damage and expense is directly
attributable to any Hazardous Discharge resulting from actions on the part of
the Lender, its officers, directors, employees and agents. The obligations of
Borrower and each Guarantor under this Section 5.9 shall arise upon the
discovery of the presence of any Hazardous Substances in violation of
applicable Environmental Laws on Borrower's or such Guarantor's property,
whether or not any federal, state, or local environmental agency has taken or
threatened any action in connection with the presence of any Hazardous
Substances. The obligation and the indemnifications hereunder shall survive the
termination of this Agreement.
(f) For purposes of Section 5.9 and 4.7, all references to
Real Property shall be deemed to include all of Borrower's and each Guarantor's
right, title and interest in and to its owned and leased premises;
5.10. Inspections. At all times during normal business hours and
upon reasonable notice (unless a Default or Event of Default has occurred or
Agent reasonably suspects that a Default or Event of Default has occurred, in
which event no prior notice shall be required), Agent shall have the right to
(a) visit and inspect Borrower's and each Guarantor's properties and the
Collateral, (b) inspect, audit and make extracts from Borrower's and each
Guarantor's relevant books and records, including, but not limited to,
management letters prepared by independent accountants, and (c) discuss with
Borrower's and each Guarantor's principal officers and independent accountants,
the business, assets, liabilities, financial condition results of operations
and business prospects of Borrower. Agent may conduct inspections at Borrower's
and each Guarantor's properties no more than four (4) times per Loan Year
unless an Event of Default has occurred or the results of any audit report are
not satisfactory to Agent in its discretion, in which event there shall be no
limit on the number of inspection performed. Borrower and each Guarantor will
deliver to Agent any instrument necessary for Agent to obtain records from any
service bureau maintaining records for such Borrower or Guarantor.
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5.11. Dismissal of Appeals. Borrower shall use commercially
reasonable efforts to have dismissed any presently filed and pending appeals to
the Confirmation Order, including, without limitation such appeal pending by
High River Limited Partnership in the United States District Court, Southern
District of Texas and shall immediately make application to have such appeals
dismissed on the grounds of mootness.
VI. NEGATIVE COVENANTS
Neither Borrower nor any Guarantor shall and neither Borrower nor any
Guarantor shall permit any of its Subsidiaries to, until satisfaction in full
of the Obligations and termination of this Agreement:
6.1. Mergers, Consolidations and Other Fundamental Changes.
(a) Consolidate with or merge with or into any other Person,
or, directly or indirectly, sell, lease, assign, transfer or convey all or
substantially all of its assets (computed on a consolidated basis), to another
Person or group of Persons acting in concert, whether in a single transaction
or through a series of related transactions, unless:
(i) either (x) Borrower or such Guarantor, as the case may
be, shall be the continuing Person, or (y) the Person (if other than Borrower)
formed by such consolidation or into which Borrower or such Guarantor, as the
case may be, is merged or to which all or substantially all of the properties
and assets of Borrower or such Guarantor, as the case may be, are transferred as
an entirety or substantially as an entirety (Borrower or such Guarantor, as the
case may be, or such other Person being hereinafter referred to as the
"Surviving Person") shall be a corporation or partnership organized and validly
existing under the laws of the United States, any State thereof or the District
of Columbia, and shall expressly assume, by a joinder agreement supplemental
hereto and any supplements to any Security Documents as Agent in its sole
discretion may require, executed and delivered to Agent on or prior to the
consummation of such transaction, in form satisfactory to the Agent, all the
obligations of the Borrower or such Guarantor, as the case may be, under this
Agreement and the Ancillary Documents and shall execute such Security Documents
as may be necessary to maintain the Lien of Agent on the Collateral of the
Surviving Person;
(ii) No Default or Event of Default shall exist or shall
occur immediately after giving effect to such transaction;
(iii) immediately after giving effect to such transaction,
on a pro forma basis, (x) the Net Worth of the Surviving Person is at least
equal to the Net Worth of such predecessor or transferring entity immediately
prior to such transaction, and (y) the Surviving Person immediately after giving
effect on a pro forma basis to the Consolidated Fixed Charges of the Surviving
Person, (A) the Consolidated Fixed Charge Coverage Ratio of the Surviving Person
for the Reference Period is greater than 2.5 to 1, and (B) the Surviving
Person's Adjusted Consolidated Tangible Assets are equal to or greater than 150%
of the total consolidated principal amount or accreted value, as the case may
be, of Debt of the Surviving Person; and
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(iv) Borrower has delivered to Agent an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, assignment, or transfer and such supplemental agreements comply with
this Section 6.1(a) and that all conditions precedent herein provided relating
to such transaction have been satisfied.
For purposes of this Section 6.1(a), the Consolidated Fixed Charge Coverage
Ratio shall be determined on a pro forma consolidated basis (giving effect to
such transaction) for the four fiscal quarters immediately preceding such
transaction.
(b) For purposes of clause (a), the sale, lease, conveyance,
assignment, transfer, or other disposition of all or substantially all of the
properties and assets of one or more Subsidiaries of Borrower or any Guarantor,
which properties and assets, if held by Borrower or such Guarantor instead of
such Subsidiaries, would constitute all or substantially all of the properties
and assets of the Borrower or such Guarantor, on a consolidated basis, shall be
deemed to be the transfer of all or substantially all of the properties and
assets of Borrower and such Guarantor.
(c) Notwithstanding anything contained in the foregoing to
the contrary, any Subsidiary of Borrower or any Guarantor with a Net Worth
greater than zero may merge into Borrower or any Guarantor (or a wholly owned
Subsidiary of Borrower or any Guarantor) at any time, provided, however, that
Borrower shall have delivered to Agent an Officers' Certificate stating that
such Subsidiary has a Net Worth greater than zero and such merger does not
result in a Default or an Event of Default hereunder.
(d) Upon any consolidation or merger, or any transfer of
assets in accordance with Section 6.1(a), the Surviving Person formed by such
consolidation or into which Borrower or any Guarantor is merged or to which
such transfer is made shall succeed to, and be substituted for, and may
exercise every right and power of, Borrower or any Guarantor under this
Agreement, the Security Documents and the other Ancillary Documents with the
same effect as if such Surviving Person had been named as Borrower or a
Guarantor herein. When a Surviving Person duly assumes all of the obligations
of Borrower pursuant hereto, the predecessor shall be released from such
obligations.
6.2. Asset Sales. (a) Consummate an Asset Sale unless (x) with
respect to Asset Sales by any Guarantor an amount equal to the Net Cash
Proceeds therefrom is (A) applied to repay the Obligations in such order as
Agent may determine, (B) used to make cash payments in the ordinary course of
business and consistent with past practices that are not otherwise prohibited
by this Agreement, provided, however, that the aggregate amount so used
pursuant to this clause (B) from and after the Closing Date does not exceed $3
million (without duplication of amounts used for Capital Expenditures in
accordance with clause (C) of this Section 6.2 below), or (C) used for Capital
Expenditures in a Related Business within 180 days after the date of such Asset
Sale or used to reimburse Borrower and its Subsidiaries for Capital
Expenditures made prior to such Asset Sale, or (y) with respect to proposed
Asset Sales by Borrower resulting in Net Cash Proceeds which, when aggregated
with the Net Cash Proceeds of all other Asset Sales in the same fiscal year
(other than Asset Sales to which Agent has consented hereunder) exceeds
$1,000,000 in such fiscal year, such Asset Sale shall not be consummated unless
Agent shall have given its prior written consent and Borrower shall deposit
with Agent an amount equal to the amount of such Net Cash Proceeds in excess of
$1,000,000, to be held as cash collateral for
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the Obligations. Absent the existence of an Event of Default, Agent shall
release such cash collateral in an amount (i) which Borrower certifies to Agent
was previously expended by Borrower for Capital Expenditures by Borrower prior
to such Asset Sale and such expended amount has not been previously reimbursed
to Borrower, or (ii) which represents the imminent expenditure of funds by
Borrower for Capital Expenditures in a Related Business within 180 days after
the date of such Asset Sale upon the receipt by Agent of proof reasonably
satisfactory to Agent of such imminent expenditure of funds.
(b) Notwithstanding the foregoing limitations on Asset Sales
and restrictions on and requirements for the use of Net Cash Proceeds
therefrom, Borrower and Guarantors, as the case may be, may at any time and
from time to time, but subject to Subsection 6.2(c) below, effect any of the
following transactions, and the Net Cash Proceeds, if any, realized from any of
the following transactions shall not be subject to the application requirements
of Section 6.2(a):
(i) Borrower and Guarantors may engage in Asset
Sales incident to and resulting from a transaction expressly
permitted under Section 6.1;
(ii) Borrower and Guarantors may sell, assign,
lease, license, transfer, abandon or otherwise dispose of (a)
damaged, worn out, unserviceable or other obsolete property
in the ordinary course of business, or (b) other property no
longer necessary for the proper conduct of their business;
(iii) Borrower and Guarantors may convey, sell,
transfer or otherwise dispose of Hydrocarbons or other
mineral products in the ordinary course of business; and
(iv) Borrower and Guarantors may convey, sell,
transfer or otherwise dispose of Drilling Production Payments
and interests related to Drilling Programs; provided,
however, that an amount equal to the Net Cash Proceeds of
each such conveyance, sale, transfer or other disposition
shall be used for Capital Expenditures (including without
limitation the reimbursement of Borrower and Guarantors for
Capital Expenditures already made) or to repay the
Obligations.
(c) Notwithstanding any other provision of this Section 6.2,
Borrower shall not transfer any Collateral included in the Borrowing Base if,
after giving effect to such transfer and any repayment of Obligations
hereunder, an Overadvance shall exist.
(d) Notwithstanding anything to the contrary contained in
this Section 6.2, Borrower shall not effect the consummation of, and shall not
permit Galveston Bay Pipeline or Galveston Bay Processing, as the case may be,
to consummate a GB Facility Asset Sale unless an amount equal to the Net GB
Financing Proceeds resulting therefrom is (i) distributed by Galveston Bay
Pipeline or Galveston Bay Processing, as the case may be, to Borrower and used
by Borrower for Capital Expenditures in a Related Business of Borrower, each
within 180 days after the date of consummation of such GB Facility Asset Sale,
or (ii) to the extent not used in accordance with clause (i) preceding with 180
days after the date of consummation of such GB Facility Asset Sale, applied by
Borrower to repay the Obligations.
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6.3. Limitation on Incurrence of Additional Debt. Except as set forth
in this Section 6.3, from and after the Closing Date, directly or indirectly,
create, incur, assume, guarantee, or otherwise become liable for, contingently
or otherwise (to "Incur" or, as appropriate, an "Incurrence"), any Debt,
except:
(a) the Obligations and the Guaranty;
(b) Debt evidenced by the Indenture and the Indenture
Notes; provided, however, the aggregate principal amount outstanding under the
Indenture shall not exceed $200,000,000;
(c) Debt outstanding under the Receivables Facility;
(d) Debt in an aggregate principal amount outstanding
not to exceed at any one time $67.5 million;
(e) Subordinated Debt of Borrower solely to any wholly
owned Subsidiary of Borrower, or Debt of any wholly owned Subsidiary of
Borrower solely to Borrower or to any wholly owned Subsidiary of Borrower;
provided, however, that if any Subsidiary holding such Debt, for any reason, is
no longer deemed a Subsidiary of Borrower, any outstanding Debt incurred by
Borrower or another Subsidiary pursuant to this Section 6.3(b) shall constitute
a new incurrence of Debt and be subject to the restrictions of Section 6.3.
(f) Debt of Borrower or any Guarantor secured by a
Permitted Lien that meets the requirements of clause (c), (d), or (e) of the
definition of "Permitted Liens" set forth in Section 1.1;
(g) (1) any guaranty of Debt permitted by clauses (a),
(b), (c), or (k) hereof, which guaranty shall not be included in the
determination of the amount of Debt which may be incurred pursuant to (a), (b),
(c), or (k) hereof, or (2) any guarantee by Borrower of the obligations of any
wholly owned Subsidiary of Borrower to the extent such obligations so
guaranteed (A) do not constitute Debt (unless and only to the extent such Debt
is otherwise permitted under this Section 6.3) and (B) except to the extent
such obligations constitute Debt otherwise permitted under this Section 6.3,
such obligations are of the type customarily Incurred by such wholly owned
Subsidiary in favor of third parties in the ordinary course of conducting its
Related Business;
(h) Borrower and any Guarantor may incur Debt as an
extension, renewal, replacement, or refunding of (i) any item of the Debt
permitted to be incurred by Section 6.3(k), (ii) Debt existing on the Closing
Date that is secured by assets of Galveston Bay Pipeline, up to a maximum
principal amount of such Debt so extended, renewed, replaced or refunded under
this Section 6.3(h) not to exceed $2,000,000, (iii) Debt existing on the
Closing Date (other than this Agreement and the Receivables Facility) that is
secured by assets of Galveston Bay Processing, up to a maximum principal amount
of such Debt so extended, renewed, replaced or refunded under this Section
6.3(h) not to exceed $10,000,000 or (iv) the Debt permitted to be incurred by
this Section 6.3(h) (each such item of Debt is referred to as "Refinancing
Debt"), provided, however, that (1) the maximum principal amount of each item
of Refinancing Debt (or, if such item of Refinancing Debt is issued with
original issue discount, the original issue price of such
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item of Refinancing Debt) permitted under this clause (g) may not exceed the
lesser of (x) the principal amount of the item of Debt being extended, renewed,
replaced, or refunded plus reasonable financing fees and other associated
reasonable out-of-pocket expenses including consent payments, premium, if any,
and related fees, in each case other than those paid to a Affiliate
(collectively, "Refinancing Fees"), or (y) if such item of Debt being extended,
renewed, replaced, or refunded was issued at an original issue discount, the
original issue price, plus amortization of the original issue discount as of
the time of the Incurrence of such item of Refinancing Debt plus Refinancing
Fees, (2) each item of Refinancing Debt has a Weighted Average Life and a final
maturity that is equal to or greater than the related Debt being extended,
renewed, replaced, or refunded at the time of such extension, renewal,
replacement, or refunding, and (3) each item of Refinancing Debt shall rank
with respect to the Obligations to an extent no less favorable in respect
thereof to the Lenders than the related Debt being refinanced;
(i) Debt represented by trade payables or accrued
expenses, in each case incurred on normal, customary terms in the ordinary
course of business, not overdue for a period of more than 45 days (or, if
overdue for a period of more than 45 days, being contested in good faith and by
appropriate proceedings and adequate reserves with respect thereto being
maintained on the books of Borrower or any Guarantor in accordance with GAAP)
and not constituting any amounts due to banks or other financial institutions;
(j) Swap Obligations of Borrower or any Guarantor;
(k) Debt of Borrower or any Guarantor to holders of
Allowed Priority Tax Claims under the Plan of Reorganization, to holders of
Allowed Claims in classes 2, 5, 6A or 6B under the Plan of Reorganization, or
under surety bonds, letters of credit or reimbursement obligations related to
or constituting collateral securing Borrower's or any Guarantor's obligations
thereunder;
(l) letters of credit and reimbursement obligations
relating thereto to the extent collateralized by cash or Cash Equivalents;
(m) Debt outstanding on the date hereof and listed on
Schedule 4.8(b)(ii) hereof;
(n) Debt secured by a Permitted Lien that meets the
requirements of clause (w) of the definition of "Permitted Liens" set forth in
Section 1.2;
(o) the Attributable Debt incurred by Borrower in
connection with a Sale and Leaseback Transaction of the Headquarters Facility
if the aggregate principal amount thereof at the time of incurrence does not
exceed 100% of the appraised Value of the Headquarters Facility as determined
by an Appraisal dated not more than six (6) months prior to the date on which
such Sale and Leaseback Transaction is consummated; and
(p) Debt in respect of Drilling Production Payments not
to exceed the limitation set forth in Section 7.4 of this Agreement.
Debt incurred and Disqualified Capital Stock issued by any
Person that is not a Subsidiary of Borrower, which Debt or Disqualified Capital
Stock is outstanding at the time such
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Person becomes a Subsidiary of, or is merged into, or consolidated with
Borrower or one of its Subsidiaries, as the case may be, shall be deemed to
have been incurred or issued, as the case may be, at the time such Person
becomes a Subsidiary of, or is merged into, or consolidated with Borrower or
one of its Subsidiaries.
Notwithstanding anything to the contrary contained in this
Section 6.3 or in Section 6.4, Borrower shall not effect the consummation of,
and shall not permit Galveston Bay Pipeline or Galveston Bay Processing, as the
case may be, to consummate, a GB Facility Financing unless (A) concurrently
with the consummation of such GB Facility Financing Borrower shall cause a duly
executed and acknowledged GB Consent and Subordination Agreement to be
delivered to the Agent and (B) an amount equal to the Net GB Financing Proceeds
resulting therefrom is (i) used by Galveston Bay Pipeline or Galveston Bay
Processing, as the case may be, for Capital Expenditures in a Related Business
of such Person within 180 days after the date of consummation of such GB
Facility Financing, (ii) distributed by Galveston Bay Pipeline or Galveston Bay
Processing, as the case may be, to Borrower and used by Borrower for Capital
Expenditures in a Related Business of such Borrower, each within 180 days after
the date of consummation of such GB Facility Financing, (iii) used, in part, as
contemplated in the preceding clause (i), and used, in part, as contemplated in
the preceding clause (ii), or (iv) to the extent not used in accordance with
clause (i), (ii) or (iii) preceding within 180 days after the date of
consummation of such GB Facility Financing, distributed by Galveston Bay
Pipeline or Galveston Bay Processing, as the case may be, to Borrower and, on
the 181st day after the date of consummation of such GB Facility Financing,
such amount, if any, distributed to Borrower pursuant to this clause (iv) shall
be deemed to be included within the Net Cash Proceeds subject to application
pursuant to Section 6.2(a)(x)(A).
For the purpose of determining compliance with this Section
6.3, (A) if an item of Debt meets the criteria of more than one of the types of
Debt described in the above clauses, Borrower, Guarantors or the Subsidiary in
question shall have the right to determine in its sole discretion the category
to which such Debt applies and shall not be required to include the amount and
type of such Debt in more than one of such categories and may elect to
apportion such item of Debt between or among any two or more of such categories
otherwise applicable, and (B) the amount of any Debt which does not pay
interest in cash or which was issued at a discount to face value shall be
deemed to be equal to the amount of the liability in respect thereof determined
in accordance with GAAP.
6.4. Creation of Liens. Create or suffer to exist any Lien upon or
against any of its property or assets now owned or hereafter acquired, except
Permitted Liens. For the purpose of determining compliance with this Section
6.4, if a Lien meets the criteria of more than one of the types of Permitted
Liens, Borrower, Guarantors or the Subsidiary in question shall have the right
to determine in its sole discretion the category of Permitted Lien to which
such Lien applies, shall not be required to include such Lien in more than one
of such categories, and may elect to apportion such Lien between or among any
two or more categories otherwise applicable.
6.5. Limitation on Investments, Loans and Advances. Make any
advance, loan, extension of credit or capital contribution to, or purchase any
stock, bonds, note, debentures or other securities of or any assets
constituting a business unit of, or make any other investment in, any Person,
except pursuant to a Permitted Investment.
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6.6. Limitation on Restricted Payments. Directly or indirectly
make any Restricted Payment.
6.7. Nature of Business. Neither Borrower nor any Guarantor shall
directly or indirectly engage to any substantial extent in any line or lines of
business activity other than a Related Business or such other business
activities as are reasonably related or incidental thereto.
6.8. Limitation on Transactions with Affiliates.
(a) Neither Borrower or any Guarantor shall enter directly or
indirectly into, or permit to exist, any Affiliate Transaction with any Officer
Affiliate, except for (i) transactions that constitute Permitted Investments
under clause (vi) of the definition of the term "Permitted Investments" set
forth in Section 1.2, (ii) employee compensation arrangements relating to the
full-time employment of Officer Affiliates by Borrower or any of its
Subsidiaries, (iii) the Existing Agreements, and (iv) transactions effected
pursuant to and in accordance with the terms of the Existing Agreements.
(b) Neither Borrower or any Guarantor shall enter directly or
indirectly into, or permit to exist, any Affiliate Transaction with any
Non-Officer Affiliate, except for (i) transactions made in good faith, the
terms of which are (x) fair and reasonable to Borrower or such Subsidiary, as
the case may be, (y) at least as favorable as the terms which could be obtained
by Borrower or such Guarantor, as the case may be, in a comparable transaction
made on an arm's length basis with Persons who are not Affiliates and (z) such
transaction must first be unanimously approved by the Board of Directors of
Borrower or such Guarantor which is the transacting party pursuant to a Board
Resolution, as fair and reasonable to Borrower or such Guarantor, as the case
may be, and on terms which are at least as favorable as the terms which could
be obtained by Borrower or such Guarantor, as the case may be, on an arm's
length basis with Persons who are not Affiliates, (ii) transactions between
Borrower, any Guarantor and any wholly-owned Subsidiary of Borrower or any
Guarantor or transactions between wholly-owned Subsidiaries of Borrower or any
Guarantor, (iii) transactions pursuant to the Indenture and related documents,
in each case, as amended, and (iv) transactions effected pursuant to and in
accordance with the terms and provisions of any court-approved settlement
relating to the Debtors' First Amended Objection of Claims of Orion Refining
Corporation (TransTexas Claim No. 1187) and TCR Holding Corporation (TransTexas
Claim No. 971) filed on February 11, 2000, in the TransTexas Case; and (v) any
employee compensation arrangement or ordinary course expense advance.
(c) Without limiting the foregoing provisions of Section
6.8(b), with respect to any Affiliate Transaction or series of Affiliate
Transactions (other than any Affiliate Transaction described clauses (ii),
(iii), or (iv) of Section 6.8(b)) with an aggregate value in excess of $5
million, Borrower must first obtain a favorable written opinion as to the
fairness of such transaction to Borrower or such Subsidiary, as the case may
be, from a financial point of view, from a nationally recognized investment
banking or "big 5" accounting firm.
6.9. Subsidiaries. Form any Material Subsidiary unless such
Material Subsidiary executes and delivers a joinder to this Agreement joining
this Agreement as a Guarantor and such other documents and instruments deemed
appropriate by Agent with respect to such Subsidiary promptly following such
formation or acquisition.
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6.10. Fiscal Year and Accounting Changes. Change its fiscal year
from January 31 or make any significant change (i) in accounting treatment and
reporting practices except as required by GAAP or (ii) in tax reporting
treatment except as required by law; provided, however, that Borrower may
change its tax year to conform to its fiscal year.
6.11. Amendment of Articles of Incorporation, By-Laws. Amend or
modify any material term or provision of its Articles of Incorporation or
By-Laws unless required by law and except to the extent such amendment could
not reasonably be expected to have a Material Adverse Effect.
6.12. Compliance with ERISA. (i) (x) Maintain, or permit any member
of the Controlled Group to maintain, or (y) become obligated to contribute, or
permit any member of the Controlled Group to become obligated to contribute, to
any ERISA Plan, other than those ERISA Plans disclosed on Schedule 4.8(d); (ii)
engage, or permit any member of the Controlled Group to engage, in any
non-exempt "prohibited transaction", as that term is defined in section 406 of
ERISA and Section 4975 of the Code; (iii) incur, or permit any member of the
Controlled Group to incur, any "accumulated funding deficiency", as that term
is defined in Section 302 of ERISA or Section 412 of the Code; (iv) terminate,
or permit any member of the Controlled Group to terminate, any ERISA Plan where
such event could result in any liability of Borrower or any member of the
Controlled Group or the imposition of a lien on the property of Borrower or any
member of the Controlled Group pursuant to Section 4068 of ERISA; (v) assume,
or permit any member of the Controlled Group to assume, any obligation to
contribute to any Multiemployer Plan not disclosed on Schedule 4.8(d); (vi)
incur, or permit any member of the Controlled Group to incur, any withdrawal
liability to any Multiemployer Plan; (vii) fail promptly to notify Agent of the
occurrence of any Termination Event; (viii) fail to comply, or permit a member
of the Controlled Group to fail to comply, with the requirements of ERISA or
the Code or other applicable laws in respect of any ERISA Plan; (ix) fail to
meet, or permit any member of the Controlled Group to fail to meet, all minimum
funding requirements under ERISA or the Code or postpone or delay or allow any
member of the Controlled Group to postpone or delay any funding requirement
with respect of any ERISA Plan.
6.13. Prepayment of Indenture Notes. At any time, directly or
indirectly, prepay the Indenture Notes or repurchase, redeem, retire or
otherwise acquire any Indenture Notes except, so long as an Event of Default
does not exist or would not exist after giving effect thereto, regularly
scheduled or required repayments, purchases or redemptions or refinancing of
the Indenture Notes by the Borrower pursuant to Article III or Section 4.14(b)
et seq. of the Indenture or as otherwise permitted hereunder.
6.14. Limitations on Restricting Subsidiary Dividends. Except as
listed on Schedule 6.14 or in connection with a GB Facility Financing, Borrower
shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly, create, assume, or suffer to exist any consensual encumbrance or
restriction on the ability of any Subsidiary of Borrower to pay dividends or
make other distributions on the Capital Stock of any Subsidiary of Borrower,
except encumbrances and restrictions existing under this Agreement, the
Receivables Facility or the Indenture (or any refinancing of any such Debt
facilities incurred in accordance with Section 6.3(g)), and any agreement of a
Person acquired by Borrower or a Subsidiary of Borrower, which restrictions
existed at the time of acquisition, were not put in place in anticipation of
such
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acquisition and are not applicable to any Person or property, other than the
Person or any property of the Person so acquired.
6.15. Changes Relating to Subordinated Debt. Amend the terms of any
Subordinated Debt if the effect of such amendment is to: (a) increase the
interest rate on such Debt; (b) shorten the maturity of such Subordinated Debt;
(c) change any event of default or add any covenant with respect to such Debt;
(d) change the payment provisions of such Debt; (e) change the subordination
provisions thereof; or (f) change or amend any other term if such change or
amendment would materially increase the obligations of the obligor or confer
additional material rights on the holder of such Debt in a manner adverse to
Borrower, Agent or any Lender.
VII. FINANCIAL COVENANTS.
Borrower shall, until payment of the Obligations and termination of
this Agreement:
7.1. Consolidated Coverage Ratio. Not permit the Consolidated
Coverage Ratio for Borrower and its Subsidiaries on a consolidated basis at the
end of each fiscal quarter with respect to the immediately preceding fiscal
period set forth below (ending on the last day of such fiscal quarter) to be
less than Consolidated Coverage Ratio set forth below as corresponds to the
applicable fiscal period:
Period Coverage Ratio
------ --------------
One quarter ended 4/30/00 .33 to 1
Two quarters ended 7/31/00 .40 to 1
Three quarters ended 10/31/00 .45 to 1
Four Quarters Ended
-------------------
1/31/01 .50 to 1
4/30/01 .55 to 1
7/31/01 .60 to 1
10/31/01 .65 to 1
1/31/02 .70 to 1
4/30/02 .75 to 1
7/31/02 .80 to 1
10/31/02 .85 to 1
1/31/03 .90 to 1
4/30/03 1.00 to 1
7/31/03 1.10 to 1
10/31/03 1.20 to 1
1/31/04 and thereafter 1.25 to 1
until the end of the Term
7.2. Consolidated Net Income. Not permit the sum of (i)
Consolidated Net Income for Borrower and its Subsidiaries on a consolidated
basis plus (ii) dividend requirements of Borrower and its consolidated
Subsidiaries (whether in cash or otherwise (except dividends
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payable solely in shares of Qualified Capital Stock)) with respect to Preferred
Stock paid, accrued, or scheduled to be paid or accrued during each period set
forth below (in each case to the extent attributable to such period and
excluding items eliminated in consolidation) at the end of each fiscal quarter
with respect to the immediately preceding fiscal period set forth below (ending
on the last day of such fiscal quarter) to be less than the amount set forth
below as corresponds to the applicable fiscal period:
Fiscal Period Net Income
------------- ----------
One quarter ended 4/30/00 ($12,000,000)
Two quarters ended 7/31/00 ($25,000,000)
Three quarters ended 10/31/00 ($38,000,000)
Four Quarters Ended
-------------------
1/31/01 ($40,000,000)
4/30/01 ($37,500,000)
7/31/01 ($35,000,000)
10/31/01 ($32,500,000)
1/31/02 ($30,000,000)
4/30/02 ($27,500,000)
7/31/02 ($25,000,000)
10/31/02 ($22,500,000)
1/31/03 ($20,000,000)
4/30/03 ($15,000,000)
7/31/03 ($10,000,000)
10/31/03 ($ 5,000,000)
1/31/04 and thereafter 0
until the end of the Term
7.3. Minimum Consolidated EBITDA. Not permit Consolidated EBITDA
for Borrower and its Subsidiaries on a consolidated basis at the end of each
fiscal quarter with respect to the immediately preceding fiscal period set
forth below (ending on the last day of such fiscal quarter) to be less than the
Consolidated EBITDA set forth below as corresponds to the applicable fiscal
period:
Fiscal Period EBITDA
------------- ------
One quarter ended 4/30/00 $18,000,000
Two quarters ended 7/31/00 $38,000,000
Three quarters ended 10/31/00 $60,000,000
Four Quarters Ended
-------------------
1/31/01 $80,000,000
4/30/01 $82,500,000
7/31/01 $85,000,000
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10/31/01 $ 87,500,000
1/31/02 $ 90,000,000
4/30/02 $ 92,500,000
7/31/02 $ 95,000,000
10/31/02 $ 97,500,000
1/31/03 $100,000,000
4/30/03 $102,500,000
7/31/03 $105,000,000
10/31/03 $107,500,000
1/31/04 and thereafter until $110,000,000
the end of the Term
7.4. Drilling Production Payments. From and after the Closing
Date, outstanding Debt with respect to Drilling Production Payments shall not,
in the aggregate exceed the amounts set forth below during the periods set
forth:
Maximum Drilling Production
Amount of Period Payment Liabilities
---------------- -------------------
Closing Date through 10/31/00 $60,000,000
11/1/00 through 1/31/01 $57,500,000
2/1/01 through 4/30/01 $55,000,000
5/1/01 through 7/31/01 $50,000,000
8/1/01 through 10/31/01 $45,000,000
11/1/01 through 1/31/02 $40,000,000
2/1/02 through 4/30/02 $35,000,000
5/1/02 and thereafter until $30,000,000
the end of the Term
Neither the foregoing provisions nor anything else in this Agreement or the
Ancillary Documents shall be deemed to prevent Borrower from offering to
TCW/Southern, as supplements and additions to the TCW/Southern Production
Payment, any TCW/Southern Mandatory Offered Wells that Borrower is obligated to
offer pursuant to the terms of the Production Payment Purchase Agreement on or
about the date hereof, between TCW/Southern and Borrower, and upon request
Agent shall execute such documents as may be necessary to permit any such
TCW/Southern Mandatory Offered Well to be made subject to the TCW/Southern
Production Payment and to confirm that the interests therein added to the
TCW/Southern Production Payment (but not Borrower's retained interests) are
free from any Liens under the Ancillary Documents. In addition (but not in
limitation of the foregoing), Borrower may make additional wells and acreage,
other than TCW/Southern Mandatory Offered Wells, subject to the TCW/Southern
Production Payment or any other Drilling Production Payment, provided that:
(a) Borrower shall not, without the Agent's consent, so make
subject any proved Hydrocarbon Reserves that have been given value in any
Proved Reserves Report submitted by Borrower in connection with any Borrowing
Base determination.
(b) the Debt attributable to any such Drilling Production
Payment, plus all then existing Debt of Borrower and its Subsidiaries in
respect of other Drilling Production
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Payments, shall not exceed the foregoing limitations in this Section 7.4 on the
maximum amount of Drilling Production Payment Debt that Borrower can incur, and
(c) Borrower shall certify to Agent that the foregoing
conditions have been satisfied and that no Event of Default then exists.
Subject to such conditions, Agent shall upon request execute such documents as
may be necessary to permit the proposed Drilling Production Payment transaction
to be implemented.
VIII. CONDITIONS PRECEDENT.
8.1. Conditions to Initial Advances. The agreement of Lenders to
make the initial Advances requested to be made on the Closing Date is subject
to the satisfaction or waiver by Lenders, immediately prior to or concurrently
with the making of such Advances, of the following conditions precedent:
(a) Loan Documents. Agent shall have received this Agreement,
the Notes, the Security Documents, the Guaranties (executed by all Material
Subsidiaries) and the other Ancillary Documents (including all Exhibits and
Schedules) duly executed and delivered by an authorized officer of Borrower;
(b) Filings, Registrations and Recordings. Each document
(including, without limitation, any Uniform Commercial Code financing
statement) required by this Agreement, any Ancillary Document or under law or
reasonably requested by the Agent to be filed, registered or recorded in order
to create, in favor of Agent, a perfected security interest in or lien upon the
Collateral shall have been executed by Borrower;
(c) Corporate Proceedings of Borrower. Agent shall have
received a copy of the resolutions in form and substance reasonably
satisfactory to Agent, of the Board of Directors of Borrower and the Guarantors
authorizing (i) the execution, delivery and performance of Documents to which
it is a party and the Receivables Facility and (ii) the granting by Borrower of
the security interests in and liens upon the Collateral, in each case certified
by the Secretary or an Assistant Secretary of Borrower as of the Closing Date;
and, such certificate shall state that the resolutions thereby certified have
not been amended, modified, revoked or rescinded as of the date of such
certificate;
(d) Incumbency Certificates of Borrower. Agent shall have
received a certificate of the Secretary or an Assistant Secretary of Borrower
and each Guarantor, dated the Closing Date, as to the incumbency and signature
of the officers of Borrower and each Guarantor executing the Document to which
it is a party, together with evidence of the incumbency of such Secretary or
Assistant Secretary;
(e) Certificates. Agent shall have received a copy of the
Amended and Restated Certificate of Incorporation of Borrower and each
Guarantor, and all amendments thereto, certified by the Secretary of State or
other appropriate official of its jurisdiction of incorporation together with
copies of the Amended and Restated By-Laws of Borrower and each Guarantor
certified as accurate and complete by the Secretary of Borrower and such
Guarantor;
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(f) Good Standing Certificates. Agent shall have received
good standing certificates for Borrower and each Guarantor dated as of a recent
date issued by the Secretary of State or other appropriate official of
Borrower's and each Guarantor's jurisdiction of incorporation and each
jurisdiction where the conduct of Borrower's and each Guarantor's business
activities or the ownership of its properties necessitates qualification;
(g) Legal Opinions. Agent shall have received the executed
legal opinions of Gardere & Wynne, LLP and local counsel, each in form and
substance satisfactory to Agent which shall cover such matters incident to the
transactions contemplated by this Agreement and the Ancillary Documents as
Agent may reasonably require and Borrower hereby authorizes and directs such
counsel on its behalf and on behalf of Guarantors to deliver such opinions to
Agent and the Lenders;
(h) No Litigation. (i) No litigation, investigation or
proceeding before or by any arbitrator or Governmental Body shall be continuing
or threatened against Borrower or any Guarantor or against the officers or
directors of Borrower or any Guarantor (A) in connection with the Documents or
any of the transactions contemplated thereby and which, in the reasonable
opinion of Agent, is deemed material or (B) other than litigation described in
Borrower's or such Guarantor's Exchange Act filings, which if adversely
determined, could, in the reasonable opinion of Agent, have a Material Adverse
Effect; and (ii) no injunction, writ, restraining order or other order of any
nature materially adverse to Borrower or any Guarantor or the conduct of its
business or inconsistent with the due consummation of the Transactions shall
have been issued by any Governmental Body;
(i) Solvency Certificate; Pro Forma Financial Statements;
Projections. Agent shall have received a Solvency Certificate in the form of
Exhibit 8.1(i) executed by the Chief Financial Officer of Borrower along with a
copy of the Pro Forma Financial Statements and Projections which shall be
satisfactory in all respects to Agent;
(j) Collateral Examination. Agent shall have completed
Collateral examinations (including title examinations) and received appraisals,
the results of which shall be satisfactory in form and substance to the Agent;
(k) Fees. Agent shall have received all fees payable to Agent
and the Lenders on or prior to the Closing Date pursuant to Article III hereof
and counsel for Credit Suisse First Boston Management Corporation, Angelo
Gordon & Co., L.P. and Oaktree Capital Management, LLC, as general partner and
investment manager of certain funds and accounts it manages (collectively the
"Bondholder Lenders') shall have received all amounts due and payable to the
Bondholder Lenders on or prior to the Closing Date pursuant to Section 17.9(b)
hereof;
(l) Insurance. Agent shall have received in form and
substance satisfactory to Agent, certified copies of Borrower's and each
Guarantor's casualty insurance policies, together with loss payable
endorsements on Agent's standard form of loss payee endorsement naming Agent as
loss payee, and certified copies of Borrower's and each Guarantor's liability
insurance policies, together with endorsements naming Agent as a co-insured;
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(m) Environmental Reports. Agent shall have received all
environmental studies and reports prepared by independent environmental
engineering firms of all Real Property on Schedule 8.1(m);
(n) Payment Instructions. Agent shall have received written
instructions from Borrower directing the application of proceeds of the initial
Advances made pursuant to this Agreement;
(o) Consents. Agent shall have received any and all Consents
necessary to permit the effectuation of the transactions contemplated by this
Agreement and the Ancillary Documents; and, Agent shall have received such
Consents and waivers of such third parties as might assert claims with respect
to the Collateral, as Agent and its counsel shall deem necessary;
(p) No Adverse Material Change. (i) Since October 31, 1999,
the date of the last quarterly Financial Statement filed with the SEC and
supplementing the Disclosure Statement, there shall not have occurred (x) any
material adverse change in the financial condition operations, properties or
prospects of Borrower and its Subsidiaries, either individually or taken as a
whole, (y) no material damage or destruction to any of the Collateral nor any
material depreciation in the value thereof and (z) no event, condition or state
of facts which could reasonably be expected to have a Material Adverse Effect
and (ii) no representations made or information supplied to Agent or any Lender
shall have been proven to be inaccurate or misleading in any material respect;
(q) Review of Working Capital Accounts. Agent shall have
completed its review of Borrower's working capital accounts;
(r) Contract Review. Agent shall have reviewed all material
contracts of Borrower and each Guarantor including, without limitation, leases,
union contracts, labor contracts, vendor supply contracts, license agreements
and distributorship agreements, working capital accounts, marketing agreements
and such contracts and agreements shall be satisfactory in all respects to
Agent;
(s) Closing Certificate. Agent shall have received a closing
certificate signed by the Chief Financial Officer of Borrower dated as of the
date hereof, stating that (i) all representations and warranties set forth in
this Agreement and the Ancillary Documents are true and correct on and as of
such date, (ii) Borrower is on such date in compliance with all the terms and
provisions set forth in this Agreement and the Ancillary Documents and (iii) on
such date no Default or Event of Default has occurred or is continuing;
(t) Borrowing Base Certificate. Agent shall have received a
Borrowing Base Certificate demonstrating to the satisfaction of Agent that the
aggregate amount of Eligible Reserves is sufficient in value and amount to
support Advances in the amount requested by Borrower on the Closing Date;
(u) Receivables Facility. The Receivables Facility shall
close effective on the Closing Date;
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(v) Indenture. Agent shall have received executed copies of
the Indenture, the Indenture Notes, and other related agreements, each
certified as of the Closing Date by the Secretary or Assistant Secretary of the
Borrower (x) to be a true, correct and complete copy of such document and (y)
not to have been amended or rescinded from the form so certified and to be in
full force and effect;
(w) Confirmation Orders. The Agent shall have received a
certificate of the Secretary or Assistant Secretary of the Borrower, dated as
of the Closing Date, certifying (x) that attached thereto are true, correct and
complete copies of each of the Confirmation Orders (including the Plan of
Reorganization attached to such Confirmation Order) and (y) that no appeal or
motion for rehearing has been filed in connection with such Confirmation
Orders;
(x) Intercreditor Agreement. Agent shall have received the
fully executed Intercreditor Agreement, which Intercreditor Agreement shall be
satisfactory in form and substance to Agent in its sole discretion;
(y) Liens. The Security Documents shall create in favor of
the Agent for the benefit of the Lenders a first priority perfected security
interest (subject to Permitted Prior Liens) in all Collateral.
(x) Proved Reserves Report. The Agent and the Lenders shall
have received a Proved Reserves Report with respect to proven Hydrocarbon
Reserves of the Borrower, which shall be in form and substance satisfactory to
the Agent and the Lenders.
(y) Plan of Reorganization. The terms and conditions of the
Plan of Reorganization shall not have been amended or modified from the form of
the Plan of Reorganization attached to the Confirmation Order without the
approval of the Required Lenders; provided, however, that modifications which
in the reasonable judgment of the Agent do not impair or adversely affect the
rights and remedies of the Lenders may be implemented by the Borrower without
such approval. All conditions precedent to the effectiveness of the Plan of
Reorganization shall have been satisfied (or waived), the Confirmation Order
shall have become a Final Order and the Effective Date shall have occurred.
(z) Implementation of the Plan. In accordance with the terms
of the Plan of Reorganization, (i) the Borrower shall have issued the Class A
Common Stock, the Class B Common Stock, the Junior Preferred Stock, the Senior
Preferred Stock, the Warrants, and the Senior Secured Notes to all holders of
Allowed Claims and Interests entitled to receive same and (ii) the Borrower
shall have distributed cash to all holders of Allowed Claims entitled to
receive same.
(aa) Distributions. Borrower shall have established
procedures to ensure Agent of the payment of distributions due under the Plan
of Reorganization and all ongoing payments due in connection with ongoing
operations and to the holders of royalty interests and with respect to
severance taxes, which procedures shall be satisfactory to Agent in its sole
and absolute discretion.
(bb) Reports. Agent shall have received reports on
investigations conducted by Agent and/or its designees, with respect to
Borrower's and each Guarantor's business and assets,
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including compliance with all applicable laws, the conclusions of such report
to be reasonably satisfactory to Agent.
(cc) Debt Obligations. The Agent shall have reviewed all
documentation relating to all debt obligations of the Borrower and each
Guarantor, and shall be satisfied in all respects with such review. Agent shall
have received evidence that the total amount of Drilling Production Payment
liability does not exceed $60,000,000.
(dd) Minimum PV10. (i) The PV10 of total proved Hydrocarbon
Reserves (utilizing the Gillespie Price Method), excluding Hydrocarbon Reserves
attributable to wells subject to Production Payments to the extent of the
Dedication Percentage applicable to the Hydrocarbon Reserves at such wells,
shall not be less than 100% of the outstanding Obligations (after giving effect
to the initial Advances under this Agreement). (ii) The PV10 (utilizing the
Gillespie Price Method) of total proved developed producing Hydrocarbons
(including wells subject to Production Payments, but excluding any PV10
attributable to the interest of the entity to whom the Production Payments are
owed) shall not be less than 100% of the outstanding Obligations (after giving
effect to the initial Advances under this Agreement).
(ee) Distribution Channels. Agent shall have obtained the
right, pursuant to appropriate documentation, to utilize any and all rights
with respect to pipeline distribution and processing necessary to market the
now existing or hereafter acquired Hydrocarbon Reserves.
(ff) Minimum Syndication. GMACCC shall have received
Commitments from other Lenders of not less than $20,000,000 effective on the
Closing Date, which condition shall be deemed satisfied if $20,000,000 of
Obligations under the Existing DIP Facility become $20,000,000 of Obligations
under this Agreement.
(gg) Other. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
Transactions shall be satisfactory in form and substance to Agent, the Lenders
and their counsel.
8.2. Conditions to Each Advance. The agreement of Lenders to make
any Advance requested to be made on any date (including, without limitation,
its initial Advance), is subject to the satisfaction of the following
conditions precedent as of the date such Advance is made:
(a) Distributions. Borrower shall have established procedures
to ensure Agent of the payment of distributions due under the Plan of
Reorganization and all ongoing payments due in connection with ongoing
operations and to the holders of royalty interests and with respect to
severance taxes, which procedures shall be satisfactory to Agent in its sole
and absolute discretion.
(b) Representations and Warranties. Each of the
representations and warranties made by Borrower in or pursuant to this
Agreement and any related agreements to which it is a party, and each of the
representations and warranties contained in any certificate, document or
financial or other statement furnished at any time under or in connection with
this Agreement or any related agreement shall be true and correct in all
material respects on and as of such date as if made on and as of such date,
provided that any representation or warranty made as of a specific date shall
be true and correct in all material respects as of such specific date;
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(c) No Default. No Event of Default or Default shall have
occurred and be continuing on such date, or would exist after giving effect to
the Advances requested to be made, on such date; provided, however that Agent
in its sole discretion, may continue to make Advances notwithstanding the
existence of an Event of Default or Default and that any Advances so made shall
not be deemed a waiver of any such Event of Default or Default;
(d) Maximum Advances. In the case of any Advances requested
to be made, after giving effect thereto, the aggregate Advances shall not
exceed the maximum amount of Advances permitted under Section 2.1 hereof; and
(e) Counsel for the Bondholder Lenders shall have received
all amounts due and payable to the Bondholder Lenders on or after the Closing
Date pursuant to Section 17.9(b) hereof.
Each request for an Advance by Borrower hereunder shall constitute a
representation and warranty by Borrower as of the date of such Advance that the
conditions contained in this subsection shall have been satisfied.
IX. INFORMATION AS TO BORROWER.
Borrower and each Guarantor shall, until satisfaction in full of the
Obligations and the termination of this Agreement:
9.1. Disclosure of Material Matters. Immediately upon learning
thereof, report to Agent all matters materially affecting the value,
enforceability or collectability of any portion of the Collateral including,
without limitation, Borrower's reclamation or repossession of, or the return to
Borrower of, a material amount of goods or claims or disputes asserted by any
Customer or other obligor.
9.2. Borrowing Base Certificate. Deliver to Agent on or before
the twenty-fifth (25th) day of each month as and for the prior month a
Borrowing Base Certificate.
9.3. Proved Reserves Report. Furnish Agent on a six month basis a
Proved Reserves Report, prepared as of February 1 and August 1 of each year,
and delivered to Agent within 45 days of such date. Borrower may submit an
interim Proved Reserve Report prepared by the petroleum engineer which prepared
the most recent Proved Reserves Report or by an independent petroleum engineer
approved by Agent, prior to the date required hereunder for purposes of
calculating the Borrowing Base. In addition, Agent may require an Agent's
Proved Reserve Report as set forth in Section 2.1 hereof. Any Proved Reserve
Report, any reserve update included in any Borrowing Base Certificate or
Agent's Proved Reserve Report prepared by (i) Netherland, Sewell & Associates,
Inc. shall be prepared in accordance with the SEC Method or (ii) Cawley,
Gillespie & Associates shall be based upon the current NYMEX spot price and on
the Gillespie Method.
9.4. Intentionally Omitted
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9.5. Material Occurrences. Promptly notify Agent in writing upon
the occurrence of (a) any Event of Default or Default; (b) any event of default
under the Indenture; (c) any event which with the giving of notice or lapse of
time, or both, would constitute an event of default under the Indenture; (d)
any event, development or circumstance whereby any financial statements or
other reports furnished to Agent fail in any material respect to present
fairly, in accordance with GAAP consistently applied, the financial condition
or operating results of Borrower as of the date of such statements; (e) any
accumulated retirement plan funding deficiency which, if such deficiency
continued for two plan years and was not corrected as provided in Section 4971
of the Code, could subject Borrower to a tax imposed by Section 4971 of the
Code; (f) each and every default by Borrower which might reasonably be expected
to result in the acceleration of the maturity of any Debt in excess of
$5,000,000, including the names and addresses of the holders of such Debt with
respect to which there is a default existing or with respect to which the
maturity has been or could be accelerated, and the amount of such Debt; and (g)
any other development in the business or affairs of Borrower which could
reasonably be expected to have a Material Adverse Effect; in each case
describing the nature thereof and the action Borrower proposes to take with
respect thereto.
9.6. SEC Reports. Whether or not the Borrower is subject to the
reporting requirements of Section 13 or Section 15(d) of the Exchange Act, the
Borrower shall deliver to the Agent and each Lender, within 60 days after the
end of each fiscal quarter (other than any fiscal quarter ending a fiscal year)
and within 105 days after the end of each fiscal year quarterly and annual
financial statements, respectively, substantially equivalent to financial
statements that would have been included in the reports filed with the
Securities and Exchange Commission (the "SEC") if the Borrower were subject to
the reporting requirements of Section 13 or Section 15(d) of the Exchange Act,
including, with respect to annual information only, a report thereon by the
Borrower's independent certified public accountants as such would be required
in such reports to the SEC, and, in each case, together with a management's
discussion and analysis of financial condition and results of operations which
would be so required and, unless the SEC will not accept such reports, file
with the SEC the annual, quarterly and other reports which it is or would have
(if it were subject to such reporting obligations) been required to file with
the SEC. Annual and quarterly financial statements required to be delivered by
Borrower under this Section 9.6 shall be accompanied by comparable
consolidating balance sheets and consolidating income statements for each
Material Subsidiary (reviewed, with respect to annual information only, by
Borrower's independent certified public accountants).
9.7. Compliance Certificate; Notice of Default. Deliver to Agent
within 60 days after the end of each of its fiscal quarters, or 105 days after
the end of a fiscal quarter that is also the end of a fiscal year, an Officer's
Certificate equivalent to the certificate delivered to the Trustee under
Section 4.7(a) of the Indenture and complying with Section 314(a)(4) of the
Trust Indenture Act, as amended, and stating that a review of its activities
and the activities of its Subsidiaries during the preceding fiscal quarter has
been made under the supervisions of the signing officers with a view to
determining whether Borrower and its Subsidiaries have kept, observed,
performed and fulfilled its obligations under this Agreement and further
stating, as to each such Officer signing such certificate, regardless of
whether the signer knows of any failure by Borrower or any Subsidiary of
Borrower to comply with any conditions or covenants in this Agreement, or of
the occurrence of any Default, and, if such signer does know of such a failure
to comply or Default, the certificate shall describe such failure or Default
with particularity.
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(a) Deliver to Agent within 105 days after the end of each of
its fiscal years a written report of a firm of independent certified public
accountants with an established national reputation stating that in conducting
their audit for such fiscal year, nothing has come to their attention that
caused them to believe that the Company or any Subsidiary of the Company was not
in compliance with the provisions set forth in Sections 6.2, 6.3 or 6.7.
(b) Deliver to Agent, immediately upon becoming aware of any
Default or Event of Default under this Agreement, an Officers' Certificate
specifying such Default or Event of Default and what action Borrower is taking
or proposes to take with respect thereto. Neither Agent nor any Lender shall be
deemed to have knowledge of a Default or an Event of Default unless one of its
officers receives notice of the Default giving rise thereto from Borrower.
(c) Deliver to Agent, promptly after the occurrence thereof,
an Officers' Certificate informing Agent in reasonable detail of (i) any change
in the composition of the Board of Directors of Borrower or any of its
Subsidiaries, and/or (ii) any amendment to the charter or by-laws of Borrower or
any of its Subsidiaries.
9.8. Quarterly Financial Statements. Furnish Agent within sixty (60)
days after the end of each fiscal quarter, an unaudited balance sheet of
Borrower on a consolidated and consolidating basis and unaudited statements of
income and stockholders' equity and cash flow of Borrower reflecting results of
operations from the beginning of the fiscal year to the end of such quarter and
for such quarter, prepared consistent with the reporting requirements of the
Exchange Act, whether or not Borrower is subject to such reporting requirements
and on a basis consistent with prior practices and complete and correct in all
material respects, subject to normal year end adjustments. The reports shall be
accompanied by a certificate of Borrower's President and/or Chief Financial
Officer which shall state that, based on an examination sufficient to permit him
to make an informed statement, no Default or Event of Default exists, or, if
such is not the case, specifying such Default or Event of Default, its nature,
when it occurred, whether it is continuing and the steps being taken by Borrower
with respect to such default and, such certificate shall have appended thereto
calculations which set forth Borrower's compliance with the requirements or
restrictions imposed by Article VII hereof.
9.9. Other Reports. Furnish Agent as soon as available, but in any
event within ten (10) days after the issuance thereof, (i) with copies of such
financial statements, reports and returns as Borrower shall send to its
stockholders and (ii) copies of all material notices sent pursuant to the
Indenture.
9.10. Additional Information. Furnish Agent with such additional
information as Agent shall reasonably request in order to enable Agent and
Lenders to determine whether the terms, covenants, provisions and conditions of
this Agreement and the Notes have been complied with by Borrower including,
without limitation and without the necessity of any request by Agent, (a) copies
of all environmental audits and reviews, (b) at least thirty (30) days prior
thereto, notice of Borrower's opening of any new office or place of business or
Borrower's closing of any existing office or place of business, (c) promptly
upon Borrower's learning thereof, notice of any labor dispute to which Borrower
may become a party, any strikes or walkouts relating to any of its plants or
other facilities, and the expiration of any labor contract to which Borrower is
a party or by which Borrower is bound, and (d) promptly after its incurrence,
notice of the incurrence of additional Drilling Production Payment liability.
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9.11. Projected Operating Budget. Furnish Agent, no later than thirty
(30) days prior to the beginning of each of Borrower's fiscal years commencing
with fiscal year 2001, a month by month projected operating budget and cash flow
of Borrower on a consolidated or consolidating basis for such fiscal year
(including an income statement for each month and a balance sheet as at the end
of the last month in each fiscal quarter), such projections to be accompanied by
a certificate signed by Borrower's President or President and/or Chief Financial
Officer to the effect that such projections have been prepared on the basis of
sound financial planning practice consistent with past budgets and financial
statements and that such officer has no reason to question the reasonableness of
any material assumptions on which such projections were prepared.
9.12. Intentionally Omitted.
9.13. Notice of Suits, Adverse Events. Promptly notify Agent in writing
of any litigation, suit or administrative proceeding affecting Borrower, whether
or not the claim is covered by insurance, and of any suit or administrative
proceeding, which could reasonably be expected to have a Material Adverse
Effect. Furnish Agent with prompt notice of (i) any lapse or other termination
of any Consent issued to Borrower by any Governmental Body or any other Person
that is material to the operation of Borrower's business, (ii) any refusal by
any Governmental Body or any other Person to renew or extend any such Consent;
and (iii) copies of any periodic or special reports filed by Borrower with any
Governmental Body or Person, if such reports indicate any material change in the
business, operations, affairs or condition of Borrower, or if copies thereof are
requested by Agent, and (iv) copies of any material notices and other
communications from any Governmental Body or Person which specifically relate to
Borrower.
9.14. ERISA Notices and Requests. Furnish Agent with immediate written
notice in the event that (i) Borrower or any member of the Controlled Group
knows or has reason to know that a Termination Event has occurred, together with
a written statement describing such Termination Event and the action, if any,
which Borrower or member of the Controlled Group has taken, is taking, or
proposes to take with respect thereto and, when known, any action taken or
threatened by the Service, Department of Labor or PBGC with respect thereto,
(ii) Borrower or any member of the Controlled Group knows or has reason to know
that a prohibited transaction (as defined in Sections 406 of ERISA and 4975 of
the Code) has occurred together with a written statement describing such
transaction and the action which Borrower or any member of the Controlled Group
has taken, is taking or proposes to take with respect thereto, (iii) a funding
waiver request has been filed with respect to any Plan together with all
communications received by either Borrower or any member of the Controlled Group
with respect to such request, (iv) any increase in the benefits of any existing
ERISA Plan or the establishment of any new ERISA Plan or the commencement of
contributions to any ERISA Plan to which either Borrower or any member of the
Controlled Group was not previously contributing shall occur, (v) Borrower or
any member of the Controlled Group shall receive from the PBGC a notice of
intention to terminate a ERISA Plan or to have a trustee appointed to administer
a ERISA Plan, together with copies of each such notice, (vi) Borrower or any
member of the Controlled Group shall receive any favorable or unfavorable
determination letter from the Service regarding the qualification of a ERISA
Plan under Section 401(a) of the Code, together with copies of each such letter;
(vii) Borrower or any member of the Controlled Group shall receive a notice
regarding the imposition of withdrawal liability, together with copies of each
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such notice; (viii) Borrower or any member of the Controlled Group shall fail to
make a required installment or any other required payment under Section 412 of
the Code on or before the due date for such installment or payment; (ix)
Borrower or any member of the Controlled Group knows that (a) a Multiemployer
Plan has been terminated, (b) the administrator or plan sponsor of a
Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the PBGC
has instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan.
9.15. Additional Documents. Execute and deliver to Agent, upon request,
such documents and agreements as Agent may, from time to time, reasonably
request to carry out the purposes, terms or conditions of this Agreement.
9.16. Environmental Reports. Furnish Agent, concurrently with the
delivery of the financial statements referred to in Sections 9.6 and 9.8, with a
certificate signed by the President and/or Chief Financial Officer of Borrower
stating, to the best of his knowledge, that Borrower is in compliance in all
material respects with all applicable Environmental Laws. To the extent Borrower
is not in compliance in all material respects with such applicable Environmental
Laws, the certificate shall set forth with specificity all areas of
non-compliance and the proposed action Borrower will implement in order to
achieve full compliance.
X. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall
constitute an "Event of Default":
10.1. failure by Borrower to pay any principal or interest on the
Obligations when due, whether at maturity or by reason of acceleration pursuant
to the terms of this Agreement or by notice of intention to prepay, or by
required prepayment or failure to pay any other liabilities or make any other
payment, fee or charge provided for herein or in any Ancillary Document when
due;
10.2. any representation or warranty made or deemed made by Borrower in
this Agreement or any Ancillary Document or in any certificate, document or
financial or other statement furnished at any time in connection herewith or
therewith shall prove to have been misleading in any material respect on the
date when made or deemed to have been made;
10.3. failure by Borrower to perform, keep or observe any term or
covenant contained in Article VII of this Agreement.
10.4. issuance of a notice of Lien, levy, assessment, injunction or
attachment against Borrower's, any Subsidiary's or any Guarantor's property
having an aggregate value in excess of $1,000,000 which is not stayed or lifted
within thirty (30) days;
10.5. failure or neglect of Borrower to perform, keep or observe any
term, provision, condition or covenant contained in (i) this Agreement or any
Ancillary Document (other than any provision embodied in or covered by any other
clause of this Article X) and the same shall remain unremedied for thirty (30)
days or more after written notice from Agent to Borrower of
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any such failure and (ii) Article VI of this Agreement and the same shall remain
unremedied for ten (10) days or more after the occurrence thereof;
10.6. any judgment is rendered or judgment liens filed against
Borrower, any Subsidiary or any Guarantor for an amount in excess of $1,000,000
which within thirty (30) days of such rendering or filing is not either
satisfied, stayed or discharged of record;
10.7. Borrower shall (i) apply for, consent to or suffer the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
liquidator or similar fiduciary of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of creditors, (iii)
commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (vi) acquiesce to, or fail to have dismissed, within thirty (30) days,
any petition filed against it in any involuntary case under such bankruptcy
laws, or (vii) take any action for the purpose of effecting any of the
foregoing;
10.8. Borrower shall admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business;
10.9. any Material Subsidiary of Borrower, or any Guarantor, shall (i)
apply for, consent to or suffer the appointment of, or the taking of possession
by, a receiver, custodian, trustee, liquidator or similar fiduciary of itself or
of all or a substantial part of its property, (ii) admit in writing its
inability, or be generally unable, to pay its debts as they become due or cease
operations of its present business, (iii) make a general assignment for the
benefit of creditors, (iv) commence a voluntary case under any state or federal
bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a bankrupt
or insolvent, (vi) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vii) acquiesce to, or fail to have
dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (viii) take any action for the
purpose of effecting any of the foregoing;
10.10. any change in Borrower's condition or affairs (financial or
otherwise) which in Agent's opinion materially impairs the Collateral or the
ability of Borrower to perform its Obligations under this Agreement;
10.11. any Lien created hereunder or provided for hereby or under any
related agreement, with respect Collateral having a value of $75,000 or greater,
for any reason ceases to be or is not a valid and perfected Lien having a first
priority interest (other than Permitted Prior Liens);
10.12. a default or event of default has occurred and been declared and
continuing under the Indenture or the Receivables Facility of any Ancillary
Document which default shall not have been cured or waived within any applicable
grace period;
10.13. a default by Borrower or any Subsidiary or Guarantor in the
payment, when due (after any applicable grace period or extension for the
payment thereof) of any principal of or interest on any Debt having a principal
amount, individually or in the aggregate, in excess of $1,000,000, except so
long as the requisite holder or holders of such Debt shall have waived such
default;
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10.14. a default of the obligations of Borrower under any other
agreement to which it is a party shall occur which may reasonably be expected to
have a Material Adverse Effect and which default is not cured within any
applicable grace period;
10.15. any Change of Control shall occur and Agent shall fail to
consent to such Change of Control within twenty (20) days after the occurrence
of such Change of Control;
10.16. any material provision of this Agreement shall, for any reason,
cease to be valid and binding on Borrower, or Borrower shall so claim in writing
to Agent;
10.17. if (i) any Governmental Body shall (A) revoke, terminate,
suspend or adversely modify any license, permit, patent, trademark or tradename
of Borrower, the continuation of which is material to the continuation of
Borrower's business, or (B) commence proceedings to suspend, revoke, terminate
or adversely modify any such license, permit, trademark, tradename or patent and
such proceedings shall not be dismissed or discharged within sixty (60) days, or
(c) schedule or conduct a hearing on the renewal of any license, permit,
trademark, tradename or patent necessary for the continuation of Borrower's
business and the staff of such Governmental Body issues a report recommending
the termination, revocation, suspension or material, adverse modification of
such license, permit, trademark, tradename or patent; (ii) any agreement which
is necessary or material to the operation of Borrower's business shall be
revoked or terminated and not replaced by a substitute acceptable to Agent
within thirty (30) days after the date of such revocation or termination, and
such revocation or termination and non-replacement could have a Material Adverse
Effect;
10.18. any portion of the Collateral shall be seized or taken by a
Governmental Body;
10.19. an event or condition specified in Sections 4.8(d), 6.13 or 9.14
hereof shall occur or exist with respect to any ERISA Plan and, as a result of
such event or condition, together with all other such events or conditions,
Borrower or any member of the Controlled Group shall incur, or in the opinion of
Agent be reasonably likely to incur, a liability to a ERISA Plan or the PBGC (or
both) which, in the reasonable judgment of Agent, could have a Material Adverse
Effect;
10.20. if any Guarantor (i) attempts to terminate or (ii) challenges
the validity of, or its liability under, any Guaranty; or
10.21. if any Guarantor default in the payment of any of its payment
obligations under the Guaranty and such default shall continue for a period of
ten (10) days hereunder or under the Guaranty or if any proceeding shall be
brought by Borrower or any Guarantor to challenge the validity, binding effect
of this Agreement or the Guaranty, or should this Agreement or the Guaranty
cease to be a valid, binding and enforceable obligation of a Guarantor.
10.22. if the average NYMEX closing market price of gas per MMBTU drop
below $1.50 in any month, unless the PV10 attributable to proved developed
producing wells (excluding any PV10 attributable to wells subject to Production
Payments) is at least 140% of the outstanding Obligations.
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XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
11.1. Rights and Remedies. Upon the occurrence of (i) an Event of
Default pursuant to Section 10.7 all Obligations shall be immediately due and
payable and this Agreement and the obligation of Lenders to make Advances shall
be deemed terminated, and (ii) any of the other Events of Default and at any
time thereafter (such default not having previously been cured), at the option
of Required Lenders, all Obligations shall be immediately due and payable and
Lenders shall have the right to terminate this Agreement and to terminate the
obligation of Lenders to make Revolving Advances. Upon the occurrence of any
Event of Default, Agent shall have the right to exercise any and all other
rights and remedies provided for herein, under the Uniform Commercial Code and
at law or equity generally, including, without limitation, the right to
foreclose the security interests granted herein and to realize upon any
Collateral by any available judicial procedure and/or to take possession of and
sell any or all of the Collateral with or without judicial process. Agent may
enter any of Borrower's premises or other premises without legal process and
without incurring liability to Borrower therefor, and Agent may thereupon, or at
any time thereafter, in its discretion without notice or demand, take the
Collateral and remove the same to such place as Agent may deem advisable and
Agent may require Borrower to make the Collateral available to Lenders at a
convenient place. With or without having the Collateral at the time or place of
sale, Agent may sell the Collateral, or any part thereof, at public or private
sale, at any time or place, in one or more sales, at such price or prices, and
upon such terms, either for cash, credit or future delivery, as Agent may elect.
Except as to that part of the Collateral which is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, Agent shall give Borrower reasonable notification of such sale or sales,
it being agreed that in all events written notice mailed to Borrower at least
five (5) days prior to such sale or sales is reasonable notification. At any
public sale Agent or any Lender may bid for and become the purchaser, and Agent,
any Lender or any other purchaser at any such sale thereafter shall hold the
Collateral sold absolutely free from any claim or right of whatsoever kind,
including any equity of redemption and such right and equity are hereby
expressly waived and released by Borrower. In connection with the exercise of
the foregoing remedies, Agent is granted permission, without charge, to use all
of Borrower's trademarks, trade styles, trade names, patents, patent
applications, licenses, franchises and other proprietary rights which are used
in connection with the Collateral for the purpose of disposing of such Inventory
and (b) Equipment for the purpose of completing the manufacture of such
Collateral. The proceeds realized from the sale of any Collateral shall be
applied in accordance with Section 11.5 hereof. If any deficiency shall arise,
Borrower shall remain liable to Agent and the Lenders therefor.
11.2. Agent's Discretion. Agent shall have the right in its sole
discretion to determine which rights, Liens, security interests or remedies
Agent may at any time pursue, relinquish, subordinate, or modify or to take any
other action with respect thereto and such determination will not in any way
modify or affect any of Agent's or Lenders' rights hereunder.
11.3. Setoff. In addition to any other rights which Agent or any Lender
may have under applicable law, upon the occurrence of an Event of Default
hereunder, Agent and such Lender shall have a right to apply any of Borrower's
property held by Agent and such Lender or by the Bank to reduce the Obligations.
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11.4. Rights and Remedies not Exclusive. The enumeration of the
foregoing rights and remedies is not intended to be exhaustive and the exercise
of any right or remedy shall not preclude the exercise of any other right or
remedies provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
11.5. Allocation of Payments After Event of Default. Notwithstanding
any other provisions of this Agreement to the contrary, after the occurrence and
during the continuance of an Event of Default, all amounts collected or received
by the Agent on account of the Obligations or any other amounts outstanding
under any of the Ancillary Documents or in respect of the Collateral may, at
Agent's discretion, be paid over or delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket
costs and expenses (including without limitation, reasonable
attorneys' fees) of the Agent in connection with enforcing the
rights of the Lenders under this Agreement and the Ancillary
Documents and any protective advances made by the Agent with
respect to the Collateral under or pursuant to the terms of
this Document;
SECOND, to payment of any fees owed to the Agent;
THIRD, to the payment of all reasonable out-of-pocket
costs and expenses (including without limitation, reasonable
attorneys' fees) of each of the Lenders in connection with
enforcing its rights under this Agreement and the Ancillary
Documents or otherwise with respect to the Obligations owing
to such Lender;
FOURTH, to the payment of all of the Obligations
consisting of accrued fees and interest;
FIFTH, to the payment of the outstanding principal
amount of the Obligations;
SIXTH, to all other Obligations and other obligations
which shall have become due and payable under the Ancillary
Documents or otherwise and not repaid pursuant to clauses
"FIRST" through "FIFTH" above;
SEVENTH, to the payment of the surplus, if any, to
whoever may be lawfully entitled to receive such surplus.
In carrying out the foregoing, (i) amounts received shall be
applied in the numerical order provided until exhausted prior to application to
the next succeeding category; and (ii) each of the Lenders shall receive (so
long as it is not a Defaulting Lender) an amount equal to its pro rata share
(based on the proportion that the then outstanding Advances held by such Lender
bears to the aggregate then outstanding Advances) of amounts available to be
applied pursuant to clauses "THIRD", "FOURTH", "FIFTH" and "SIXTH" above.
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XII. WAIVERS AND JUDICIAL PROCEEDINGS.
12.1. Waiver of Notice. Borrower and each Guarantor hereby waives
notice of non-payment of any of the Receivables, demand, presentment, protest
and notice thereof with respect to any and all instruments, notice of acceptance
hereof, notice of loans or advances made, credit extended, Collateral received
or delivered, or any other action taken in reliance hereon, and all other
demands and notices of any description, except such as are expressly provided
for herein.
12.2. Delay. No delay or omission on Agent's or any Lender's part in
exercising any right, remedy or option shall operate as a waiver of such or any
other right, remedy or option or of any default.
12.3. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A)
ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO
OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
XIII. EFFECTIVE DATE AND TERMINATION.
13.1. Term. This Agreement, which shall inure to the benefit of and
shall be binding upon the respective successors and permitted assigns of each of
Borrower, each Guarantor (except for any successor or assign of a Guarantor in
connection with a transaction as a result of which the relevant Guaranty will be
released or terminated pursuant to the terms of this Agreement), Agent and each
Lender, shall become effective on the date hereof and shall continue in full
force and effect until the last day of the Term unless sooner terminated as
herein provided. The Term may be extended, with the written consent of all
Lenders, for successive periods of one (1) year each by Borrower giving Agent a
written request to extend the Term no more than 90 days nor less than 60 days
prior to the then scheduled end of the Term. If all Lenders do not consent to
such request at least 30 days before the then scheduled end of the Term, then
there shall not be any one year extensions of the Term. Borrower may terminate
this Agreement at any time upon forty-five (45) days' prior written notice upon
payment in full of the Obligations. This Agreement shall also terminate upon the
effective date of termination of the Receivables Facility. In the event the
Obligations are prepaid in full prior to the last day of the Term (the date of
such prepayment hereinafter referred to as the "Prepayment Date"), Borrower
shall pay an early termination fee in an amount equal to (a) $600,000 if the
Prepayment Date occurs from the Closing Date to and including the date
immediately preceding the first anniversary of the Closing Date, (b) $400,000 if
the Prepayment Date occurs on or after the first
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anniversary of the Closing Date to and including the date immediately preceding
the second anniversary of the Closing Date, (c) $200,000 if the Prepayment Date
occurs on or after the second anniversary of the Closing Date to and including
the date immediately preceding the third anniversary of the Closing Date, (d)
$100,000 if the Prepayment Date occurs on or after the third anniversary of the
Closing Date to and including the date which immediately precedes the last day
of the Term, provided that if GMACCC shall assign 50% or more of the Commitments
under this Agreement to one or more Lenders, the foregoing early termination fee
shall equal 50% of the foregoing fees.
13.2. Termination. The termination of the Agreement shall not affect
any of Borrower's, any Guarantor's, Agent's or any Lender's rights, or any of
the Obligations having their inception prior to the effective date of such
termination, and the provisions hereof shall continue to be fully operative
until all transactions entered into, rights or interests created or Obligations
have been fully disposed of, concluded or liquidated. The Liens and rights
granted to Agent and Lenders hereunder and the financing statements filed
hereunder shall continue in full force and effect, notwithstanding the
termination of this Agreement or the fact that Borrower's Account may from time
to time be temporarily in a zero or credit position, until all of the
Obligations of Borrower have been paid or performed in full after the
termination of this Agreement or Borrower has furnished Agent and the Lenders
with an indemnification satisfactory to Agent and the Lenders with respect
thereto. Accordingly, Borrower and each Guarantor waives any rights which it may
have under Section 9-404(1) of the Uniform Commercial Code to demand the filing
of termination statements with respect to the Collateral, and Agent shall not be
required to send such termination statements to Borrower, or to file them with
any filing office, unless and until this Agreement shall have been terminated in
accordance with its terms and all Obligations paid in full in immediately
available funds. All representations, warranties, covenants, waivers and
agreements contained herein shall survive termination hereof until all
Obligations are paid or performed in full.
XIV. REGARDING AGENT.
14.1. Appointment. Each Lender hereby designates GMACCC to act as Agent
for such Lender under this Agreement and the Ancillary Documents. Each Lender
hereby irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Ancillary Documents and to exercise such
powers and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal, interest, fees (except fees set forth herein which are
payable to Agent for its own account and not for the benefit of Lenders),
charges and collections received pursuant to this Agreement, for the ratable
benefit of Lenders; provided, however, the Bondholder Lenders' aggregate share
of the fees set forth in Sections 3.2(a) and 3.2(b) shall equal, and Agent shall
remit to Bondholder Lenders, an amount equal to $200,000. Agent may perform any
of its duties hereunder by or through its agents or employees. As to any matters
not expressly provided for by this Agreement (including without limitation,
collection of the Notes) Agent shall not be required to exercise any discretion
or take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Required Lenders, and such instructions shall be binding;
provided, however, that Agent shall not be required to take any action which
exposes Agent to liability or
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which is contrary to this Agreement or the Ancillary Documents or applicable law
unless Agent is furnished with an indemnification reasonably satisfactory to
Agent with respect thereto.
14.2. Nature of Duties. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the Ancillary Documents.
Neither Agent nor any of its officers, directors, employees or agents shall be
(i) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross (not mere) negligence or
willful misconduct, or (ii) responsible in any manner for any recitals,
statements, representations or warranties made by Borrower or any officer
thereof contained in this Agreement, or in any of the Ancillary Documents or in
any certificate, report, statement or Ancillary Document referred to or provided
for in, or received by Agent under or in connection with, this Agreement or any
of the Ancillary Documents or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement, or any of the
Ancillary Documents or for any failure of Borrower to perform its obligations
hereunder. Agent shall not be under any obligation to any Lender to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any of the Ancillary Documents
(including the failure of any Guarantor to perform under its Guaranty), or to
inspect the properties, books or records of Borrower or any Guarantor. The
duties of Agent as respects the Advances to Borrower shall be mechanical and
administrative in nature; Agent shall not have by reason of this Agreement a
fiduciary relationship in respect of any Lender; and nothing in this Agreement,
expressed or implied, is intended to or shall be so construed as to impose upon
Agent any obligations in respect of this Agreement except as expressly set forth
herein.
14.3. Lack of Reliance on Agent and Resignation.
(a) Independently and without reliance upon Agent or any other
Lender, each Lender has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of Borrower in connection
with the making and the continuance of the Advances hereunder and the taking or
not taking of any action in connection herewith, and (ii) its own appraisal of
the creditworthiness of Borrower. Agent shall have no duty or responsibility,
either initially or on a continuing basis, to provide any Lender with any credit
or other information with respect thereto, whether coming into its possession
before making of the Advances or at any time or times thereafter except as shall
be provided by Borrower pursuant to the terms hereof. Agent shall not be
responsible to any Lender for any recitals, statements, information,
representations or warranties herein or in any agreement, document, certificate
or a statement delivered in connection with or for the execution, effectiveness,
genuineness, validity, enforceability, collectability or sufficiency of this
Agreement or any Ancillary Document, or of the financial condition of Borrower,
or be required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of this Agreement, the
Note, the Ancillary Documents or the financial condition of Borrower, or the
existence of any Event of Default or any Default.
(b) Agent may resign on sixty (60) days' written notice to
each of Lenders and Borrower and upon such resignation, the Required Lenders
will promptly designate a successor Agent reasonably satisfactory to Borrower.
If a successor Agent shall not have been so appointed within said sixty (60) day
period, the retiring Agent, upon notice to Borrower, shall then appoint a
successor Agent who shall serve as Agent until such time as Required Lenders
appoint a successor Agent as provided herein. Any prepaid fees paid to Agent in
the year in
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which Agent's resignation is effective shall be prorated and the portion of such
fees attributable to the number of full calendar months after the effective date
of such resignation shall be remitted to the replacement Agent.
(c) Any such successor Agent shall succeed to the rights,
powers and duties of Agent, and the term "Agent" shall mean such successor agent
effective upon its appointment, and the former Agent's rights, powers and duties
as Agent shall be terminated, without any other or further act or deed on the
part of such former Agent. After any Agent's resignation as Agent, the
provisions of this Article XIV shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.
14.4. Certain Rights of Agent. If Agent shall request instructions from
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Ancillary Document, Agent shall be
entitled to refrain from such act or taking such action unless and until Agent
shall have received instructions from the Required Lenders; and Agent shall not
incur liability to any Person by reason of so refraining. Without limiting the
foregoing, Lenders shall not have any right of action whatsoever against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.
14.5. Reliance. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or
Ancillary Document or telephone message believed by it to be genuine and correct
and to have been signed, sent or made by the proper person or entity, and, with
respect to all legal matters pertaining to this Agreement and the Ancillary
Documents and its duties hereunder, upon advice of counsel selected by it. Agent
may employ agents and attorneys-in-fact and shall not be liable for the default
or misconduct of any such agents or attorneys-in-fact selected by Agent with
reasonable care.
14.6. Notice of Default. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder or under
the Ancillary Documents, unless Agent has received notice from a Lender or
Borrower referring to this Agreement or the Ancillary Documents, describing such
Default or Event of Default and stating that such notice is a "notice of
default". In the event that Agent receives such a notice, Agent shall give
notice thereof to Lenders. Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Required
Lenders subject to the proviso in Section 14.1; provided, that, unless and until
Agent shall have received such directions, Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best interests of
Lenders.
14.7. Indemnification. To the extent Agent is not reimbursed and
indemnified by Borrower, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Advances (or, if no Advances are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing its
duties hereunder, or in any way relating to or arising out of this Agreement or
any Ancillary Document; provided that, Lenders shall not be liable for any
portion of such liabilities, obligations, losses,
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damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from Agent's gross (not mere) negligence or willful misconduct.
14.8. Agent in its Individual Capacity. With respect to the obligation
of Agent to lend under this Agreement, the Advances made by it shall have the
same rights and powers hereunder as any other Lender and as if it were not
performing the duties as Agent specified herein; and the term "Lender" or any
similar term shall, unless the context clearly otherwise indicates, include
Agent in its individual capacity as a Lender. Agent may engage in business with
Borrower as if it were not performing the duties specified herein, and may
accept fees and other consideration from Borrower for services in connection
with this Agreement or otherwise without having to account for the same to
Lenders.
14.9. Delivery of Documents. To the extent Agent receives financial
statements required under Sections 9.7 and 9.8 from Borrower pursuant to the
terms of this Agreement, Agent will promptly furnish such documents and
information to Lenders.
14.10. Borrower's Undertaking to Agent. Without prejudice to their
respective obligations to Lenders under the other provisions of this Agreement,
Borrower hereby undertakes with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for the account of
Agent or the Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall pro tanto
satisfy Borrower's obligations to make payments for the account of the Agent or
Lenders or the relevant one or more of them pursuant to this Agreement.
XV. RELEASE OF COLLATERAL.
15.1. Disposition of Certain Collateral Without Requesting Release.
(a) Borrower or its Subsidiaries may, so long as an Event of
Default shall not have occurred and be continuing or would exist after giving
effect thereto and without requesting or receiving the consent of Agent (or any
lender, trustee or collateral agent under any of the Security Documents), (i)
make cash payments (including repayments of Debt permitted to be incurred
hereby) that are not otherwise prohibited by this Agreement, and (ii) dispose of
Collateral, free from the Agent's security interests, pursuant to 6.2(b);
provided, however, Borrower shall not dispose of or transfer any Collateral
included in the Borrowing Base or make any payment if after giving effect
thereto an Overadvance shall exist.
(b) The right of Borrower to rely upon the provisions of
Sections 15.1(a) with respect to transactions described in Section 6.2(b)(iv)
from the date of this Agreement to December 31, 2000, and for each twelve-month
period thereafter beginning on January 1 (a "Twelve-Month Period") shall be
conditioned upon Borrower delivering to Agent, on or before January 30, 2001,
and thereafter within 30 days following the end of such Twelve-Month Period, an
Officers' Certificate to the effect that the proceeds of all of such
dispositions which involve Collateral during such Twelve-Month Period (other
than those such dispositions wherein Borrower has complied with Section 15.2)
were used by Borrower or its Subsidiaries in connection with their businesses
and in accordance with the terms of Section 6.2 herein.
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15.2. Requesting Release of Collateral.
(a) Upon receipt of a Release Request, Agent shall execute and
deliver, within five Business Days from the receipt of such Release Request, any
instruments deemed by Borrower to be reasonably necessary or reasonably
appropriate to release all or a part of the Collateral from the security
interests of Agent, if the provisions of this Section 15.2 have been complied
with. Any such Release Request shall request Agent to execute one or more
specifically described release instruments (which release instruments shall
accompany such Release Request) and shall certify (i) that no Event of Default
has occurred and is continuing (or with respect to a Release Request relating to
any of the Security Documents, that no event of default has occurred and is
continuing or would exist after giving effect thereto under the applicable
Security Document), (ii) that no Collateral included in the Borrowing Base shall
be disposed of if after giving effect to such disposition (and any payment of
Obligations in connection therewith) an Overadvance shall exist, and (iii) that
one of the conditions of this Section 15.2 set forth below (specifying such
condition) has been fulfilled, and if such specified condition is described in
clause (i) below, that the conditions of Section 15.1(a), if applicable, have
been, or simultaneously with or immediately following the release will be,
fulfilled:
(i) the Collateral will be disposed of in compliance
with Section 15.1(a);
(ii) the Net Proceeds from the Collateral to be
released will be used within five (5) Business Days to repay
the Obligations;
(iii) the Collateral is to be released in connection
with an Asset Sale made in compliance with Section 6.2; all of
the conditions precedent to the termination of the Security
Document under which the Lien in the Collateral to be released
was created, or to the release of such Collateral from the
Lien created by such Security Document, as set forth in such
Security Document, have been satisfied;
(iv) the Collateral to be released secures, or will
secure upon release, debt or other obligations that constitute
First Lien Debt; or
(v) the release of the Collateral to be released is
required pursuant to, or is required in order to effect
compliance with, the Plan or a Plan Order.
(b) At the request of Borrower (or with respect to releases
under the Security Documents, the grantor of the security interest thereunder),
Agent shall, in lieu of releasing any Collateral pursuant to this Section 15.2,
execute and deliver a Subordination Agreement with respect to such Collateral in
form and substance acceptable to Agent.
XVI. GUARANTY.
16.1. Guaranty. Each Guarantor jointly and severally unconditionally
guaranties to each Lender the prompt payment when due (whether by acceleration
or otherwise) of all present and future Obligations, and irrespective of the
genuineness, validity, regularity or enforceability of such Obligations, or of
any instrument evidencing any of the Obligations or of any collateral
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therefor or of the existence or extent of such collateral, and irrespective of
the allowability, allowance or disallowance of any or all of the Obligations in
any case commenced by or against Borrower under Title 11, United States Code,
including, without limitation, post-petition interest, fees, costs and charges
that would have accrued or been added to the Obligations but for the
commencement of such case.
16.2. No Impairment. Agent may at any time and from time to time,
either before or after the maturity thereof, without notice to or further
consent of any Guarantor, extend the time of payment of, exchange or surrender
any collateral for, renew or extend any of the Obligations or increase or
decrease the interest rate thereon, and may also make any agreement with
Borrower or with any other party to or person liable on any of the Obligations,
or interested therein, for the extension, renewal, payment, compromise,
discharge or release thereof, in whole or in part, or for any modification of
the terms thereof or of any Ancillary Documents, or make any election of rights
Agent may deem desirable under the United States Bankruptcy Code, as amended, or
any other federal or state bankruptcy, reorganization, moratorium or insolvency
law relating to or affecting the enforcement of creditors' rights generally (any
of the foregoing, an "Insolvency Law") without in any way impairing or affecting
the obligations of Guarantors hereunder. The obligations of Guarantors hereunder
shall be effective regardless of the subsequent incorporation, merger or
consolidation of Borrower, or any change in the composition, nature, personnel
or location of Borrower and shall extend to any successor entity to Borrower,
including a debtor in possession or the like under any Insolvency Law.
16.3. Guaranty Absolute. Each Guarantor guarantees that the Obligations
will be paid strictly in accordance with the terms of this Agreement and/or any
other document, instrument or agreement creating or evidencing the Obligations,
regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of Borrower with respect
thereto. Each Guarantor hereby knowingly accepts the full range of risk
encompassed within a contract of "continuing guaranty" which risk includes the
possibility that Borrower will contract additional indebtedness for which such
Guarantor may be liable hereunder after Borrower's financial condition or
ability to pay its lawful debts when they fall due has deteriorated, whether or
not Borrower has properly authorized incurring such additional indebtedness.
Each Guarantor acknowledges that (i) no oral representations, including any
representations to extend credit or provide other financial accommodations to
Borrower, have been made by Agent or any Lender to induce such Guarantor to
enter into this Agreement and (ii) any extension of credit to Borrower shall be
governed solely by the provisions of this Loan Agreement and the Ancillary
Documents. The liability of each Guarantor under this Agreement shall be
absolute and unconditional, in accordance with its terms, and shall remain in
full force and effect without regard to, and shall not be released, suspended,
discharged, terminated or otherwise affected by, any circumstance or occurrence
whatsoever, including, without limitation: (a) any waiver, indulgence, renewal,
extension, amendment or modification of or addition, consent or supplement to or
deletion from or any other action or inaction under or in respect of this
Agreement and the Ancillary Documents or any other instruments or agreements
relating to the Obligations or any assignment or transfer of any thereof; (b)
any lack of validity or enforceability of any of this Agreement, the Ancillary
Documents or any assignment or transfer of any thereof; (c) any furnishing of
any additional security to Agent or its assignees or any acceptance thereof or
any release of any security by Agent or its assignees; (d) any limitation on any
party's liability or obligation under this Agreement, the Ancillary Documents or
any other documents, instruments or agreements relating to the Obligations or
any assignment or transfer
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of any thereof or any invalidity or unenforceability, in whole or in part, of
any such document, instrument or agreement or any term thereof; (e) any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceeding relating to Borrower or any Guarantor, or
any action taken with respect to this Agreement by any trustee or receiver, or
by any court, in any such proceeding, whether or not the undersigned shall have
notice or knowledge of any of the foregoing; (f) any exchange, release or
nonperfection of any Collateral, or any release, or amendment or waiver of or
consent to departure from any guaranty or security, for all or any of the
Obligations; or (g) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, any Guarantor. Any amounts due from any
Guarantor to Agent and Lenders shall bear interest until such amounts are paid
in full at the highest rate then applicable to the Obligations.
16.4. Waivers. (a) This is a guaranty of payment and not of collection.
Neither Agent nor any Lender shall be under any obligation to institute suit,
exercise rights or remedies or take any other action against Borrower or any
other person liable with respect to any of the Obligations or resort to any
collateral security held by it to secure any of the Obligations as a condition
precedent to any Guarantor being obligated to perform as agreed herein and each
Guarantor hereby waives any and all rights which it may have by statute or
otherwise which would require Agent or any Lender to do any of the foregoing.
Each Guarantor further consents and agrees that Lender shall not be under any
obligation to marshal any assets in favor of any Guarantor, or against or in
payment of any or all of the Obligations. Each Guarantor hereby waives all
rights of suretyship. Each Guarantor hereby waives any rights to interpose any
defense, counterclaim or offset of any nature and description which it may have
or which may exist between and among Agent, any Lender, Borrower and/or any
Guarantor with respect to any Guarantor's obligations hereunder, or which
Borrower may assert on the underlying debt, including but not limited to failure
of consideration, breach of warranty, fraud, payment (other than cash payment in
full of the Obligations), statute of frauds, bankruptcy, infancy, statute of
limitations, accord and satisfaction, and usury.
(b) Each Guarantor further waives (i) notice of the acceptance
of this Agreement, of the making of any such loans or extensions of credit, and
of all notices and demands of any kind to which such Guarantor may be entitled,
including, without limitation, notice of adverse change in Borrower's financial
condition or of any other fact which might materially increase the risk of any
Guarantor and (ii) presentment to or demand of payment from anyone whomsoever
liable upon any of the Obligations, protest, notices of presentment, non-payment
or protest and notice of any sale of collateral security or any default of any
sort.
16.5. Payments from Guarantor. Agent, with or without notice to any
Guarantor, may apply on account of the Obligations any payment from any
Guarantor or any other guarantor, or amounts realized from any security for the
Obligations.
16.6. No Termination. This is a continuing irrevocable guaranty and
shall remain in full force and effect and be binding upon each Guarantor and
each Guarantor's successors and assigns, until all of the Obligations have been
paid in full and this Agreement has been terminated. If any of the present or
future Obligations are guaranteed by Persons in addition to Guarantors, the
death, release or discharge in whole or in part or the bankruptcy, merger,
consolidation, incorporation, liquidation or dissolution of one or more of them
shall not discharge or affect the liabilities of any Guarantor hereunder.
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16.7. Recapture. Anything in this Agreement to the contrary
notwithstanding, if Agent or any Lender receives any payment or payments on
account of the liabilities guarantied hereby, which payment or payments or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver, or
any other party under any Insolvency Law, common law or equitable doctrine, then
to the extent of any sum not finally retained by Agent or any Lender, each
Guarantor's obligations to Agent or such Lender shall be reinstated and this
Agreement shall remain in full force and effect (or be reinstated) until payment
shall have been made to Lender, which payment shall be due on demand.
16.8. Guaranties of Borrower and Material Subsidiaries. Borrower and
each of its Material Subsidiaries acknowledge, by their execution and delivery
of this Agreement and each Guaranty, that Agent and Lenders are relying on the
provisions of this Article XVI in extending credit hereunder on the Closing
Date, that all Material Subsidiaries of Borrower are benefiting by the financing
being provided by Agent and Lenders and that the Holders would not have agreed
to provide such financing without the guaranties of all Material Subsidiaries.
16.9. Release of Galveston Bay Pipeline.
Upon receipt of a written request of Borrower in the form of
an Officer's Certificate, the Agent shall execute and deliver, within five
Business Days from the receipt of such written request, any instruments deemed
by Borrower to be reasonably necessary or reasonably appropriate to release
Galveston Bay Pipeline from the Guaranty, if the provisions of this Section 16.9
have been complied with. Any such written request shall request the Agent to
execute one or more specifically described release instruments (which release
instruments shall accompany such written request) and shall certify (i) that no
Event of Default has occurred and is continuing, and (ii) that Galveston Bay
Pipeline is to be released from the Guaranty in connection with a GB Facility
Financing made in compliance with Section 6.3.
16.10. Release of Galveston Bay Processing.
Upon receipt of a written request of Borrower in the form of
an Officer's Certificate, the Agent shall execute and deliver, within five
Business Days from the receipt of such written request, any instruments deemed
by Borrower to be reasonably necessary or reasonably appropriate to release
Galveston Bay Processing from the Guaranty, if the provisions of this Section
16.10 have been complied with. Any such written request shall request the Agent
to execute one or more specifically described release instruments (which release
instruments shall accompany such written request) and shall certify (i) that no
Event of Default has occurred and is continuing, and (ii) that Galveston Bay
Processing is to be released from the Guaranty in connection with a GB Facility
Financing made in compliance with Section 6.3 provided, however, Agent shall not
be required to deliver such release until Galveston Bay Processing shall have
delivered to Agent a general release in form and substance satisfactory to
Agent.
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XVII. MISCELLANEOUS.
17.1. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applied to contracts to be
performed wholly within the State of New York. Any judicial proceeding brought
by or against Borrower or any Guarantor with respect to any of the Obligations,
this Agreement or any related agreement may be brought in any court of competent
jurisdiction in the State of New York, United States of America, and, by
execution and delivery of this Agreement, Borrower and each Guarantor accepts
for itself and in connection with its properties, generally and unconditionally,
the non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees
to be bound by any judgment rendered thereby in connection with this Agreement.
Borrower and each Guarantor hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
registered mail (return receipt requested) directed to Borrower or any Guarantor
at its address set forth in Section 17.6 and service so made shall be deemed
completed five (5) days after the same shall have been so deposited in the mails
of the United States of America. Nothing herein shall affect the right to serve
process in any manner permitted by law or shall limit the right of Agent or any
Lender to bring proceedings against Borrower or any Guarantor in the courts of
any other jurisdiction. Borrower and each Guarantor waive any objection to
jurisdiction and venue of any action instituted hereunder and shall not assert
any defense based on lack of jurisdiction or venue or based upon forum non
conveniens. Any judicial proceeding by Borrower or any Guarantor against Agent
or any Lender involving, directly or indirectly, any matter or claim in any way
arising out of, related to or connected with this Agreement or any related
agreement, shall be brought only in a federal or state court located in the City
of New York, State of New York.
17.2. Entire Understanding. (a) This Agreement and the documents
executed concurrently herewith contain the entire understanding between
Borrower, Guarantors, Agent and each Lender and supersedes all prior agreements
and understandings, if any, relating to the subject matter hereof. Any promises,
representations, warranties or guarantees not herein contained and hereinafter
made shall have no force and effect unless in writing, and executed by the party
or parties making such representations, warranties or guarantees. Neither this
Agreement nor any portion or provisions hereof may be changed, modified,
amended, waived, supplemented, discharged, cancelled or terminated orally or by
any course of dealing, or in any manner other than by an agreement in writing,
signed by the party to be charged. Borrower and each Guarantor acknowledges that
it has been advised by counsel in connection with the execution of this
Agreement and Ancillary Documents and is not relying upon oral representations
or statements inconsistent with the terms and provisions of this Agreement.
(b) The Required Lenders, Agent with the consent in writing of
the Required Lenders, and Borrower may, subject to the provisions of this
Section 17.2(b), from time to time enter into written supplemental agreements to
this Agreement, the Notes or the Ancillary Documents executed by Borrower and
each Guarantor, for the purpose of adding or deleting any provisions or
otherwise changing, varying or waiving in any manner the rights of the Lenders,
Agent, Borrower or Guarantors thereunder or the conditions, provisions or terms
thereof of waiving any Event of Default thereunder, but only to the extent
specified in such written agreements; provided, however, that no such
supplemental agreement shall, without the consent of all the Lenders:
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(i) increase the Commitment Percentages of any Lender
or alter any provision in respect of the sharing of Obligations and duties among
Agent and Lenders or among the Lenders.
(ii) increase the Maximum Revolving Advance Amount or
the Term Loan;
(iii) extend the maturity of any Note or the due date
for any amount payable hereunder, or decrease the rate of interest or reduce any
fee payable by Borrower to Lenders pursuant to this Agreement;
(iv) alter the definition of the term Required
Lenders or alter, amend or modify this Section 17.2(b);
(v) release any Collateral other than in compliance
with Article XV of the Loan Agreement;
(vi) change the rights and duties of Agent; or
(vii) waive the conditions precedent contained in
Section 8.1(k) or Section 8.2(e) hereof.
Any such supplemental agreement shall apply equally to each Lender and shall be
binding upon Borrower, Guarantors, Lenders and Agent and all future holders of
the Obligations. In the case of any waiver, Borrower, Guarantors, Agent and
Lenders shall be restored to their former positions and rights, and any Event of
Default waived shall be deemed to be cured and not continuing, but no waiver of
a specific Event of Default shall extend to any subsequent Event of Default
(whether or not the subsequent Event of Default is the same as the Event of
Default which was waived), or impair any right consequent thereon.
17.3. Successors and Assigns; Participations; New Lenders.
(a) This Agreement shall be binding upon and inure to the
benefit of Borrower, each Guarantor, Agent, each Lender, all future holders of
the Obligations and their respective successors and assigns, except neither
Borrower nor any Guarantor may assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of Agent and
each Lender.
(b) Borrower and each Guarantor acknowledges that in the
regular course of commercial banking business one or more Lenders may at any
time and from time to time sell, subject to clause (f), below, participating
interests in the Advances to other financial institutions pursuant to a
participation agreement in form and substance satisfactory to such Lender and
consented to in writing by Agent in its discretion (each such Participant or
purchaser of a participating interest, a "Participant"). Each Participant may
exercise all rights of payment (including without limitation rights of set-off)
with respect to the portion of such Advances held by it or other Obligations
payable hereunder as fully as if such Participant were the direct holder thereof
provided that Borrower shall not be required to pay to any Participant more than
the amount which it would have been required to pay to Lender which granted an
interest in its
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Advances or other Obligations payable hereunder to such Participant had such
Lender retained such interest in the Advances hereunder or other Obligations
payable hereunder and in no event shall Borrower be required to pay any such
amount arising from the same circumstances and with respect to the same Advances
or other Obligations payable hereunder to both such Lender and such Participant.
Borrower hereby grants to any Participant a continuing security interest in any
deposits, moneys or other property actually or constructively held by such
Participant as security for the Participant's interest in the Advances.
(c) Any Lender may sell, assign or transfer, subject to clause
(f), below, all or any part of its rights under this Agreement and the Ancillary
Documents to one or more additional banks or financial institutions and one or
more additional banks or financial institutions may commit to make Advances
hereunder (each a "Purchasing Lender"), in minimum amounts of not less than
$1,000,000, with respect to Bondholder Lenders and their Transferees and
$5,000,000, with respect to all other Lenders, pursuant to a Commitment
Transfer Supplement, executed by a Purchasing Lender, the transferor Lender and
Agent and delivered to Agent for recording. Upon such execution, delivery,
acceptance and recording, from and after the transfer effective date determined
pursuant to such Commitment Transfer Supplement, (i) Purchasing Lender
thereunder shall be a party hereto and, to the extent provided in such
Commitment Transfer Supplement, have the rights and obligations of a Lender
thereunder with a Commitment Percentage as set forth therein (subject to the
provisions of Section 7.16 hereof pursuant to which such Purchasing Lender may
elect to refuse to make Advances after the Closing Date), and (ii) the
transferor Lender thereunder shall, to the extent provided in such Commitment
Transfer Supplement, be released from its obligations under this Agreement, the
Commitment Transfer Supplement creating a novation for that purpose. Such
Commitment Transfer Supplement shall be deemed to amend this Agreement to the
extent, and only to the extent, necessary to reflect the addition of such
Purchasing Lender and the resulting adjustment of the Commitment Percentages
arising from the purchase by such Purchasing Lender of all or a portion of the
rights and obligations of such transferor Lender under this Agreement and the
Ancillary Documents. Borrower and each Guarantor hereby consents to the addition
of such Purchasing Lender and the resulting adjustment of the Commitment
Percentages arising from the purchase by such Purchasing Lender of all or a
portion of the rights and obligations of such transferor Lender under this
Agreement and the Ancillary Documents. Borrower and each Guarantor shall execute
and deliver such further documents and do such further acts and things in order
to effectuate the foregoing.
(d) Agent shall maintain at its address a copy of each
Commitment Transfer Supplement delivered to it and a register (the "Register")
for the recordation of the names and addresses of the Advances owing to each
Lender from time to time. The entries in the Register shall be conclusive, in
the absence of manifest error, and Borrower, Guarantors, Agent and Lenders may
treat each Person whose name is recorded in the Register as the owner of the
Advance recorded therein for the purposes of this Agreement. The Register shall
be available for inspection by Borrower, any Guarantor or any Lender at any
reasonable time and from time to time upon reasonable prior notice. Agent shall
receive a fee in the amount of $3,000 payable by the applicable Purchasing
Lender upon the effective date of each transfer or assignment to such Purchasing
Lender.
(e) Borrower and each Guarantor authorizes each Lender to
disclose to any Participant or Purchasing Lender and any prospective Participant
or Purchasing Lender any and
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all financial information in such Lender's possession concerning Borrower and
each Guarantor which has been delivered to such Lender by or on behalf of
Borrower or any Guarantor pursuant to this Agreement or in connection with such
Lender's credit evaluation of Borrower or any Guarantor provided such party
agrees to be bound by the confidentiality provision of Section 17.15 hereof.
17.4. Application of Payments. Agent shall have the continuing and
exclusive right to apply or reverse and re-apply any payment and any and all
proceeds of Collateral to any portion of the Obligations. To the extent that
Borrower makes a payment or Agent or any Lender receives any payment or proceeds
of the Collateral for Borrower's benefit, which are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, debtor in possession, receiver, custodian or any other party under
any bankruptcy law, common law or equitable cause, then, to such extent, the
Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Agent or such
Lender.
17.5. Indemnity. Borrower and each Guarantor shall indemnify Agent,
each Lender and each of their respective officers, directors, Affiliates,
employees and agents from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
fees and disbursements of counsel) which may be imposed on, incurred by, or
asserted against Agent or any Lender in any litigation, proceeding or
investigation instituted or conducted by any Governmental Body or any other
Person with respect to any aspect of, or any transaction contemplated by, or
referred to in, or any matter related to, this Agreement or the Ancillary
Documents, whether or not Agent or any Lender is a party thereto, except to the
extent that any of the foregoing arises out of the willful misconduct or gross
(not mere) negligence of the party being indemnified.
17.6. Notice. Any notice or request hereunder may be given to Borrower,
any Guarantor or to Agent or any Lender at their respective addresses set forth
below or at such other address as may hereafter be specified in a notice
designated as a notice of change of address under this Section. Any notice or
request hereunder shall be given by (a) hand delivery, (b) overnight courier,
(c) registered or certified mail, return receipt requested, or (d) telecopy to
the number set out below (or such other number as may hereafter be specified in
a notice designated as a notice of change of address) with electronic
confirmation of its receipt. Any notice or other communication required or
permitted pursuant to this Agreement shall be deemed given (a) when personally
delivered to any officer of the party to whom it is addressed, (b) on the
earlier of actual receipt thereof or three (3) days following posting thereof by
certified or registered mail, postage prepaid, or (c) upon actual receipt
thereof when sent by a recognized overnight delivery service or (d) upon actual
receipt thereof when sent by telecopier to the number set forth below with
electronic confirmation of its receipt, in each case addressed to each party at
its address set forth below or at such other address as has been furnished in
writing by a party to the other by like notice:
(A) If to Agent at: GMAC Commercial Credit LLC
1290 Avenue of the Americas
New York, New York 10104
Attention: Jack MacGowan,
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with a copy to: Thomas Strachan
Telephone: (212) 408-
Telecopier: (212) 408-4317
with a copy to: Hahn & Hessen LLP
350 Fifth Avenue
New York, New York 10118-0075
Attention: Steven J. Seif, Esq.
Telephone: (212) 946-0294
Telecopier: (212) 594-7167
(B) If to Lender other than Agent, as specified on the signature
pages hereof
(C) If to Borrower or
any Guarantor, at: c/o TransTexas Gas Corporation
1300 North Sam Houston Parkway East,
Suite 310
Houston, Texas 77032
Attention: Ed Donahue
Telephone: (281) 987-8600
Telecopier: (281) 986-8865
with a copy to: Gardere & Wynne, LLP
3000 Thanksgiving Tower
1601 Elm Street
Dallas, Texas 75201-4761
Attention: Barry Drees
Telephone: (214) 999-4567
Telecopier: (214) 999-4667
17.7. Survival. The obligations of Borrower under Sections 3.6, 3.7,
4.9, 14.7 and 17.5 shall survive termination of this Agreement and the Ancillary
Documents and payment in full of the Obligations.
17.8. Severability. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
17.9. Expenses.
(a) All costs and expenses including, without limitation,
reasonable attorneys' fees and disbursements incurred by Agent, Agent on behalf
of the Lenders and the Lenders (i) in all efforts made to enforce payment of any
Obligation or effect collection of any Collateral, or (ii) in connection with
the entering into, modification, amendment, administration and enforcement of
this Agreement or any consents or waivers hereunder and all related agreements,
documents and instruments, or (iii) in instituting, maintaining, preserving,
enforcing and foreclosing on Agent's security interest in or Lien on any of the
Collateral, whether through judicial proceedings or otherwise, or (iv) in
defending or prosecuting any actions or proceedings
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arising out of or relating to Agent's or any Lender's transactions with
Borrower, or (v) in connection with any advice given to Agent or any Lender with
respect to its rights and obligations under this Agreement and all related
agreements, shall be reimbursed by Borrower and may be charged to Borrower's
Account or the Receivables Facility and shall be part of the Obligations.
(b) The Borrower shall reimburse all costs and expenses of the
Bondholder Lenders including, without limitation, reasonable attorneys' fees and
disbursements incurred by the Bondholder Lenders, in accordance with (i) the
debtor-in-possession financing order, dated June 16, 1999, relating to the
Bondholder Lenders and the Borrower in the bankruptcy proceeding of the Borrower
then pending in the United States Bankruptcy Court for the Southern District of
Texas, Corpus Christi Division and (ii) the respective invoices provided by the
Bondholder Lenders' New York and Texas co-counsel to the Borrower on or prior to
the Closing Date.
17.10. Injunctive Relief. Borrower and each Guarantor recognizes that,
in the event Borrower or any Guarantor fails to perform, observe or discharge
any of its obligations or liabilities under this Agreement, any remedy at law
may prove to be inadequate relief to the Lenders; therefore, Agent, if Agent so
requests, shall be entitled to temporary and permanent injunctive relief in any
such case without the necessity of proving that actual damages are not an
adequate remedy.
17.11. Consequential Damages. Neither Agent, any Lender nor any agent
or attorney for any of them shall be liable to Borrower or any Guarantor for any
special, direct, punitive, exemplary or consequential damages arising from any
breach of contract, tort or other wrong relating to the establishment,
administration or collection of the Obligations.
17.12. Captions. The captions at various places in this Agreement are
intended for convenience only and do not constitute and shall not be interpreted
as part of this Agreement.
17.13. Counterparts; Telecopied Signatures. This Agreement may be
executed in any number of and by different parties hereto on separate
counterparts, all of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
17.14. Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
17.15. Confidentiality. Agent, each Lender and each Transferee agree to
use commercially reasonable efforts (equivalent to the efforts Agent or such
Lender applies to maintain the confidentiality of its own confidential
information) to maintain as confidential all non-public information obtained by
Agent, such Lender or such Transferee pursuant to this Agreement; provided,
however, Agent, each Lender and each Transferee may disclose such confidential
information (a) to its examiners, outside auditors, counsel and other
professional advisors (provided such advisors are informed of and agree to be
bound by the confidentiality
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provisions of this Agreement), (b) to Agent, any Lender or to any prospective
Transferees and Purchasing Lenders (provided that such prospective Transferees
and Purchasing Lenders agree to be bound by the confidentiality provisions of
the Agreement), (c) as required or requested by any governmental authority or
representative thereof or pursuant to legal process and (d) which ceases to be
confidential through no fault of Agent or such Lender; provided, further that
unless specifically prohibited by applicable law or court order, Agent, each
Lender and each Transferee shall use its best efforts prior to disclosure
thereof, to notify Borrower of the applicable request for disclosure of such
non-public information (A) by a governmental authority or representative thereof
(other than any such request in connection with an examination of the financial
condition of a Lender or a Transferee by such governmental authority) or (B)
pursuant to legal process.
17.16. Provisions Relating to Bondholder Lenders.
(a) Notwithstanding anything in this Agreement to the
contrary, Agent, each Lender, Borrower and each Guarantor
hereby acknowledge and agree that Bondholder Lenders shall not
make, or be obligated to make, Advances after the Closing Date
and that for purposes of this Agreement, in the event any
additional Advances are made hereunder, the Bondholder Lenders
shall be treated as Defaulting Lenders in accordance with
Section 2.14 hereof, except that (i) Advances made by Lenders
which are not Defaulting Lenders shall be made pro rata based
on their respective Commitment Percentages applied to the
total amount of the approved Advance plus their respective
Commitment Percentages applied to the principal amount that
the Defaulting Lender(s) have elected not to fund and that
such other Lenders have agreed to fund, (ii) each Lender's
Commitment Percentage shall be adjusted upon each new Advance
made hereunder, provided that neither Agent nor any Lender
shall be obligated to make Advances in excess of its
Commitment, and (iii) notwithstanding the provisions of
Section 2.14(c), Bondholder Lenders shall continue to retain
their rights to give instructions to Agent and to approve,
disapprove, consent to or vote on any matters relating to this
Agreement and the Ancillary Documents up to its then
outstanding Commitment Percentage and the definition of
"Required Lenders" shall continue to include each of the
Bondholder Lenders up to its then outstanding Commitment
Percentage. Each Bondholder Lender consents to any such
Advance made by Agent as a non-Bondholder Lender and any
reduction in such Bondholder Lender's Commitment Percentage
resulting therefrom. If any Lender desires to increase its
Commitment above that which is in effect on the Closing Date
due to the Bondholder Lenders' not funding any additional
Advances, it may do so and its Commitment and Commitment
Percentage shall be automatically amended and adjusted,
respectively.
(b) Each transferee of the Bondholder Lenders shall
be treated as a "Lender" required to make Advances hereunder
after the Closing Date unless such Transferee notifies Agent
in its Commitment Transfer Supplement that it wishes to be
treated as a Bondholder Lender pursuant to the terms of this
Section 17.16.
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OIL & GAS REVOLVING CREDIT
AND TERM LOAN AGREEMENT
IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the day and year first above written.
TRANSTEXAS GAS CORPORATION, as Borrower
By:
------------------------------------
Its:
-----------------------------------
GALVESTON BAY PROCESSING CORPORATION, as
Guarantor
By:
------------------------------------
Its:
-----------------------------------
GALVESTON BAY PIPELINE COMPANY, as Guarantor
By:
------------------------------------
Its:
-----------------------------------
GMAC COMMERCIAL CREDIT LLC, as a Lender and
as Agent
By:
------------------------------------
Its:
-----------------------------------
Commitment Percentage: 61.90477%
Commitment Amount: $32,500,000
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OIL & GAS REVOLVING CREDIT
AND TERM LOAN AGREEMENT
'
CREDIT SUISSE FIRST BOSTON MANAGEMENT
CORPORATION, as a Lender
By:
------------------------------------
Its:
-----------------------------------
Commitment Percentage: 12.69841%
Commitment Amount: $6,666,666.67
ANGELO GORDON & CO. L.P., as a Lender
By:
------------------------------------
Its:
-----------------------------------
Commitment Percentage: 12.69841%
Commitment Amount: $6,666,666.67
OAKTREE CAPITAL MANAGEMENT,
as general partner and
investment manager of
certain funds and accounts
it manages, as Lender
By:
------------------------------------
Its:
-----------------------------------
Commitment Percentage: 12.69841%
Commitment Amount: $6,666,666.66
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STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this _____ day of ______________, 2000, before me personally came
______________________________, to me known, who, being by me duly sworn, did
depose and say that he is the __________________ of _______________________, the
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by order of the board of directors
of said corporation, and that he signed his name thereto by like order.
------------------------------
Notary Public
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this _____ day of ______________, 2000, before me personally came
______________________________, to me known, who, being by me duly sworn, did
depose and say that he is the __________________ of GMAC Commercial Credit LLC,
the corporation described in and which executed the foregoing instrument and
that he signed his name thereto by order of the board of directors of said
corporation.
------------------------------
Notary Public
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this _____ day of ______________, 2000, before me personally came
______________________________, to me known, who, being by me duly sworn, did
depose and say that he is the __________________ of _______________________, the
corporation described in and which executed the foregoing instrument and that he
signed his name thereto by order of the board of directors of said corporation.
------------------------------
Notary Public
98
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STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this _____ day of ______________, 2000, before me personally came
______________________________, to me known, who, being by me duly sworn, did
depose and say that he is the __________________ of _______________________, the
corporation described in and which executed the foregoing instrument and that he
signed his name thereto by order of the board of directors of said corporation.
------------------------------
Notary Public
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this _____ day of ______________, 2000, before me personally came
______________________________, to me known, who, being by me duly sworn, did
depose and say that he is the __________________ of _______________________, the
corporation described in and which executed the foregoing instrument and that he
signed his name thereto by order of the board of directors of said corporation.
------------------------------
Notary Public
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this _____ day of ______________, 2000, before me personally came
______________________________, to me known, who, being by me duly sworn, did
depose and say that he is the __________________ of _______________________, the
corporation described in and which executed the foregoing instrument and that he
signed his name thereto by order of the board of directors of said corporation.
------------------------------
Notary Public
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STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this _____ day of ______________, 2000, before me personally came
______________________________, to me known, who, being by me duly sworn, did
depose and say that he is the __________________ of _______________________, the
corporation described in and which executed the foregoing instrument and that he
signed his name thereto by order of the board of directors of said corporation.
------------------------------
Notary Public
100
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TABLE OF CONTENTS
<TABLE>
<S> <C>
I. DEFINITIONS..............................................................................................1
1.1. Accounting Terms................................................................................1
1.2. General Terms...................................................................................1
1.3. Uniform Commercial Code Terms..................................................................35
1.4. Certain Matters of Construction................................................................35
II. ADVANCES, PAYMENTS......................................................................................35
2.1. Revolving Advances.............................................................................35
2.2. Procedure for Borrowing Revolving Advances.....................................................36
2.3. Disbursement of Advance Proceeds...............................................................36
2.4. Term Loan......................................................................................37
2.5. Swingline Loans................................................................................37
2.6. Maximum Advances...............................................................................38
2.7. Repayment of Advances..........................................................................38
2.8. Repayment of Excess Advances...................................................................38
2.9. Statement of Account...........................................................................38
2.10. Additional Payments............................................................................39
2.11. Manner of Borrowing and Payment................................................................39
2.12. Mandatory Prepayments..........................................................................40
2.13. Use of Proceeds................................................................................40
2.14. Defaulting Lender..............................................................................41
III. INTEREST AND FEES.......................................................................................42
3.1. Interest.......................................................................................42
3.2. (a) Structuring Fee............................................................................42
(b) Origination Fee............................................................................42
(c) Facility Fee...............................................................................42
(d) Administration Fee.........................................................................42
3.3. Collateral Monitoring Fee......................................................................42
3.4. Computation of Interest and Fees...............................................................43
3.5. Maximum Charges................................................................................43
3.6. Increased Costs................................................................................43
3.7. Capital Adequacy...............................................................................44
IV. REPRESENTATIONS AND WARRANTIES..........................................................................44
4.1. Authority......................................................................................44
4.2. Formation and Qualification....................................................................45
4.3. Survival of Representations and Warranties.....................................................45
4.4. Tax Returns....................................................................................45
4.5. Financial Statements...........................................................................45
</TABLE>
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<TABLE>
<S> <C>
4.6. Corporate Name.................................................................................46
4.7. O.S.H.A. and Environmental Compliance..........................................................46
4.8. Solvency; No Litigation, Violation, Indebtedness or Default....................................47
4.9. Patents, Trademarks, Copyrights and Licenses...................................................48
4.10. Licenses and Permits...........................................................................48
4.11. Default of Indebtedness........................................................................48
4.12. No Default.....................................................................................49
4.13. No Burdensome Restrictions.....................................................................49
4.14. No Labor Disputes..............................................................................49
4.15. Margin Regulations.............................................................................49
4.16. Investment Company Act.........................................................................49
4.17. Disclosure.....................................................................................49
4.18. Delivery of Credit Suisse Documentation........................................................49
4.19. Swaps..........................................................................................49
4.20. Conflicting Agreements.........................................................................50
4.21. Application of Certain Laws and Regulations....................................................50
4.22. Business and Property of Borrower; Title.......................................................50
4.23. Security Interests.............................................................................50
4.24. Insurance......................................................................................50
4.25. Plan of Reorganization.........................................................................50
4.26. Indenture Qualification........................................................................50
4.27. Location of Borrower...........................................................................51
V. AFFIRMATIVE COVENANTS...................................................................................51
5.1. Payment of Debt................................................................................51
5.2. Corporate Existence............................................................................51
5.3. Payment of Taxes and Other Claims..............................................................51
5.4. Maintenance of Properties and Insurance........................................................51
5.5. Compliance with Laws; Violations...............................................................53
5.6. Execution of Supplemental Instruments..........................................................53
5.7. Payment of Indebtedness........................................................................53
5.8. Standards of Financial Statements..............................................................53
5.9. Environmental Matters..........................................................................53
5.10. Inspections....................................................................................54
VI. NEGATIVE COVENANTS......................................................................................55
6.1. Mergers, Consolidations and Other Fundamental Changes..........................................55
6.2. Asset Sales....................................................................................56
6.3. Limitation on Incurrence of Additional Indebtedness............................................58
6.4. Creation of Liens..............................................................................60
6.5. Limitation on Investments, Loans and Advances..................................................60
6.6. Limitation on Restricted Payments..............................................................61
6.7. Nature of Business.............................................................................61
6.8. Limitation on Transactions with Affiliates.....................................................61
6.9. Subsidiaries...................................................................................61
</TABLE>
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<TABLE>
<S> <C>
6.10. Fiscal Year and Accounting Changes.............................................................62
6.11. Amendment of Articles of Incorporation, By-Laws................................................62
6.12. Compliance with ERISA..........................................................................62
6.13. Prepayment of Indenture Notes..................................................................62
6.14. Limitations on Restricting Subsidiary Dividends................................................62
6.15. Changes Relating to Subordinated Debt..........................................................63
VII. FINANCIAL COVENANTS.....................................................................................63
7.1. Consolidated Coverage Ratio....................................................................63
7.2. Consolidated Net Income........................................................................63
7.3. Consolidated Minimum EBITDA....................................................................64
7.4. Drilling Production Payments...................................................................65
VIII. CONDITIONS PRECEDENT....................................................................................66
8.1. Conditions to Initial Advances.................................................................66
(a) Loan Documents........................................................................66
(b) Filings, Registrations and Recordings.................................................66
(c) Corporate Proceedings of Borrower.....................................................66
(d) Incumbency Certificates of Borrower...................................................66
(e) Certificates..........................................................................66
(f) Good Standing Certificates............................................................67
(g) Legal Opinions........................................................................67
(h) No Litigation.........................................................................67
(i) Solvency Certificate; Pro Forma financial Statements; Projections.....................67
(j) Collateral Examination................................................................67
(k) Fees..................................................................................67
(l) Insurance.............................................................................67
(m) Environmental Reports.................................................................68
(n) Payment Instructions..................................................................68
(o) Consents..............................................................................68
(p) No Adverse Material Change............................................................68
(q) Review of Working Capital Accounts....................................................68
(r) Contract Review.......................................................................68
(s) Closing Certificate...................................................................68
(t) Borrowing Base Certificate............................................................68
(u) Receivables Facility..................................................................68
(v) Indenture.............................................................................69
(w) Confirmation Orders...................................................................69
(y) Intercreditor Agreement...............................................................69
(z) Liens.................................................................................69
(aa) Proved Reserves Report................................................................69
(bb) Plan of Reorganization................................................................69
(cc) Implementation of the Plan............................................................70
(dd) Distributions.........................................................................70
(ee) Reports...............................................................................70
</TABLE>
iii
<PAGE> 105
<TABLE>
<S> <C>
(ff) Debt Obligations......................................................................70
(gg) Minimum PV10..........................................................................70
(hh) Distribution Channels.................................................................70
(ii) Minimum Syndication...................................................................70
(jj) Other.................................................................................70
8.2. Conditions to Each Advance.....................................................................70
(a) Distributions.........................................................................70
(b) Representations and Warranties........................................................70
(c) No Default............................................................................71
(d) Maximum Advances......................................................................71
IX. INFORMATION AS TO BORROWER..............................................................................71
9.1. Disclosure of Material Matters.................................................................71
9.2. Borrowing Base Certificate.....................................................................71
9.3. Proved Reserves Report.........................................................................71
9.4. Intentionally Omitted..........................................................................71
9.5. Material Occurrences...........................................................................72
9.6. SEC Reports....................................................................................72
9.7. Compliance Certificate; Notice of Default......................................................72
9.8. Quarterly Financial Statements.................................................................73
9.9. Other Reports..................................................................................73
9.10. Additional Information.........................................................................73
9.11. Projected Operating Budget.....................................................................74
9.12. Intentionally Omitted..........................................................................74
9.13. Notice of Suits, Adverse Events................................................................74
9.14. ERISA Notices and Requests.....................................................................74
9.15. Additional Documents...........................................................................75
9.16. Environmental Reports..........................................................................75
X. EVENTS OF DEFAULT.......................................................................................75
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT..............................................................78
11.1. Rights and Remedies............................................................................78
11.2. Agent's Discretion.............................................................................78
11.3. Setoff.........................................................................................78
11.4. Rights and Remedies not Exclusive..............................................................79
11.5. Allocation of Payments After Event of Default..................................................79
XII. WAIVERS AND JUDICIAL PROCEEDINGS........................................................................80
12.1. Waiver of Notice...............................................................................80
12.2. Delay..........................................................................................80
12.3. Jury Waiver....................................................................................80
</TABLE>
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<PAGE> 106
<TABLE>
<S> <C>
XIII. EFFECTIVE DATE AND TERMINATION..........................................................................80
13.1. Term...........................................................................................80
13.2. Termination....................................................................................81
XIV. REGARDING AGENT.........................................................................................81
14.1. Appointment....................................................................................81
14.2. Nature of Duties...............................................................................82
14.3. Lack of Reliance on Agent and Resignation......................................................82
14.4. Certain Rights of Agent........................................................................83
14.5. Reliance.......................................................................................83
14.6. Notice of Default..............................................................................83
14.7. Indemnification................................................................................83
14.8. Agent in its Individual Capacity...............................................................84
14.9. Delivery of Documents..........................................................................84
14.10. Borrower's Undertaking to Agent................................................................84
XV. RELEASE OF COLLATERAL...................................................................................84
15.1. Disposition of Certain Collateral Without Requesting Release...................................84
15.2. Requesting Release of Collateral...............................................................85
XVI. GUARANTY................................................................................................85
16.1. Guaranty.......................................................................................86
16.2. No Impairment..................................................................................86
16.3. Guaranty Absolute..............................................................................86
16.4. Waivers........................................................................................87
16.5. Payments from Guarantor........................................................................87
16.6. No Termination.................................................................................87
16.7. Recapture......................................................................................88
16.8. Guaranties of Borrower and Material Subsidiaries...............................................88
16.9. Release of Galveston Bay Pipeline..............................................................88
16.10. Release of Galveston Bay Processing............................................................88
XVII. MISCELLANEOUS...........................................................................................89
17.1. Governing Law..................................................................................89
17.2. Entire Understanding...........................................................................89
17.3. Successors and Assigns; Participations; New Lenders............................................90
17.4. Application of Payments........................................................................92
17.5. Indemnity......................................................................................92
17.6. Notice.........................................................................................92
17.7. Survival.......................................................................................93
17.8. Severability...................................................................................93
17.9. Expenses.......................................................................................93
17.10. Injunctive Relief..............................................................................94
17.11. Consequential Damages..........................................................................94
</TABLE>
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<PAGE> 107
<TABLE>
<S> <C>
17.12. Captions.......................................................................................94
17.13. Counterparts, Telecopied Signatures............................................................94
17.14. Construction...................................................................................94
17.15. Confidentiality................................................................................94
17.16. Provisions Relating to Bondholder Lenders......................................................95
4.18. Evidence of Title..............................................................................vi
4.19. Notification of Legal Proceedings..............................................................vi
4.21. Transfer or Division Orders....................................................................vi
</TABLE>
vi
<PAGE> 108
Exhibit 4.27
All defined terms herein not otherwise defined in the Agreement shall
have the meanings ascribed thereto in the Mortgages.
A. Representations and Warranties. Borrower hereby warrants and
represents, as of the date hereof (giving effect to the Confirmation Order and
the transactions contemplated thereunder and under the Plan and the Security
Documents to the Agent and Lenders as follows:
1. Leases. With respect to Leases covering all wells and Lands
to which value has been ascribed in that certain reserve report,
prepared as of November 1, 1999 (the "Netherland Reserve Report"), by
Netherland Sewell & Associates, LLC: (a) the Leases are valid,
subsisting leases as to all such wells and Lands, and are superior and
paramount to all other Oil and Gas Leases respecting the properties to
which they pertain and all rentals, royalties and other amounts due and
payable in accordance with the terms of the Leases have been duly paid
or provided for; (b) the Leases are in full force and effect; and (c)
except as disclosed in writing by Borrower to Lender, Borrower, and to
the best of Borrower's knowledge all other parties to the Leases, have
performed in all material respects all obligations required to be
performed by them and are not in material default under nor in receipt
of any claim of material default under any Lease, and no event has
occurred which, with the passage of time or the giving of notice or
both, would cause a material breach of, or default under, any Lease,
and Borrower has no knowledge of any material breach or anticipated
breach by the other parties to any Lease.
2. Documents. Each of the existing Material Production Sale
Contracts is valid, binding and enforceable in accordance with its
respective terms (except as the enforceability thereof may be limited
by bankruptcy, insolvency, reorganization or moratorium or other
similar laws relating to creditor's rights and by general equitable
principles which may limit the right to obtain equitable remedies
(regardless of whether such enforceability is considered in a
proceeding at equity or at law), and except as rights to indemnity
thereunder may be limited by applicable law) and is in full force and
effect, and no material default on the part of any party thereto exists
thereunder. To the best knowledge of Borrower, all amounts due and
payable in accordance with the terms of each Material Production Sale
Contract have been duly paid or provided for and the obligations to be
performed under each of the Material Production Sale Contracts have
been duly performed, in all material respects in accordance with the
terms of such contracts and any related agreements, and in conformity
with all applicable laws, rules, regulations and orders of all courts
and regulatory authorities having jurisdiction.
3. Title. Except for Permitted Liens, Borrower has (a) good
and indefeasible title to, and is possessed of, the portion of the
Collateral constituting the leasehold estates under the Leases referred
to in A1 above (b) good and marketable title to the portion of the
Collateral constituting Pipeline Assets or other personal property for
the use and operation of such Pipeline Assets as it has been used in
the past and as it is proposed to be used in the business of storing
and transporting Hydrocarbons and other products and
<PAGE> 109
any lack of title to such Pipeline Assets or personal property related
thereto has not had and will not have any material adverse effect on
Borrower's ability to use the Pipeline Assets and related personal
property as it is proposed to be used in Borrower's business and will
not materially increase the cost of such use, and (c) good title to the
portion of the Collateral constituting personal property that is not
described in the foregoing clause (b). Borrower owns, in the aggregate,
not more than the amount of undivided working interests and not less
than the amount of net revenue interests in the Leases set forth in the
Netherland Reserve Report. For purposes of this Paragraph (c), "working
interest" shall refer to Borrower's share of expense in the applicable
Lease, well or drilling and production unit shown in the Netherland
Reserve Report, and "net revenue interest" shall refer to Borrower's
share of production from the applicable Lease, well or drilling and
production unit after satisfaction of all royalties, overriding
royalties, production payments or similar non-operating interests. Each
of the Material Production Sale Contracts is free from any material
credit, deduction, allowance, defense, dispute, setoff, or counterclaim
(other than current charges provided for in such instruments but not
yet due and payable), and there is no material extension or indulgence
with respect thereto. Borrower is not aware of any defect in or
challenge to its ownership of the rights or other interests in any of
the Collateral that would, individually or in the aggregate, materially
lessen the value of the Collateral for its use as part of the Pipeline
Assets or materially interfere with the ordinary conduct of the
business of Borrower or the use of the Collateral for the purposes for
which held, except as expressly disclosed to Lender in writing.
4. Contracts. Borrower is not obligated by virtue of any
prepayment under any Production Sale Contract, balancing agreement or
other similar contract providing for the sale by Borrower of
Hydrocarbons, helium and/or other minerals, which contains a "take or
pay" clause or under any similar prepayment agreement or arrangement,
including, without limitation, "gas balancing agreements" to deliver
Hydrocarbons, helium and/or other minerals (amounting to a material
portion of the Hydrocarbons, helium and/or other minerals covered
hereby) at some future time without then or thereafter receiving full
payment therefor.
5. Producing Wells. All producing wells located on the Lands
have been drilled, operated and produced in conformity in all material
respects with all applicable laws, rules, regulations and orders of all
regulatory authorities having jurisdiction and are subject to no
material penalties on account of past production, and such wells are,
in fact, bottomed under and are producing from, and the well bores are
wholly within, the Lands.
6. Pipelines and Pipeline Assets. All Pipelines and Pipeline
Assets have been constructed and operated in conformity in all material
respects with all applicable laws, rules, regulations and orders of all
regulatory authorities having jurisdiction and, except as expressly
disclosed in writing to Lender, are subject to no material penalties on
account of past operations.
<PAGE> 110
B. Particular Covenants and Agreements of Borrower. Borrower hereby
covenants to Agent and Lenders as follows:
1. Operation of Collateral. So long as the Obligations or any
part thereof remains unpaid, and whether or not Borrower is the
operator of the Collateral, Borrower shall, at Borrower's own expense:
(a) do all things necessary to keep
unimpaired Borrower's rights and remedies in or under the
Collateral and, except as otherwise permitted in this
Agreement, shall (i) not abandon any well or forfeit,
surrender, release or default under (other than any
abandonment, forfeiture, surrender, release or default that,
individually or in the aggregate with all other such defaults,
would not have a Material Adverse Effect) any Lease to which
value has been ascribed in the Proved Reserve Report, or in
the event Borrower is not the operator, shall use commercially
reasonable efforts to prevent any of the above, unless
undertaken in the ordinary course of business, (ii) enter into
or otherwise acquire obligations under Production Sale
Contracts (as defined in the Mortgages) only on terms and
conditions to which a reasonably prudent producer, seller,
purchaser, or processor, as applicable, of Subject Minerals,
would agree, and (iii) not abandon, sell, convey, assign,
lease or otherwise transfer any right, title or interest of
Borrower into or under the Pipelines or the Pipeline Assets,
or consent to any of the foregoing except as permitted in
Section 6.2 of this Agreement;
(b) except as otherwise permitted in this
Agreement, perform or cause to be performed, each and all
covenants, agreements, terms, conditions and limitations
imposed upon Borrower or its predecessors in interest (except
where any failure to so perform or cause to be performed,
individually or in the aggregate with all other such failures,
would not have a Material Adverse Effect) and expressly
contained in (i) the Leases and any instrument or document
relating thereto, and (ii) any assignment or other form of
conveyance, under or through which the Leases, the Pipelines,
Pipeline Assets, Lands, or Rights-of-Way and Franchises, or an
undivided interest therein are now held, and perform or cause
to be performed all implied covenants and obligations imposed
upon Borrower in connection therewith or with any document or
instrument relating thereto;
(c) cause, or in the event Borrower is not
the operator of the Subject Interests or the Pipeline Assets,
use commercially reasonable efforts to cause, the Subject
Interests and the Pipeline Assets to be maintained, developed,
protected against drainage, and continuously operated for the
production of Hydrocarbons, helium and/or other minerals, and
the gathering, storing, transmission and distribution of
Hydrocarbons, as applicable, in a good and workmanlike manner
as would be operated by a prudent operator and in compliance
in all material respects with all applicable operating
agreements and contracts, and all applicable federal, state
and local laws, rules and regulations, excepting those being
contested in good faith in such a manner as not to
<PAGE> 111
jeopardize the Agent's or Lender's rights in and to the
Subject Interests or the Pipeline Assets, as applicable;
(d) except as otherwise permitted in this
Agreement, cause to be paid, promptly as and when due and
payable, except where the failure to make any such payments
would not, individually or in the aggregate, have a Material
Adverse Effect, all rentals, delay rentals, royalties and
Obligations payable in respect of the Subject Interests, and
all expenses incurred in or arising from the operation or
development of the Subject Interests, or, in the event
Borrower is not the operator, shall use its best efforts to
cause each of the foregoing to be paid;
(e) cause the Equipment necessary for the
Borrower's business operations to be kept in good and
effective operating condition (reasonable wear and tear
excepted) and all repairs, renewals, replacements, additions
and improvements thereof or thereto, needful to the production
of the Subject Minerals, to be promptly made;
(f) except as otherwise permitted by this
Agreement, cause the Pipelines to be kept in good and
effective operating condition (reasonable wear and tear
excepted), and all repairs, renewals, replacements, additions
and improvements thereof or thereto, necessary to the
gathering, storing, transmission and distribution of
Hydrocarbons through the Pipelines, to be promptly made;
(g) deliver, or cause to be delivered, to
Agent a copy of any notice, demand or other communication from
any other party to any material Leases or any material
Production Sale Contract, relating to any alleged, potential
or actual material breach thereunder or material breach of any
of the covenants, agreements, terms, or limitations thereof or
purporting to terminate or in any other way adversely affect
the rights of Borrower thereunder.
2. Recording, Etc. Borrower will promptly and at Borrower's
expense record, register, deposit and file this and every other
instrument in addition or supplemental hereto in such offices and
places and at such times and as often as may be necessary to perfect,
preserve, protect and renew the lien and security interest hereof as a
recorded lien on the real property and fixtures now or hereafter
comprising the Collateral and perfected security interest on the
personal property and fixtures now or hereafter comprising the
Collateral, as the case may be and the rights and remedies of the Agent
hereunder, and otherwise will do and perform all matters or things
necessary or expedient to be done or observed by reason of any law or
regulation of the State of Texas or of the United States of America or
any other state of the United States or of any other competent
authority, for the purpose of effectively creating, maintaining and
preserving the lien and security interest created by this Agreement and
the perfection and priority thereof.
<PAGE> 112
3. Records, Statements and Reports. Borrower will keep proper
books of record and account in which complete and correct entries will
be made of Borrower's transactions in accordance with GAAP consistently
applied.
4. Further Assurances. Borrower will execute and deliver such
other and further instruments and will use its best efforts to do such
other and further acts as in the opinion of Agent may be necessary or
desirable to carry out more effectively the purposes of the Mortgage,
including, without limiting the generality of the foregoing, (a) prompt
correction of any defect which may hereafter be discovered in the title
to the Collateral or any part thereof other than Permitted Liens or in
the execution and acknowledgment of the Mortgage, the Notes or other
document executed in connection herewith or therewith, (b) prompt
execution and delivery of all division or transfer orders that in the
opinion of the Lender are needed to transfer effectively to Agent the
assigned proceeds of production from the Subject Interests, (c)
obtaining any necessary governmental approvals, including, without
limitation, those of the State of Texas and (d) prompt execution of any
supplements or amendments to this Agreement for purposes of
memorializing the encumbrance of any after acquired property.
5. Adverse Claim. Borrower will warrant and forever defend,
subject to the Permitted Liens, the title to the Collateral unto the
Agent against every Person whomsoever lawfully claiming the same or any
part thereof. Should an adverse claim be made against or a cloud
develop upon the title to any part of the Collateral, other than
Permitted Liens, or upon the lien and security interest created by the
Mortgage, Borrower agrees that it will immediately defend such adverse
claim or take appropriate action to remove such cloud at Borrower's
expense, and Borrower further agrees that after prior notice to
Borrower, Agent may take such other action as it deems advisable to
protect and preserve their interests in the Collateral, and, in such
event, Borrower will indemnify Lenders and Agent against any and all
costs, attorneys' fees and other expenses which it or they may incur in
defending against any such adverse claim or taking action to remove any
such cloud.
6. Notice of Pooling or Unitization. Except as otherwise
provided in the Mortgages hereof, Borrower will promptly notify Agent
in writing upon the first filing of any petition or request with any
governmental or regulatory agency regarding any pooling or unitization
arrangement pertaining to the Collateral or any part thereof, and any
pooling or unitization arrangement which is imposed or which Borrower
learns may be imposed on the Collateral or any part thereof, which
would cause Borrower to suffer a significant reduction in income on a
monthly basis from the Collateral.
7. Compliance with Operating Agreements. Borrower agrees to
promptly pay all bills for labor and materials incurred in the
operation of the Collateral and will promptly pay its share of all
costs and expenses incurred under any joint operating agreement
affecting the Collateral or any portion thereof (except for those
amounts being disputed in good faith and for which adequate reserves
have been made); will furnish Agent, as and when requested, full
information as to the status of any joint account
<PAGE> 113
maintained with others under any such operating agreement; will not
take any action to incur any liability or lien thereunder.
8. Evidence of Title. Promptly upon receipt of a written
request from Agent, Borrower will furnish and deliver, at the election
of Agent, either (a) complete or supplemental abstracts of title, as
the case may be, prepared by competent abstractors, or (b) title
opinions prepared by competent legal counsel and, in either event,
covering title to property described in the most recent Proved Reserve
Report from the sovereignty of the soil to the latest practicable date,
when taken together with abstracts and/or title opinions previously
furnished to Agent by Borrower. Should Borrower fail to furnish such
abstracts upon such request, Agent may obtain such abstracts, and any
and all costs incurred thereby shall be payable by Borrower to Agent
upon demand at the principal offices of Agent. The abstracts shall be
and constitute a part of the Collateral as defined above.
9. Notification of Legal Proceedings. Borrower will notify
Agent promptly and in writing of the commencement of any legal material
proceedings affecting the Collateral or any part thereof, and will take
such action as may be necessary to preserve the rights of Borrower, the
Agent and Lenders affected thereby; and should Borrower fail or refuse
to take any such action, Agent may at its election take such action on
behalf and in the name and at the cost and expense of Borrower.
20. Transfer or Division Orders. Upon written request of Agent
(but subject to the consent in writing of Lender under the Receivables
Facility), Borrower will execute and deliver written notices of
assignments to any persons, corporations or other entities owing or
which may in the future owe to Borrower monies or accounts arising in
connection with (a) any oil, gas or mineral production from all or any
portion of the Collateral; (b) any gas contracts, processing contracts
or other contracts relating to all or any portion of the Collateral; or
(c) the operation of or production from all or any portion of the
Collateral. The notices of assignments shall advise the third parties
that all of the monies or accounts described above have been assigned
to Agent, and if required by Agent, shall also require and direct that
future payments thereof, including amounts then owing and unpaid, be
paid directly to Agent.
31. Performance of Gas Contracts. Borrower will perform and
observe in all material respects all of its obligations under each
contract relating to the sale of gas produced from or attributable to
the Collateral except where the failure to do so could not have a
Material Adverse Effect.
42. Borrower Holds as Nominee. In the event that the Agent
forecloses or attempts to foreclose on the Collateral, but such
foreclosure will not become effective as to some or all of the
Collateral unless and until the consent of a third party is obtained,
then Borrower agrees to hold title to such portion of the Collateral as
nominee for Agent or any other party who would have acquired such
Collateral at foreclosure until such time as the necessary consents are
obtained. In acting as nominee, Borrower shall take such acts, and only
such acts, with respect to the Collateral as Agent or any other party
who
<PAGE> 114
would have acquired the same may direct and the beneficial interest
under such Collateral shall run to Agent or such other party. Borrower
shall enter into a nominee agreement in form and substance satisfactory
to Agent or such other party and execute any other documents or
agreements reasonably necessary to effectuate the provisions of this
section.
<PAGE> 115
EXHIBIT 1.2A
TRANSTEXAS GAS CORPORATION
BORROWING BASE CERTIFICATE
Calculated under method (i)*, (ii)* or (iii)*
as defined in "Valuation Amount"
(*Circle method used)
Borrower's Certificate for the period commencing __________ and ending _________
CALCULATION OF LOAN VALUE
1. PV10 of Eligible Hydrocarbon Reserves from $ ________
most recent Proved Reserve Report $ ________
2. Hydrocarbon production revenues during the $ ________
period, calculated at the average price
realized by Borrower $ ________
3. PV10 of Borrower's Hydrocarbon Reserves $ ________
balance at end of the period (1 above
minus 2 above) $ ________
4. Plus adjustments for capital expenditures
during period $ ________
5. Adjusted PV10 of Hydrocarbon Reserves
balance at end of period (3 above plus 4
above) $ ________
6. Estimated Production Payment Liabilities
at the end of the period relating to wells
comprising part of the most recent Proved
Reserves Report $ ________
7. End-of-period PV10 of Eligible Hydrocarbon
Reserves (5 above minus 6 above) $ ________
8. Loan value @ 50% of net Eligible
Hydrocarbon Reserves (not greater than
$52,500,000) $ ________
Exit Facility Loan Balance $ ________
Availability (A8 above minus B above) before Reserves $ ________
NYMEX Natural Gas Average Price per MMBtu for prior month $ ________
Low-price calculation (Calculation necessary only if D
above is $1.50 or less) $ ________
1. PV10 of Proved Developed Producing wells
(excluding any PV10 attributable to wells
subject to Production Payments) (Must be
not less than 140% of Exit Facility Loan
Balance) $ ________
<PAGE> 116
F. CALCULATION OF COVERAGE SHORTFALL I
(PROVED DEVELOPED RESERVES)
1. PV10 of Total Proved Developed Producing
Reserves, from most recent Proved Reserves
Report $ ________
2. Hydrocarbon production revenues during the
period, calculated at the average price
realized by borrower $ ________
3. PV10 of Total Proved Developed Reserves at
end of period (1 minus 2) $ ________
4. PV10 of Total Proved Developed Reserves
subject to Production Payment(s)
calculated at the Dedication Percentage
applicable to such wells $ ________
5. Plus adjustments for capital expenditure
during period $ ________
6. Adjusted PV10 of Total Proved Developed
Reserves not dedicated to Production
Payment(s) at end of period (3 minus 4,
plus 5) $ ________
7. Exit Facility Balance $ ________
8. Excess/(Shortfall) (6 minus 7) $ ________
(1) G. Calculation of Coverage Shortfall II
(PROVED DEVELOPED PRODUCING RESERVES)
1. PV10 of Total Proved Developed Producing
Reserves, from most recent Proved Reserves
Report $ ________
2. Hydrocarbon production revenues during the
period, calculated at the average price
realized by borrower $ ________
3. PV10 of Total Proved Developed Producing
Reserves at end of period (1 minus 2) $ ________
4. Outstanding balance of Production Payments
relating to wells comprising part of the
most recent Proved Reserves Report $ ________
5. Plus adjustments for capital expenditures
during period $ ________
6. Adjusted PV10 of Total Proved Developed
Producing Reserves, net of Production
Payment(s) at end of period (3 minus 4,
plus 5) $ ________
7. Exit Facility Balance $ ________
8. Excess/(Shortfall) (6 minus 7) $ ________
<PAGE> 117
H. Amounts secured by or subject to Permitted Prior
Liens that Prime Agent's Lien on Hydrocarbon
Reserves $ ________
All Royalty Payments, Materials Payables, Mechanics Payables, Severance
Taxes and Ad Valorem Taxes have been paid in accordance with Sections
5.3 and 5.7 of the Exit Facility.
The undersigned (President, Chief Financial Officer or Treasurer)
certifies that the above statements are true and correct and that there
exist no Events of Default under the Exit Facility.
All capitalized terms used in this Certificate which are not defined
herein shall have the meanings given to them in the Oil & Gas Revolving
Credit and Term Loan Agreement dated ___________, 2000 (the "Exit
Facility") by and among TransTexas Gas Corporation ("Borrower"), the
Lenders named therein and GMAC Commercial Credit LLC as Agent for the
Lenders.
Dated:
--------------------------- ------------------------------
Name:
-------------------------
Title:
------------------------
<PAGE> 1
EXHIBIT 4.39
MORTGAGE, DEED OF TRUST, ASSIGNMENT OF
PRODUCTION, SECURITY AGREEMENT AND FINANCING STATEMENT
DATED AS OF MARCH 15, 2000
BETWEEN
TRANSTEXAS GAS CORPORATION
(MORTGAGOR AND DEBTOR)
TO
JACK MACGOWAN, TRUSTEE
FOR THE BENEFIT OF
GMAC COMMERCIAL CREDIT LLC, AS AGENT
(MORTGAGEE AND SECURED PARTY)
"THE OIL AND GAS INTERESTS INCLUDED IN THE MORTGAGED PROPERTY WILL BE FINANCED
AT THE WELLHEADS OF THE WELLS LOCATED ON THE PROPERTIES DESCRIBED HEREIN, AND
THIS FINANCING STATEMENT IS TO BE FILED FOR RECORD, AMONG OTHER PLACES, IN THE
REAL ESTATE RECORDS."
"SOME OF THE PERSONAL PROPERTY CONSTITUTING A PORTION OF THE MORTGAGED PROPERTY
IS OR IS TO BE AFFIXED TO THE PROPERTIES DESCRIBED HEREIN AND THIS FINANCING
STATEMENT IS TO BE FILED FOR RECORD, AMONG OTHER PLACES, IN THE REAL ESTATE
RECORDS."
The mailing address of the above-named Mortgagee and Secured Party is 1290
Avenue of the Americas, New York, New York 10104, Attn: Thomas W. Strachan; the
mailing address of the above-named Mortgagor and Debtor is 1300 North Sam
Houston Parkway East, Suite 310, Houston, Texas 77032, Attn: Ed Donahue; and the
mailing address of the Trustee is c/o GMAC Commercial Credit LLC, 1290 Avenue of
the Americas, New York, New York 10104.
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.
THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES.
ATTENTION OF RECORDING OFFICERS: This instrument is a Mortgage of both
real and personal property and is, among other things, a Security Agreement and
Financing Statement under the Uniform Commercial Code. This instrument creates a
lien on rights in or relating to lands of Mortgagor which are described in
SCHEDULE 1, together with its accompanying EXHIBITS, all of which are attached
hereto.
Recorded counterparts should be returned to:
Haynes and Boone, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202
Attention: Jeffrey L. Curtis
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MORTGAGE, DEED OF TRUST, ASSIGNMENT OF
PRODUCTION, SECURITY AGREEMENT AND FINANCING STATEMENT
This Mortgage, Deed of Trust, Assignment of Production, Security
Agreement and Financing Statement, from TRANSTEXAS GAS CORPORATION, a Delaware
corporation ("MORTGAGOR"), to JACK MACGOWAN, as Trustee ("TRUSTEE") for the
benefit of GMAC COMMERCIAL CREDIT LLC, as a Lender and as Agent (in its capacity
as Agent for the benefit of the Lenders now or in the future party to the Credit
Agreement, together with its successors or assigns, "MORTGAGEE"), is made and
entered into as of this 15th day of March, 2000.
RECITALS
Mortgagor is a debtor in bankruptcy in the proceedings styled In re:
TransTexas Gas Corporation, TransAmerican Energy Corporation, TransAmerican
Refining Corporation, Case No. 99-21550-C-11 (Jointly Administered) in the
United States Bankruptcy Court for the Southern District of Texas, Corpus
Christi Division (the "COURT").
Mortgagor has filed with the Court that certain Second Amended Modified
and Restated Plan of Reorganization under Chapter 11 of the Bankruptcy Code
Proposed by Debtor (the "PLAN"). On February 7, 2000, the Court entered its
Order Confirming Debtor's Second Amended, Modified and Restated Plan of
Reorganization confirming the Plan. Additionally, the Court has issued its Order
in Furtherance of Order Dated February 7, 2000 Confirming Debtor's Chapter 11
Plan, a copy of which is attached hereto as SCHEDULE 1 (the "IMPLEMENTATION
ORDER") (except that, in accordance with the provisions of the Implementation
Order, there are attached as Exhibits to the copy of the Implementation Order
attached hereto the legal descriptions of the real properties, and estates and
interest therein, situated in the county and state in which a counterpart of
this Mortgage is filed of record).
Pursuant to the Plan, Mortgagor and Mortgagee are entering into that
certain Oil & Gas Revolving Credit and Term Loan Agreement, dated as of March
15, 2000 (as amended or modified and in effect from time to time, the "CREDIT
AGREEMENT").
Pursuant to and on the terms and conditions set forth in the Credit
Agreement, Mortgagee, and the Lenders referred to therein, have granted to
Mortgagor the following credit facilities, all as more particularly defined and
described in the Credit Agreement: (i) certain "Revolving Advances" and a
"Swingline Loan" which, collectively, are in the in the maximum principal amount
outstanding not to exceed at any time $30,000,000; and (ii) a "Term Loan" in the
maximum principal amount of $22,500,000.
Accordingly, Mortgagor has executed and delivered to Mortgagee, and the
Lenders, certain promissory notes (collectively, and as defined in the Credit
Agreement, the "NOTES") to evidence Mortgagor's repayment obligations under the
credit facilities provided in the Credit Agreement.
Under the terms of the Credit Agreement, Mortgagee is acting as the
Agent for, and for the benefit of, the Lenders, and the holders of the Notes.
Mortgagor is entering into this Mortgage pursuant to its obligations
under the Credit Agreement and for the purpose, among other things, of securing
and providing for the repayment of the Notes.
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ARTICLE I
DEFINITIONS
1.1. CERTAIN DEFINED TERMS. Unless the context otherwise requires, as
used in this Mortgage and all amendments, extensions, modifications, renewals,
supplements or waivers hereof or hereto, the following terms shall have the
following meanings, which meanings shall be equally applicable to both the
singular and plural form of such terms.
"AGENT" shall have the meaning assigned to that term in the
Credit Agreement.
"BUSINESS DAY" shall have the meaning assigned to that term in
the Credit Agreement.
"COLLATERAL" shall have the meaning set out in ARTICLE VIII of
this Mortgage.
"CONTRACT RIGHTS" shall mean all contracts, operating
agreements, mineral purchase agreements, rights of way, easements, surface
leases, permits, licenses, pooling or unitization agreements, pooling
designations and pooling orders and all other contracts or agreements pertaining
to or affecting the Mortgaged Properties or which were executed in connection
with the drilling for, producing, processing, treating, handling, storing,
transporting or marketing oil, gas or other minerals from the Mortgaged
Properties or from any properties unitized or pooled therewith, including - but
not limited to - the contracts listed on SCHEDULE 1, EXHIBIT D attached hereto.
"CREDIT AGREEMENT" shall have the meaning assigned to that
term in the introduction to this Mortgage.
"DEBTOR" shall have the meaning set out in ARTICLE VIII of
this Mortgage.
"DOCUMENTS" shall have the meaning assigned to that term in
the Credit Agreement.
"DTPA" shall mean the Texas Deceptive Trade Practices Consumer
Protection Act, Subchapter E of Chapter 17 of the Texas Business and Commerce
Code.
"EQUIPMENT" shall mean and include all of Mortgagor's now
owned or hereafter acquired, "equipment" as such term is defined in Article 9 of
the New York UCC, including without limitation, vehicles -- including, but not
limited to, all trucks, automobiles, trailers, and other vehicles, whether or
not covered by a certificate of title -- drilling rigs, workover rigs, fracture
stimulation equipment, well site compressors, rolling stock, related equipment,
and other assets accounted for as equipment by Mortgagor on its financial
statements, all proceeds thereof (from insurance or otherwise), together with
all documents of title, books, records, ledger cards, files, correspondence and
computer files, tapes, disks and related data processing software that at any
time evidence or contain information relating to the foregoing.
"EVENT OF DEFAULT" shall have the meaning assigned to that
term in SECTION 6.1.
"HIGHEST LAWFUL RATE" shall mean the maximum non-usurious
amount and the maximum non-usurious rate of interest that, under applicable law,
is permitted to be contracted for, charged, reserved, or received on the
Indebtedness.
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"HYDROCARBONS" shall mean oil, natural gas, condensate and
natural gas liquids, including any held as "inventory" (as such term is defined
in Article 9 of the New York UCC).
"INDEBTEDNESS" shall mean the following indebtedness and
liabilities of Mortgagor (and any extensions, renewals, refundings, increases,
substitutions, replacements, consolidations, modifications or rearrangements of
such indebtedness and liabilities, whether or not Mortgagor executes any
extension agreement or renewal instrument):
(a) all principal, premiums, accrued interest and any other
sums now or hereafter owing on the Notes;
(b) all amounts advanced or expended by Mortgagee under or in
connection with the Credit Agreement or this Mortgage, all reasonable costs and
out-of-pocket expenses (excluding expenses representing administrative overhead)
at any time and from time to time incurred by the Trustee or Mortgagee in
connection with the administration and/or enforcement of this Mortgage, the
Notes or the Credit Agreement (including, without limitation, the reasonable
fees and out-of-pocket expenses of counsel employed by the Trustee or Mortgagee
in connection therewith), and all sums due or to become due at any time and from
time to time hereunder or under the Credit Agreement to the Trustee or
Mortgagee, it being contemplated that Mortgagor may hereafter become indebted to
Trustee or Mortgagee in such further sum or sums; and
(c) all other amounts payable by Mortgagor under the Credit
Agreement.
"INVENTORY" shall mean all of Mortgagor's now owned or
hereafter acquired, "inventory" as such term is defined in Article 9 of the New
York UCC, including (without limitation), casing, drill pipe and other supplies
accounted for as inventory by the Mortgagor on its consolidated financial
statements (excluding Hydrocarbons), all proceeds thereof (from insurance or
otherwise), together with all documents of title, books, records, ledger cards,
files, correspondence and computer files, tapes, disks and related data
processing software that at any time evidence or contain information relating to
the foregoing.
"LANDS" shall mean that real property in AUSTIN, BRAZORIA,
CALHOUN, CHAMBERS, COLORADO, GALVESTON, HARRIS, HIDALGO, JIM HOGG, KENT, LIVE
OAK, POLK, SAN JACINTO, STARR, TRINITY, TYLER, VAL VERDE, WALKER, WEBB, WHARTON
AND ZAPATA Counties described, referred to or covered by the Leases described in
SCHEDULE 1, EXHIBITS A and C hereto, and the Pipelines and the real property
included and described in SCHEDULE 1, EXHIBIT B hereto, or the description of
which is incorporated in any such exhibit by reference to any other instrument
or document, together with any and all other land in any state or the
Outer-Continental Shelf in which Mortgagor has any interest, legal or
beneficial, recorded or unrecorded, now owned or hereafter acquired in
overriding royalty interests, mineral interests, leasehold interests, mineral
rights, royalty interests, net profits interests, oil payments, production
payments, carried interests, or otherwise.
"LEASES" shall mean those Oil and Gas Leases covering Lands in
AUSTIN, BRAZORIA, CALHOUN, CHAMBERS, COLORADO, GALVESTON, HARRIS, HIDALGO, JIM
HOGG, KENT, LIVE OAK, POLK, SAN JACINTO, STARR, TRINITY, TYLER, VAL VERDE,
WALKER, WEBB, WHARTON AND ZAPATA Counties described in SCHEDULE 1, EXHIBIT A
hereto, or the description of which is incorporated in SCHEDULE 1, EXHIBIT A by
reference to any other instrument or document, together with any and all other
Oil and Gas Leases or leasehold estates covering Lands in any state or the
Outer-Continental Shelf, including any lands pooled or
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unitized therewith, in which, or in any portion of which, Mortgagor has an
interest, now owned or hereafter acquired, as well as any extensions, renewals
or replacements of or for any of the foregoing.
"LENDERS" shall mean those Lenders from time to time parties
to the Credit Agreement, and holders of the Notes, from time to time.
"MORTGAGE" shall mean this Mortgage, Deed of Trust, Assignment
of Production, Security Agreement and Financing Statement, as same may from time
to time be amended or modified and in effect.
"MORTGAGED PROPERTY" shall have the meaning set out in ARTICLE
II to this Mortgage.
"MORTGAGEE" shall have the meaning assigned to that term in
the introduction to this Mortgage.
"MORTGAGOR" shall have the meaning assigned to that term in
the introduction to this Mortgage.
"NEW YORK UCC" shall mean the Uniform Commercial Code as in
effect in the State of New York.
"NOTES" shall have the meaning assigned to that term in the
introduction to this Mortgage.
"OIL AND GAS LEASES" shall include oil, gas and mineral leases
and shall also include subleases and assignments of operating rights.
"OPERATING EQUIPMENT" shall mean Mortgagor's interest in all
personal property, surface or subsurface machinery, equipment, facilities,
supplies or other property of whatsoever kind or nature, now or hereafter
located on or under any of the Lands or Leases or on a unit, including all or
part of the Lands or Leases or now or hereafter used, held for use or useful in
connection with the exploration, development, operation, production, treatment,
storage, processing or transportation of Hydrocarbons, helium and/or other
minerals produced or to be produced from or attributable to the Lands or Leases,
including, but not by way of limitation, all oil wells, gas wells, water wells,
injection wells, casing, tubing, rods, pumps, pumping units and engines,
christmas trees, derricks, separators, gun barrels, flow lines, tanks, tank
batteries, gas systems (for gathering, treating, compression, disposal or
injection), chemicals, solutions, water systems (for treating, disposal and
injection), pipe, pipelines, boilers, meters, apparatus, compressors, liquid
extractors, connectors, valves, fittings, power plants, poles, lines, cables,
wires, transformers, starters and controllers, machine shops, tools, machinery
and parts, storage yards and equipment stored therein, buildings and camps,
telegraph, telephone and other communication systems, roads, loading docks,
loading racks and shipping facilities, computer equipment and software, fixtures
and other appurtenances, appliances and property of every kind and character,
movable or immovable, together with all improvements, betterments and additions,
accessories and attachments thereto and replacements thereof.
"PERMITTED PRIOR LIENS" shall have the meaning assigned to
that term in the Credit Agreement.
"PIPELINES" shall mean the Pipeline Assets and all pipelines
owned and/or operated by Mortgagor for the gathering, transmission or
distribution of Hydrocarbons including, without limitation,
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those pipelines described in SCHEDULE 1, EXHIBIT B attached hereto, and any
interests in real property relating thereto.
"PIPELINE ASSETS" shall mean all parts or aspects of the gas
pipeline system of Mortgagor now or hereafter situated on any of the Lands, and
the Rights-of-Way and Franchises, including, without limitation, the pipeline
system described in SCHEDULE 1, EXHIBIT B, and all fixtures, improvements,
equipment, surface or subsurface machinery, facilities, supplies, replacement
parts, vehicles of every description, all process control computer systems and
equipment or other property of whatsoever kind or nature, including, without
limitation, all buildings, structures, machinery, gas processing plants,
Pipelines, stations, substations, compression or dehydration equipment, pumps,
pumping stations, meter houses, metering stations, regulator houses, ponds,
tanks, scrapers and scraper traps, fittings, valves, connections, cathodic or
electrical protection by-passes, regulators, drips, meters, pumps, pumping
units, pumping stations, storage or tankage facilities, engines, pipes, gates,
telephone and telegraph lines, electric power lines, poles, wires, casings,
radio towers, fixtures, mechanical equipment, electrical equipment, computer
equipment and software, machine shops and other equipment, used or useful in
connection therewith; together with all of Mortgagor's liquid hydrocarbons,
carbon dioxide, natural gas liquids, refined petroleum products and other
inventory fuels, carbon, chemicals, electric energy and other consumable
materials or products manufactured, processed, generated, produced, transmitted,
stored (whether above or below ground) or purchased by Mortgagor for sale,
exchange, distribution, consumption or transmission by Mortgagor, including,
without limitation, all system gas, drip gas and line fill.
"PRODUCTION SALE CONTRACTS" shall mean, all contracts now or
hereafter in effect, including, without limitation, any gas sales contracts,
entered into by Mortgagor, or Mortgagor's predecessors in interest, for the
production, sale, purchase, exchange or processing of Subject Minerals,
including - but not limited to -- any of the foregoing contracts listed on
SCHEDULE 1, EXHIBIT D, and the Contract Rights related thereto.
"RECEIVABLES" shall mean any and all of Mortgagor's now owned
or hereafter acquired "accounts" as such term is defined in Article 9 of the New
York UCC, together with the proceeds and products thereof, and all books,
records, ledger cards, files, correspondence and computer files, tapes, disks or
software that at any time evidence or contain information relating to the
foregoing.
"RIGHTS-OF-WAY AND FRANCHISES" shall mean all leases,
leaseholds, easements, rights-of-way, licenses, franchises, privileges, permits,
ordinances, grants, rights, consents, servitudes, surfaces leases or rights,
amendatory grants and interests in land for the installation, maintenance and
operation of the Subject Interests or the Pipelines, or any portion thereof, now
owned or held by Mortgagor, including, without limitation, those leases,
leaseholds, easements, rights-of-way, licenses, franchises, privileges, permits,
ordinances, grants, rights, consents, servitudes, surface leases or rights,
amendatory grants and interests in land applicable to the Subject Interests or
the Pipelines owned or held by Mortgagor and those leases, leaseholds,
easements, rights-of-way, licenses, franchises, privileges, permits, ordinances,
grants, rights, consents, servitudes, surfaces leases or rights, amendatory
grants and interests in land owned or held by Mortgagor, including without
limitation any described in SCHEDULE 1, EXHIBIT B attached hereto or arising by
virtue of the documents described in SCHEDULE 1, EXHIBIT B attached hereto,
which descriptions of real property set forth in SCHEDULE 1, EXHIBIT B or
incorporated by reference to the documents described on SCHEDULE 1, EXHIBIT B
are hereby made a part so that all of the property rights, other rights and
other assets described therein shall be subject to this Mortgage to the same
extent as if they were described herein.
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"SECURED PARTY" shall have the meaning set out in ARTICLE VIII
of this Mortgage.
"SUBJECT INTERESTS" shall mean each kind and character of
right, title, interest or estate, whether now owned or hereafter acquired, which
Mortgagor has in, under or to the Leases and all right, title, interest or
estate, whether now owned or hereafter acquired, which Mortgagor has in and to
the Lands, together with each kind and character of right, title, interest or
estate now or hereafter vested in Mortgagor in and to any and all overriding
royalty interests, mineral interests, leasehold interests, mineral rights,
royalty interests, net profits interests, oil payments, production payments,
carried interests and all other properties or interests of every kind or
character which relate to any of the Lands or Leases, whether such right, title,
interest or estate be under and by virtue of a Lease, a unitization or pooling
agreement, a unitization or pooling order, a mineral deed, a royalty deed, an
operating agreement, a revenue sharing agreement, a division order, a transfer
order, a farmout agreement, a fee simple conveyance or any other type of
contract, conveyance or instrument or under any other type of claim or title,
legal or equitable, recorded or unrecorded, all as the same shall be enlarged by
the discharge of any payments out of production or by the removal of any charges
or encumbrances to which any of same are subject.
"SUBJECT MINERALS" shall mean all Hydrocarbons, helium and/or
other minerals in, under, upon, produced or to be produced or which may be
produced, saved and sold from and which shall accrue and be attributable to the
Subject Interests, including, without limitation, all oil in tanks and all
rents, royalties, issues, profits, proceeds, products, revenues, and other
income arising from or attributable to the Subject Interests and Mortgagor's
interest therein.
"TRUSTEE" shall have the meaning assigned to that term in the
introduction to this Mortgage.
"UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial
Code as in effect in the State of Texas.
ARTICLE II
MORTGAGE, DEED OF TRUST
2.1. GRANT OF DEED OF TRUST ON REAL PROPERTY AND SECURITY INTEREST IN
PERSONAL PROPERTY. To secure the payment of the Indebtedness and to secure the
performance of the covenants, agreements and obligations of Mortgagor contained
herein, in the Credit Agreement and in all other security documents executed in
accordance therewith, Mortgagor, for and in consideration of the premises and of
the debts and trusts hereinafter mentioned, has granted, bargained, sold,
warranted, mortgaged, assigned, transferred and conveyed a security interest,
and by these presents does grant, bargain, sell, warrant, mortgage, assign,
transfer and convey and grant a security interest, unto the Trustee, for the use
and benefit of Mortgagee with power of sale, all of Mortgagor's rights, titles,
interests and estates, if any, in, to, under, derived from or with respect to
all of the assets of Mortgagor, including without limitation the following
described real and personal property, whether now owned or hereafter acquired:
(a) the Subject Interests, the Subject Minerals and the
Hydrocarbons;
(b) the Contract Rights and the Production Sale Contracts;
(c) the Equipment, Inventory and Receivables;
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(d) the Operating Equipment;
(e) the Leases and the Lands;
(f) the Pipelines;
(g) the Pipeline Assets;
(h) the Rights-of-Way and Franchises;
(i) all unitization, communitization, operating agreements,
pooling agreements and declarations of pooled units and the properties covered
and the units created thereby (including all units formed under orders,
regulations, rules or other official acts of any federal, state or other
governmental agency providing for pooling or unitization, spacing orders or
other well permits and other instruments) which relate to or affect all or any
portion of the Subject Interests;
(j) all contract rights, operating rights, general
intangibles, chattel paper, documents and instruments arising under any of the
foregoing, including without limitation, the Production Sale Contracts and all
transmission contracts or other contracts now or hereafter in effect with
respect to the Pipelines or the Pipeline Assets;
(k) all subleases, farmout agreements, assignments of
interests, assignments of operating rights, contracts, operating agreements,
bidding agreements, advance payment agreements, rights-of-way, surface leases,
franchises, servitudes, privileges, permits, licenses, easements, tenements,
hereditaments, improvements, appurtenances and benefits now existing or in the
future obtained and incident and appurtenant to any of the foregoing;
(l) all lease records, well records, production records and
accounting and other records and files which relate to any of the foregoing, and
all maps, data bases, manuals, information and data which relate to any of the
foregoing, including without limitation engineering, geological and geophysical
data;
(m) all income, revenues, rents, profits and proceeds arising
out of the gathering, transportation, processing or sale of Hydrocarbons through
the Pipelines and other accounts, contract rights, operating rights, general
intangibles, chattel paper, documents, investment property and instruments
arising under any of the foregoing;
(n) any liens and security interests in the Subject Interests
in favor of Mortgagor securing payment of proceeds from the sale of the Subject
Minerals including, but not limited to, those liens and security interests
provided for in Tex. Bus. & Com. Code Ann. Section 9.319 (Tex. UCC), as amended;
(o) all other rights, titles and interests of Mortgagor in, to
and under or derived from the Lands, the Leases, the Rights-of-Way and
Franchises, the Production Sale Contracts and/or other properties described in
SCHEDULE 1, EXHIBITS A, B or C hereto;
(p) any property that may from time to time hereafter, by
delivery or by writing of any kind executed by or on behalf of Mortgagor, be
subjected to the lien and security interest hereof by
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Mortgagor or by anyone authorized on Mortgagor's behalf, and Mortgagee and
Trustee are hereby authorized to receive the same as additional security;
(q) all other property of every nature and kind and
wheresoever situated, now owned or hereafter acquired by Mortgagor or to which
Mortgagor is now or may hereafter be entitled at law or in equity;
(r) any and all proceeds, returns, rents, royalties, issues,
profits, products, revenues and other income arising from or by virtue of the
sale, lease or other disposition of, or from any condemnation, eminent domain or
insurance payable with respect to damage, loss or destruction of, the items
described in subparagraphs (a) through (q) above;
together with any and all proceeds, products, increases, profits, substitutions,
replacements, renewals, additions, amendments and accessions of, to and for all
of the foregoing property. All the aforesaid properties, rights and interests
which are hereby subjected to the lien and/or security interest of this
instrument, together with any additions thereto which may be subjected to the
lien and/or security interest of this instrument by means of supplements hereto
or otherwise, shall hereinafter be referred to as the "MORTGAGED PROPERTY."
TO HAVE AND TO HOLD the Mortgaged Property unto the Trustee and to his
successors and assigns forever.
2.2 LIMITED LICENSE. Without limiting the security interest granted
hereby, Mortgagor hereby grants to Mortgagee a limited license in Mortgagor's
trade names, trademarks and service marks, together with Mortgagor's goodwill
associated with such trade names, trademarks and service marks, for purposes of
allowing Mortgagee to use the same in connection with any foreclosure sale or
any other disposition pursuant to the Uniform Commercial Code or this Mortgage.
ARTICLE III
WARRANTIES AND REPRESENTATIONS OF MORTGAGOR
Mortgagor represents and warrants that each of the representations and
warranties set forth in SCHEDULE 2 attached hereto is true and correct.
Additionally, each representation and warranty in the Credit Agreement is true
and correct (each of which representation and warranty is incorporated herein by
reference together with related definitions and ancillary provisions) as if set
forth herein verbatim.
ARTICLE IV
COVENANTS AND AGREEMENTS OF MORTGAGOR
Mortgagor will, for Mortgagee's benefit, timely and properly observe,
perform, and otherwise comply with each covenant and agreement in the Credit
Agreement (each of which is incorporated herein by reference together with
related definitions and ancillary provisions) as if set forth herein verbatim.
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ARTICLE V
ASSIGNMENT OF PRODUCTION
5.1. ASSIGNMENT. As further security for the payment of the
Indebtedness, subject however to the rights of the holder of any Permitted Prior
Liens, Mortgagor has transferred, assigned, warranted and conveyed and does
hereby transfer, warrant and convey to Mortgagee, effective as of the date
hereof at 9:00 a.m., local time, all of Mortgagor's rights, titles, interests
and estates in and to the following property: all Hydrocarbons, helium and/or
other minerals which are thereafter produced and which accrue to the Subject
Interests, all products obtained or processed therefrom and all revenues and
proceeds now or hereafter attributable to said Hydrocarbons, helium and/or other
minerals and said products as well as any liens and security interests securing
any sales of said Hydrocarbons, helium and/or other minerals, including, but not
limited to, those liens and security interests provided for in Tex. Bus. & Com.
Code Ann. ss. 9.319 (Tex. UCC) (Vernon 1968), as amended. All parties producing,
purchasing or receiving any such Hydrocarbons, helium and/or other minerals or
products, or having such Hydrocarbons, helium and/or other minerals, products,
or proceeds therefrom, in their possession for which they or others are
accountable to Mortgagee by virtue of the provisions of this Article, are
authorized and directed to treat and regard Mortgagee as the assignee and
transferee of Mortgagor and entitled in Mortgagor's place and stead to receive
such Hydrocarbons, helium and/or other minerals and all proceeds therefrom,
subject to the rights of the holder of any Permitted Prior Liens, and said
parties and each of them shall be fully protected in so treating and regarding
Mortgagee and shall be under no obligation to see to the application by
Mortgagee of any such proceeds or payments received by it; provided, however;
that, until Mortgagee or Mortgagor shall have instructed such parties to deliver
such Hydrocarbons, helium and/or other minerals and all products, revenues
and/or proceeds therefrom directly to Mortgagee (which such instructions may be
given only after the occurrence and during the continuance of an Event of
Default, as herein defined, but the giving of such instructions shall as to all
such parties be conclusive as to the occurrence of an Event of Default), such
parties shall be entitled to deliver such Hydrocarbons, helium and/or other
minerals and all products, revenues and/or proceeds therefrom to Mortgagor.
Mortgagor agrees, subject to the rights of the holder of any Permitted Prior
Liens, to perform all such acts, and to execute all such further assignments,
transfers and division orders and other instruments as may be required or
desired by Mortgagee or any party in order to have said revenues and proceeds so
paid to Mortgagee and/or to have such Hydrocarbons, helium and/or other minerals
delivered to Mortgagee. Mortgagee is fully authorized to receive and issue a
receipt for said revenue and proceeds, to endorse and cash any and all checks
and drafts payable to the order of Mortgagor or Mortgagee for the account of
Mortgagor received from or in connection with said revenues or proceeds and
apply the proceeds thereof in accordance with SECTION 5.2 hereof, and to execute
transfer and division orders in the name of Mortgagor, or otherwise, with
warranties binding Mortgagor. In the event that Mortgagee elects to take
delivery of any such Hydrocarbons, helium or other minerals in kind, Mortgagee
shall have the right to sell such Hydrocarbons, helium or minerals upon such
terms as Mortgagee may desire, and to apply the proceeds of such sale as
provided in SECTION 5.2 below.
5.2. APPLICATION OF PROCEEDS. Any and all payments and sale proceeds
received by Mortgagee pursuant to SECTION 5.1 hereof shall be placed in a cash
collateral account with Mortgagee and on the first day of each month applied as
follows:
First: to the payment and satisfaction of all costs and expenses
incurred in connection with the collection of such proceeds
(and in the event Mortgagee shall have taken delivery in kind,
to the costs and expenses of the sale of such Hydrocarbons,
helium or other minerals); and
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Second: then in accordance with the provisions of SECTION 7.9 below.
5.3. NO LIABILITY OF MORTGAGEE IN COLLECTING. Mortgagee is hereby
absolved from all liability for failure to enforce collection of any proceeds so
assigned and from all other responsibility in connection therewith, except the
responsibility to account to Mortgagor for funds actually received. Mortgagee
shall have the right, at its election, to prosecute and defend any and all
actions or legal proceedings deemed advisable by Mortgagee in order to collect
such funds and to protect the interests of Mortgagee and/or Mortgagor, with all
reasonable costs, expenses and attorneys' fees incurred in connection therewith
being paid by Mortgagor.
5.4. ASSIGNMENT NOT A RESTRICTION ON MORTGAGEE'S RIGHTS. Nothing herein
contained shall detract from or limit the absolute obligation of Mortgagor to
make payment in full of the Indebtedness, regardless of whether the proceeds
assigned by this Article are sufficient to pay the same, and the rights under
this ARTICLE V shall be in addition to all other security now or hereafter
existing to secure the payment of the Indebtedness.
5.5. STATUS OF ASSIGNMENT. Notwithstanding the other provisions of this
ARTICLE V, the Trustee or any receiver appointed in judicial proceedings for the
enforcement of this instrument shall have the right to receive all of the
Hydrocarbons, helium, and/or other minerals herein assigned and, subject to the
rights of the holder of any Permitted Prior Liens, the proceeds therefrom after
the Notes have been declared due and payable in accordance with the provisions
of SECTION 6.2 hereof and to apply all of said proceeds as set forth in SECTION
5.2 hereof. Upon any sale of the Subject Interests or any part thereof pursuant
to ARTICLE VII hereof, the Hydrocarbons, helium, and/or other minerals
thereafter produced from the Subject Interests so sold, and the proceeds
therefrom, shall be included in such sale and shall pass to the purchaser free
and clear of the assignment contained in this ARTICLE V.
5.6. INDEMNITY. MORTGAGOR AGREES TO INDEMNIFY, DEFEND AND HOLD THE
TRUSTEE, MORTGAGEE AND LENDERS HARMLESS AGAINST ALL CLAIMS, ACTIONS,
LIABILITIES, JUDGMENTS, COSTS, ATTORNEYS' FEES OR OTHER CHARGES OF WHATSOEVER
KIND OR NATURE (INCLUDING WITHOUT LIMITATION AMOUNTS PAID IN SETTLEMENT, COURT
COSTS AND THE FEES AND DISBURSEMENTS OF COUNSEL INCURRED IN CONNECTION WITH ANY
INVESTIGATION, LITIGATION OR OTHER PROCEEDING) (ALL HEREINAFTER IN THIS SECTION
5.6 CALLED "CLAIMS"), OTHER THAN CLAIMS ARISING FROM MORTGAGEE'S OWN GROSS
NEGLIGENCE, WILLFUL MISCONDUCT OR BAD FAITH, MADE AGAINST OR INCURRED BY THEM OR
ANY OF THEM AS A CONSEQUENCE, EITHER BEFORE OR AFTER THE PAYMENT IN FULL OF THE
INDEBTEDNESS, OF (I) THE BREACH BY MORTGAGOR OF ANY COVENANT, REPRESENTATION OR
WARRANTY CONTAINED IN THIS MORTGAGE OR TO WHICH IT REFERS, (II) ANY VIOLATION OF
LAW BY MORTGAGOR, OR (III) THE ASSERTION THAT MORTGAGOR AND/OR TRUSTEE RECEIVED
HYDROCARBONS, HELIUM AND/OR OTHER MINERALS HEREIN ASSIGNED OR THE PROCEEDS
THEREOF CLAIMED BY THIRD PERSONS. THE TRUSTEE AND MORTGAGEE SHALL HAVE THE RIGHT
TO DEFEND AGAINST ANY SUCH CLAIMS, EMPLOYING ATTORNEYS THEREFOR, AND UNLESS
FURNISHED WITH REASONABLE INDEMNITY, THEY OR EITHER OF THEM SHALL HAVE THE RIGHT
TO PAY OR COMPROMISE AND ADJUST ALL SUCH CLAIMS. MORTGAGOR WILL INDEMNIFY AND
PAY TO THE TRUSTEE, MORTGAGEE OR LENDERS ANY AND ALL SUCH AMOUNTS AS MAY BE PAID
IN RESPECT OF SUCH CLAIMS OR AS MAY BE
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SUCCESSFULLY ADJUDGED AGAINST MORTGAGEE, THE TRUSTEE AND LENDERS OR ANY OF THEM.
THE OBLIGATIONS OF MORTGAGOR AS HEREINABOVE SET FORTH IN THIS SECTION 5.6 SHALL
SURVIVE THE RELEASE OF THIS INSTRUMENT.
ARTICLE VI
EVENTS OF DEFAULT
6.1. EVENTS OF DEFAULT. It shall constitute an "EVENT OF DEFAULT"
hereunder if an "Event of Default" occurs under the terms and provisions of the
Credit Agreement.
6.2. EFFECT OF EVENT OF DEFAULT. If an Event of Default shall occur and
be continuing:
(a) Mortgagee may, subject to and in accordance with the terms
of the Credit Agreement, by notice in writing to Mortgagor declare the principal
of and accrued interest on the Notes and all other outstanding Indebtedness
secured hereby to be immediately due and payable whereupon the Notes and all
other outstanding Indebtedness shall become and be immediately due and payable,
in each instance without (except for any grace and notice expressly provided for
in the Credit Agreement) grace, demand, presentment for payment, protest or
notice of any kind to Mortgagor or any other person (including, but not limited
to, notice of intent to accelerate and notice of acceleration), all of which are
hereby expressly waived; and
(b) Mortgagee may proceed to enforce its rights hereunder.
ARTICLE VII
ENFORCEMENT OF REMEDIES
7.1. POWER OF SALE OF REAL PROPERTY CONSTITUTING A PART OF THE
MORTGAGED PROPERTY. Upon the occurrence and during the continuance of an Event
of Default, the Trustee is hereby authorized and empowered to sell or offer for
sale any part of the Mortgaged Property, with or without having first taken
possession of same, to the highest bidder for cash at public auction. Such sale
shall be made at the courthouse of the county in which the Mortgaged Property or
any part thereof is situated, as herein described, between the hours of 10:00
a.m. and 4:00 p.m. on the first Tuesday of any month, beginning within three (3)
hours of the time provided in the notices described herein, after posting a
written or printed notice or notices of the place, the earliest time at which
the sale will begin and the terms of the sale, and the portion of the Mortgaged
Property to be sold, by posting (or having some person or persons acting for the
Trustee post) for at least twenty-one (21) days preceding the date of the sale,
written or printed notice of the proposed sale at the courthouse door of said
county in which the sale is to be made, and if such portion of the Mortgaged
Property lies in more than one county, one such notice of sale shall be posted
at the courthouse door of each county in which such part of the Mortgaged
Property is situated and such part of the Mortgaged Property may be sold at the
courthouse door of any one of such counties, and the notice so posted shall
designate in which county such property shall be sold. In addition to such
posting of notice, Mortgagee, the Trustee or other holder of the Indebtedness
hereby secured (or some person or persons acting for the Trustee, Mortgagee or
other such holder) shall, at least twenty-one (21) days preceding the date of
sale, file a copy of such notice(s) in the office of the county clerk in each of
such counties and serve or cause to be served written notice of the proposed
sale by certified mail on Mortgagor and on each other debtor, if any, obligated
to pay the Indebtedness hereby secured according to the records of Mortgagee.
Service of such notice shall be completed upon deposit of the notice, enclosed
in a postpaid wrapper properly addressed to Mortgagor and
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such other debtors at their most recent address or addresses as shown by the
records of Mortgagee in a post office or official depository under the care and
custody of the United States Postal Service. The affidavit of any person having
knowledge of the facts to the effect that such a service was completed shall be
prima facie evidence of the fact of service. Mortgagor agrees that no notice of
any sale, other than as set out in this paragraph, need be given by the Trustee,
Mortgagee or any other person. Mortgagor hereby designates as its address for
the purpose of such notice, the address set out on the signature page hereof and
agrees that such address shall be changed only by depositing notice of such
change enclosed in a postpaid wrapper in post office or official depository
under the care and custody of the United States Postal Service, certified mail,
postage prepaid, return receipt requested, addressed to Mortgagee or other
holder of the Indebtedness secured hereby at the address for Mortgagee set out
herein (or to such other address as Mortgagee or other holder of the
Indebtedness secured hereby may have designated by notice given as above
provided to Mortgagor and such other debtors). Any such notice of change of
address of Mortgagor or other debtors or of Mortgagee or other holders of the
Indebtedness secured hereby shall be effective three (3) business days after
such deposit if such post office official depository is located in the State of
Texas, otherwise to be effective upon receipt. Mortgagor authorizes and empowers
the Trustee to sell the Mortgaged Property in lots or parcels or in its entirety
as the Trustee shall deem expedient and to execute and deliver to the purchaser
or purchasers thereof good and sufficient deeds of conveyance thereto by fee
simple title, with evidence of warranty by Mortgagor, subject only to Permitted
Prior Liens, and Mortgagor binds itself to warrant and forever defend the title
of such purchaser or purchasers when so made by the Trustee. Where portions of
the Mortgaged Property lie in different counties, sales in such counties may be
conducted in any order that the Trustee may deem expedient and one or more such
sales may be conducted in the same month or in successive or different months as
the Trustee may deem expedient.
As to Mortgaged Property located in the State of Texas or the Outer-Continental
Shelf adjacent to the State of Texas, such sales of all or any part of such
Mortgaged Property shall be conducted at the courthouse of any county (whether
or not the counties in which the Mortgaged Property is located are contiguous)
in the State of Texas in which any part of the Mortgaged Property is situated
(or if all of the Mortgaged Property are in the Outer-Continental Shelf, then
any county adjacent to any of the Mortgaged Property). This instrument, insofar
as it covers Mortgaged Property located in the State of Texas or the
Outer-Continental Shelf adjacent to the State of Texas, is a single instrument,
but has been executed in multiple counterparts. Attached to each such
counterpart are descriptions of Mortgaged Property located only in the
particular county in which such counterpart is to be recorded, except that a
full and complete copy of this instrument with the entire exhibits attached is
to be of record in Galveston County, Texas.
7.2. RIGHTS OF THE TRUSTEE WITH RESPECT TO PERSONAL PROPERTY
CONSTITUTING A PART OF THE MORTGAGED PROPERTY. Upon the occurrence and during
the continuance of an Event of Default, the Trustee will have all rights and
remedies granted by law, and particularly by the Uniform Commercial Code,
including but not limited to, (i) the right to proceed as to both the real and
the personal property covered hereby in accordance with the Trustee's rights and
remedies in respect of the real property covered hereby and (ii) the right to
take possession of all personal property constituting a part of the Mortgaged
Property, and for this purpose the Trustee may enter upon any premises on which
any or all of such personal property is situated and take possession of and
operate such personal property (or any portion thereof) or remove it therefrom.
The Trustee may require Mortgagor to assemble such personal property and make it
available to the Trustee at a place to be designated by the Trustee which is
reasonably convenient to all parties. If the Trustee elects to foreclose under
the Uniform Commercial Code and unless such personal property is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, the Trustee will give Mortgagor reasonable notice of the time
and place of any public sale or of the time after
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which any private sale or other disposition of such personal property is to be
made. This requirement of sending reasonable notice will be met if the notice is
mailed by first class mail, postage prepaid, to Mortgagor at the address shown
below the signatures at the end of this instrument at least five (5) Business
Days before the time of the sale or disposition.
7.3. RIGHTS OF THE TRUSTEE WITH RESPECT TO FIXTURES CONSTITUTING A PART
OF THE MORTGAGED PROPERTY. Upon the occurrence and during the continuance of an
Event of Default, the Trustee may elect to treat the fixtures constituting a
part of the Mortgaged Property as either real property collateral or personal
property collateral and proceed to exercise such rights as apply to such type of
collateral.
7.4. JUDICIAL PROCEEDINGS. Upon the occurrence and during the
continuance of an Event of Default, the Trustee, in lieu of or in addition to
exercising any power of sale hereinabove given, may proceed by a suit or suits
in equity or at law, whether for a foreclosure hereunder, or for the sale of the
Mortgaged Property, or for the specific performance of any covenant or agreement
herein contained or in aid of the execution of any power herein granted, or for
the appointment of a receiver pending any foreclosure hereunder or the sale of
the Mortgaged Property, or for the enforcement of any other appropriate legal or
equitable remedy.
7.5. POSSESSION OF THE MORTGAGED PROPERTY. It shall not be necessary
for the Trustee to have physically present or constructively in his possession
at any sale held by the Trustee or by any court, receiver or public officer any
or all of the Mortgaged Property, and Mortgagor shall deliver to the purchaser
at such sale on the date of sale the Mortgaged Property purchased by such
purchasers at such sale, and, if it should be impossible or impracticable for
any of such purchasers to take actual delivery of the Mortgaged Property, then
the title and right of possession to the Mortgaged Property shall pass to the
purchaser at such sale as completely as if the same had been actually present
and delivered.
7.6. CERTAIN ASPECTS OF A SALE. Mortgagee shall have the right to
become the purchaser at any sale held by the Trustee or by any court, receiver
or public officer, and Mortgagee shall have the right to credit upon the amount
of the bid made therefor the amount payable out of the net proceeds of such sale
to it. Recitals contained in any conveyance made to any purchaser at any sale
made hereunder shall conclusively establish the truth and accuracy of the
matters therein stated, including, without limiting the generality of the
foregoing, nonpayment of the unpaid principal sum of, and the interest accrued
on, the Notes after the same have become due and payable, advertisement and
conduct of such sale in the manner provided herein or appointment of any
successor Trustee hereunder.
7.7. RECEIPT OF PURCHASER. Upon any sale, whether made under the
Uniform Commercial Code, the power of sale herein granted and conferred or by
virtue of judicial proceedings, the receipt of the Trustee, or of the officer
making sale under judicial proceedings, shall be sufficient discharge to the
purchaser or purchasers at any sale for his or their purchase money, and such
purchaser or purchasers, his or their assigns or personal representatives shall
not, after paying such purchase money and receiving such receipt of the Trustee
or of such officer therefor, be obliged to see to the application of such
purchase money or be in anywise answerable for any loss, misapplication or
non-application thereof.
7.8. EFFECT OF SALE. Any sale or sales of the Mortgaged Property or any
part thereof, whether under the Uniform Commercial Code, the power of sale
herein granted and conferred or by virtue of judicial proceedings, shall operate
to divest all right, title, interest, claim and demand whatsoever either at law
or in equity, of Mortgagor of, in and to the Mortgaged Property sold, and shall
be a perpetual bar, both at law and
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in equity, against Mortgagor, and Mortgagor's successors or assigns, and against
any and all persons claiming or who shall thereafter claim all or any of the
property sold from, through or under Mortgagor, or Mortgagor's successors or
assigns. Nevertheless, Mortgagor, if requested by the Trustee or Mortgagee so to
do, shall join in the execution and delivery of all proper conveyances,
assignments and transfers of the properties so sold.
7.9. APPLICATION OF PROCEEDS. The proceeds of any sale of the Mortgaged
Property, or any part thereof, whether under the Uniform Commercial Code, the
power of sale herein granted and conferred or by virtue of judicial proceedings,
whose application has not elsewhere herein been specifically provided for, shall
be applied as follows:
First: to the payment of all expenses incurred by the Trustee or
Mortgagee incident to the enforcement of this Mortgage, the
Notes or any of the Indebtedness including, without limiting
the generality of the foregoing, all expenses of any entry or
taking of possession, of any sale, of advertisement thereof,
and of conveyances, and as well, court costs, compensation of
agents and employees and legal fees and expenses and a
reasonable fee to the Trustee;
Second: to the payment of all other costs, charges, expenses,
liabilities and advances incurred or made by the Trustee or
Mortgagee under this Mortgage or in executing any trust or
power hereunder;
Third: to the payment of the Notes and any other Indebtedness (other
than Indebtedness described in "First" and "Second" above),
with interest to the date of such payment, in such order and
manner as set forth in the Credit Agreement; and
Fourth: any surplus thereafter remaining shall be paid to Mortgagor or
Mortgagor's successors or assigns, as their interests shall
appear.
7.10. MORTGAGOR'S WAIVER OF RIGHTS OF MARSHALING, ETC. Mortgagor
agrees, to the full extent that Mortgagor may lawfully so agree, that Mortgagor
will not at any time insist upon or plead or in any manner whatever claim the
benefit of any stay, extension or redemption law now or hereafter in force, in
order to prevent or hinder the enforcement or foreclosure of this Mortgage or
the absolute sale of the Mortgaged Property or the possession thereof by any
purchaser at any sale made pursuant to any provision hereof, or pursuant to the
decree of any court of competent jurisdiction; but Mortgagor, for Mortgagor and
all who may claim by, through or under Mortgagor, to the maximum extent that
Mortgagor or those claiming by, through or under Mortgagor now or hereafter
lawfully may, hereby waives the benefit of all such laws. Mortgagor, for
Mortgagor and all who may claim through or under Mortgagor, waives, to the
maximum extent that Mortgagor or those claiming by, through or under Mortgagor
now or hereafter lawfully may do so, any and all right to have any of the
Mortgaged Property marshaled upon any foreclosure of the lien hereof, or sold in
inverse order of alienation, and agrees that the Trustee or any court having
jurisdiction to foreclose such lien may sell the Mortgaged Property as an
entirety. If any law in this SECTION 7.10 referred to and now in force, of which
Mortgagor or Mortgagor's successor or successors might take advantage despite
the provisions hereof, shall hereafter be repealed or cease to be in force, such
law shall not thereafter be deemed to constitute any part of the contract herein
contained or to preclude the operation or application of the provisions of this
SECTION 7.10.
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7.11. COSTS AND EXPENSES. All reasonable costs and out-of-pocket
expenses (excluding expenses representing Mortgagee's administrative overhead
and including, without limitation, reasonable attorneys' fees) incurred by the
Trustee or Mortgagee in protecting and enforcing their rights hereunder shall
constitute a demand obligation owing by Mortgagor to the party incurring such
costs and expenses and shall draw interest at an annual rate equal to the
highest rate of interest accruing among the Notes until paid, all of which shall
constitute a portion of the Indebtedness, provided, however, that in no event
shall such interest rate ever exceed the Highest Lawful Rate.
7.12. OPERATION OF PROPERTY BY THE TRUSTEE. Upon the occurrence and
during the continuance of an Event of Default and in addition to all other
rights herein conferred on the Trustee or Mortgagee, the Trustee (or any person,
firm or corporation designated by the Trustee) shall have the right and power,
but shall not be obligated, to enter upon and take possession of any of the
Mortgaged Property, and to exclude Mortgagor, and Mortgagor's agents or
servants, wholly therefrom, and to hold, use, administer, manage and operate the
same to the extent that Mortgagor shall be at the time entitled and in its place
and stead. The Trustee or Mortgagee, or any person, firm or corporation
designated by the Trustee or Mortgagee, may operate the same without any
liability to Mortgagor in connection with such operations, except for its gross
negligence or willful misconduct in the operation of such properties, and the
Trustee or any person, firm or corporation designated by the Trustee, shall have
the right and power, but shall not be obligated, to collect, receive and issue a
receipt for all Hydrocarbons produced and sold from said properties, to make
repairs, purchase machinery and equipment, conduit and power, to enter work over
operations, drill additional wells and to exercise every power, right and
privilege of Mortgagor with respect to the Mortgaged Property. When and if the
expenses of such operation and development (including costs of unsuccessful work
over operations or additional wells) have been paid and the Indebtedness paid,
said properties shall, if there has been no sale or foreclosure, be returned to
Mortgagor.
ARTICLE VIII
SECURITY AGREEMENT
8.1. Without limiting any of the provisions of this instrument, to
secure the Indebtedness, Mortgagor, as Debtor (referred to in this ARTICLE VIII
as "DEBTOR"), hereby expressly GRANTS, ASSIGNS, TRANSFERS and SETS OVER unto
Mortgagee, as Secured Party (referred to in this ARTICLE VIII as "SECURED
PARTY," whether one or more), a lien upon and a security interest in all the
Mortgaged Property, together with any and all proceeds, products, increases,
profits, substitutions, replacements, renewals, additions, amendments and
accessions of, to and for the Mortgaged Property, insofar as such property
consists of Equipment, Inventory, Receivables, contract rights, instruments,
general intangibles, chattel paper, documents, investment property,
Hydrocarbons, helium and/or other minerals, fixtures and any and all other
personal property of any kind or character (including both those now and those
hereafter existing and the following types of property as defined in S.B.1058,
76th Texas Legislature, Regular Session, 1999: commercial tort claims, letter of
credit rights, payment intangibles and software) to the full extent that such
property may be subject to the Uniform Commercial Code of the state or states
where such property is located, (said Mortgaged Property, Equipment, Inventory,
Receivables, contract rights, instruments, general intangibles, chattel paper,
documents, investment property, Hydrocarbons, helium and/or other minerals, and
all other personal property of any kind or character [including both those now
and those hereafter existing and the following types of property as defined in
S.B.1058, 76th Texas Legislature, Regular Session, 1999: commercial tort claims,
letter of credit rights, payment intangibles and software] together with any and
all proceeds, products, increases, profits, substitutions, replacements,
renewals, additions, amendments and accessions of, to and for the foregoing
property, being hereinafter collectively referred to as the "COLLATERAL"
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for the purposes of this ARTICLE VIII.) The lien and security interest created
by this Mortgage attaches upon the delivery hereof. Debtor covenants and agrees
with Secured Party that:
(a) In addition to and cumulative of any other remedies
granted in this instrument to Secured Party or to the Trustee, Secured Party
may, upon the occurrence and during the continuance of an Event of Default,
proceed under said Uniform Commercial Code as to all or any part of the
Collateral and shall have and may exercise with respect to the Collateral all
the rights, remedies and powers of a secured party after default under said
Uniform Commercial Code, including, without limitation, the right and power to
sell, at public or private sale or sales, or otherwise dispose of, lease or
utilize the Collateral and any part or parts thereof in any manner authorized or
permitted under said Uniform Commercial Code after default by a debtor, and to
apply the proceeds thereof toward payment of any costs and expenses and
attorneys' fees and legal expenses thereby incurred by Secured Party, and toward
payment of the Indebtedness in accordance with SECTION 7.9 hereof.
(b) Upon the occurrence and during the continuance of any
Event of Default, Secured Party shall have the right (without limitation) to
take possession of the Collateral and to enter upon any premises where same may
be situated for such purpose without being deemed guilty of trespass and without
liability for damages thereby occasioned (other than damages arising from the
gross negligence, willful misconduct or bad faith of Secured Party) and to take
any action deemed necessary or appropriate or desirable by Secured Party, at its
option and in its discretion, to repair, refurbish or otherwise prepare the
Collateral for sale, lease or other use or disposition as herein authorized.
Debtor waives, to the maximum extent permitted by law, any and all rights that
it may have to a judicial hearing in advance of the enforcement of any of the
Secured Party's rights hereunder, including without limitation, its rights
following an Event of Default to take immediate possession of the Collateral and
to exercise its rights with respect thereto. To the extent that any of the
Indebtedness is to be paid or performed by a person other than Debtor, Debtor
waives and agrees not to assert any rights or privileges which it may have under
Section 9-112 of the Uniform Commercial Code.
(c) To the maximum extent permitted by law, Debtor expressly
waives any notice of sale or other disposition of the Collateral and any other
right or remedies of a debtor or formalities prescribed by law relative to sale
or disposition of the Collateral or exercise of any other right or remedy of
Secured Party existing after default hereunder; and to the extent any such
notice is mailed, postage prepaid, to Debtor at the address shown with Debtor's
signature hereinbelow at least five (5) Business Days before the time of the
sale or disposition, such notice shall be deemed reasonable and shall fully
satisfy any requirement for giving of said notice. Such notice, in case of a
public sale or disposition, shall state the time and place fixed for such sale
or disposition and, in case of a private sale or disposition, shall state the
date after which such sale or disposition is to be made.
(d) Any public sale of the Collateral shall be held at such
time or times within ordinary business hours at such places as Secured Party may
fix in the notice of such sale. At any such sale, the Collateral may be sold in
one lot as an entirety or in separate parcels, as Secured Party may determine.
(e) Secured Party shall not be obligated to make any sale
pursuant to any such notice. Secured Party may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for the sale, and such sale
may be made at any time or place to which the same shall be so adjourned.
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(f) In case of any sale of all or any part of the Collateral
on credit or for future delivery, the Collateral so sold may be retained by
Secured Party until the selling price is paid by the purchaser thereof, but
Secured Party shall not incur any liability in case of the failure of such
purchaser to take up and pay for the Collateral so sold and, in case of any such
failure, such Collateral may again be sold upon like notice.
(g) Upon the occurrence and during the continuance of an Event
of Default, Secured Party is expressly granted the right, at its option, to
transfer at any time to itself or to its nominee the Collateral, or any part
thereof and to hold the same as security for the Indebtedness, and to receive
the monies, income, proceeds or benefits attributable or accruing thereto and to
apply the same toward payment of the Indebtedness, whether or not then due, in
accordance with SECTION 7.9 hereof. All rights to marshaling of assets of
Debtor, including any such right with respect to the Collateral, are hereby
waived to the maximum extent permitted by law.
(h) All recitals in any instrument of assignment or any other
instrument executed by Secured Party incident to sale, transfer, assignment,
lease or other disposition or utilization of the Collateral or any part thereof
hereunder shall be full proof of the matter stated therein, no other proof shall
be required to establish full legal propriety of the sale or other action or of
any fact, condition or thing incident thereto, and all prerequisites of such
sale or other action and of any fact, condition or thing incident thereto shall
be presumed conclusively to have been performed or to have occurred.
(i) Upon the occurrence and during the continuance of an Event
of Default, Secured Party may require Debtor to assemble the Collateral and make
it available to Secured Party at a place to be designated by Secured Party that
is reasonably convenient to both parties. All expenses of retaking, holding,
preparing for sale, lease or other use or disposition, selling, leasing or
otherwise using or disposing of the Collateral and the like which are incurred
or paid by Secured Party as authorized or permitted hereunder, including also
all attorneys' fees, legal expenses and costs, shall be added to the
Indebtedness.
(j) Should Secured Party elect to exercise its rights under
said Uniform Commercial Code as to part of the personal property and fixtures
described herein, this election shall not preclude Secured Party, Mortgagee or
the Trustee from exercising the rights and remedies granted by the preceding
paragraphs of this instrument as to the remaining personal property and
fixtures.
(k) Secured Party may, at its election, at any time after
delivery of this instrument, sign one or more photocopies hereof in order that
such photocopies may be used as a financing statement under said Uniform
Commercial Code. Such signature by Secured Party may be placed between the last
sentence of this instrument and Debtor's acknowledgment or may follow Debtor's
acknowledgment. Secured Party's signature need not be acknowledged and is not
necessary to the effectiveness hereof as a deed of trust, mortgage, assignment,
pledge or security agreement.
(l) Except as permitted by the Credit Agreement, so long as
any amount remains unpaid on the Indebtedness, Debtor will not execute nor file
in any public office any financing statement or statements affecting the
Collateral other than financing statements in favor of Secured Party hereunder,
unless the prior written specific consent and approval of Secured Party shall
have first been obtained.
(m) Secured Party is authorized to file, in any jurisdiction
where Secured Party deems it necessary, a financing statement or statements, and
at the request of Secured Party, Debtor will join
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Secured Party in executing one or more financing statements pursuant to said
Uniform Commercial Code in form satisfactory to Secured Party, and will pay the
cost of filing or recording this or any other instrument, as a financing
statement, in all public offices at any time and from time to time whenever
filing or recording of any financing statement or of this instrument is deemed
by Secured Party to be necessary or desirable. The addresses of Debtor and
Secured Party are those addresses set forth for Mortgagor and Mortgagee,
respectively, on the cover page of this Mortgage.
(n) Without in any manner limiting the generality of any of
the other provisions of this Mortgage: (i) some portions of the goods described
or to which reference is made herein are or are to become fixtures on the Lands;
(ii) the security interests created hereby under applicable provisions of the
Uniform Commercial Code of one or more of the jurisdictions in which the
Mortgaged Property is situated will attach to Hydrocarbons or the accounts
resulting from the sale thereof at the wellhead or minehead located on the
Lands; and (iii) this instrument is to be filed of record in the real estate
records as a financing statement.
(o) Debtor hereby irrevocably designates and appoints Secured
Party as its attorney-in-fact, with full power of substitution, for the purposes
of carrying out the provisions of this Mortgage and taking any action and
executing any instrument that Secured Party may deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact is
effective without further action of Mortgagor or Mortgagee upon the occurrence
and during the continuance of an Event of Default (but the determination of an
Event of Default by Secured Party shall as to all parties for the purposes
hereof be conclusive as to the occurrence of an Event of Default) and is
irrevocable and coupled with an interest.
(p) Without limiting the generality of the foregoing, Debtor
hereby irrevocably authorizes and empowers Secured Party, upon the occurrence
and during the continuance of an Event of Default, at the expense of Debtor, at
any time and from time to time, but subject to the rights of the holders of any
Permitted Prior Liens, (a) to ask, demand, receive, receipt, give acquittance
for, settle and compromise any and all monies which may be or become due or
payable or remain unpaid at any time or times to Debtor under or with respect to
the Collateral; (b) to endorse any drafts, checks, orders or other instruments
for the payment of money payable to Debtor on account of the Collateral
(including any such draft, check, order or instrument issued by an insurance
company payable jointly to Debtor and Secured Party); and (c) in the discretion
of Secured Party, to settle, compromise, prosecute or defend any action, claim
or proceeding, or take any other action, all either in its own name or in the
name of Debtor or otherwise, which Secured Party may deem to be necessary or
advisable for the purpose of exercising and enforcing its powers and rights
under this Mortgage or in furtherance of the purposes hereof, including any
action which by the terms of this Mortgage is to be taken by Debtor. Nothing in
this Mortgage shall be construed as requiring or obligating Secured Party to
make any demand or to make any inquiry as to the nature or sufficiency of any
payment received by it or to present or file any claim or notice, or to take any
action with respect to any of the Collateral or the amounts due or to become due
under any thereof, or to collect or enforce the payment of any amounts assigned
to it or to which it may otherwise be entitled hereunder at any time or times,
other than to account for amounts or Collateral received.
(q) Secured Party shall incur no liability as a result of the
sale of Collateral, or any part thereof, at any private sale. Debtor hereby
waives, to the extent permitted by applicable law, any claims against Secured
Party arising by reason of the fact that the price at which the Collateral may
have been sold at such a private sale was less than the price which might have
been obtained at a public sale or was less than the aggregate amount of the
Indebtedness, even if Secured Party accepts the first offer received and does
not offer such Collateral to more than one offeree.
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(r) Without precluding any other methods of sale, Debtor
acknowledges that the sale of the Collateral shall have been made in a
commercially reasonable manner if conducted in conformity with reasonable
commercial practices of banks disposing of similar property. Secured Party shall
not be liable for any depreciation in the value of the Collateral.
ARTICLE IX
OTHER AGREEMENTS
9.1. CREDIT AGREEMENT PREVAILS. In the event of any conflict or
inconsistency between the terms, covenants, conditions and provisions set forth
in this Mortgage and the terms, covenants, conditions and provisions set forth
in the Credit Agreement, the terms, covenants, conditions and provisions of the
Credit Agreement shall prevail.
9.2 PRODUCTION PAYMENT CONVEYANCE. This Mortgage has been executed and
delivered after Mortgagor's execution and delivery of that certain Production
Payment Conveyance (the "PRODUCTION PAYMENT CONVEYANCE"), made effective as of
9:00 a.m. Houston, Texas time, on March 1, 2000, from Mortgagor to Southern
Producer Services, L.P. ("SPS"), TCW Portfolio No. 1555 DR V Sub-Custody
Partnership, L.P. ("FUND V") and TCW DR VI Investment Partnership, L.P. ("FUND
VI"), counterparts of which are being filed for record concurrently herewith in
Chambers, Galveston, Jim Hogg, Live Oak, Wharton and Zapata Counties, Texas.
Reference to the Production Payment Conveyance is herein made for all purposes.
Pursuant to the Production Payment Conveyance, Mortgagor has conveyed
and assigned to SPS, Fund V and Fund VI the "PRODUCTION PAYMENT" (as defined in
the Production Payment Conveyance and herein so called). As provided in the
Order of the United States Bankruptcy Court attached to the Production Payment
Conveyance, the Production Payment is conveyed free and clear of any liens,
claims or other rights of Mortgagee, whether under this Mortgage or otherwise,
and the Mortgaged Property does not include the rights, titles and interests
granted under the Production Payment Conveyance as the Production Payment,
including without limitation the proceeds of the Production Payment.
The Mortgaged Property does, however, include (among other things) the
rights, titles and interests retained by Mortgagor after the conveyance of the
Production Payment which are referred to in the Production Payment Conveyance as
the "Retained Interests" (herein so called). By its acceptance of the benefits
of this Mortgage, Mortgagee and each other beneficiary hereof hereby agrees,
with and for the benefit of Mortgagor, SPS, Fund V and Fund VI and their
respective successors and assigns: (a) not to enforce any rights with respect to
the possession or use of such Retained Interests or the Equipment and fixtures
thereon (under this Mortgage or otherwise) in any way which prevents any owner
or any Person (hereafter defined) in possession of the Retained Interests
(whether Mortgagor or its successors and assigns, or any Person taking upon
foreclosure, or any receiver, it being understood that this SECTION 9.2 in no
way prevents foreclosure of this Mortgage) from honoring its duties with respect
to the Production Payment Conveyance, (b) that any Person acquiring the Retained
Interests by foreclosure or other sale pursuant to this Mortgage will take the
same subject to the obligation to perform, from and after the date of such
acquisition, the duties of Mortgagor with respect to the Production Payment
Conveyance (other than any duties of Mortgagor to pay damages for breach of any
title warranty or to pay damages for any other breach of the Production Payment
Conveyance by Mortgagor prior to the date of such acquisition), and (c) that to
the extent that Mortgagor or any other beneficiary hereof might have any lien,
claim or other right to the Production Payment (or the proceeds thereof) that
arises other than under this Mortgage, such lien or claim
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is hereby released and discharged. The term "PERSON" shall have the meaning
assigned to such term in the Credit Agreement.
9.3. INTERCREDITOR AGREEMENT. Reference is made herein for all purposes
to that certain Intercreditor Agreement (herein so called) dated the date
hereof, executed among Mortgagee, on its behalf and as agent, and Firstar Bank,
N.A., as Trustee ("SUBORDINATE LENDER"), acknowledged by Mortgagor. Under the
terms of the Intercreditor Agreement, Mortgagee and Subordinate Lender have
agreed (among other things) that the interests of Subordinate Lender in and to
the Mortgaged Property shall be inferior, and subject to, the interests of
Mortgagee in accordance with the Intercreditor Agreement.
ARTICLE X
MISCELLANEOUS
10.1. SUCCESSOR TRUSTEES. The Trustee may resign in writing addressed
to Mortgagee or be removed at any time with or without cause by an instrument in
writing duly executed by Mortgagee. In case of the death, resignation or removal
of a Trustee, a successor Trustee or Trustees may be appointed by Mortgagee from
time to time by instrument of substitution complying with any applicable
requirements of law and, in the absence of any such requirement, without other
formality than appointment and designation in writing. Such appointment and
designation shall be full evidence of the right and authority to make the same
and of all facts therein recited, and, upon the making of any such appointment
and designation, this conveyance shall vest in the named successor Trustee or
Trustees all the estate and title of the prior Trustee or Trustees in all of the
Mortgaged Property, and such successor Trustee or Trustees shall thereupon
succeed to all the rights, powers, privileges, immunities and duties hereby
conferred upon the Trustee named herein. All references herein to the Trustee
shall be deemed to refer to the Trustees from time to time acting hereunder.
10.2. LEGAL PROCEEDINGS BY AND AGAINST TRUSTEE. The Trustee shall not
be required to take any action for the enforcement of this instrument or the
exercise of any rights or remedies hereunder or to appear in or defend any
action, suit or other proceeding in connection therewith, where, in the opinion
of the Trustee, such action will be likely to involve him in expense or
liability, unless the Trustee be tendered security and indemnity satisfactory to
him against cost, expense or liability in connection therewith.
10.3. RESPONSIBILITIES OF TRUSTEE. It shall be no part of the duty of
the Trustee to see to any recording, filing or registration of this instrument
or of any instrument supplemental hereto or to see to the payment of or be under
any duty in respect to any tax or assessment or other governmental charge which
may be levied or assessed on the Mortgaged Property or against Mortgagor or to
see to the performance or observance by Mortgagor of any of the covenants or
agreements herein contained. The Trustee shall not be responsible for the
execution, acknowledgment or validity of this instrument or of any instrument
supplemental hereto or of the Notes or for the sufficiency of the security
purported to be created hereby, and the Trustee makes no representation in
respect thereof or in respect of those rights of the holders of any of the
Notes. The Trustee shall have the right to consult with counsel upon any matters
arising hereunder and shall be fully protected in relying as to legal matters on
the advice of such counsel. The Trustee shall not incur any personal liability
hereunder except for his own gross negligence, willful misconduct or bad faith,
and the Trustee shall have the right to rely on any instrument, document or
signature authorizing or supporting any action taken or proposed to be taken by
him hereunder which is believed by him in good faith to be genuine.
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10.4. ADVANCES BY MORTGAGEE OR TRUSTEE. Each and every covenant herein
contained shall be performed and kept by Mortgagor solely at Mortgagor's
expense. If Mortgagor shall fail to perform or keep any of the covenants of
whatsoever kind or nature contained in this instrument, then, if such failure is
not remedied by Mortgagor within 30 days following notice thereof by Mortgagee,
the Trustee or any receiver appointed hereunder may, but shall not be obligated
to, make advances to perform the same in Mortgagor's behalf, and Mortgagor
hereby agrees to repay such sums upon demand plus interest at an annual rate
equal to the highest rate of interest from time to time accruing on the Notes
until paid or, in the event any promissory note evidences such indebtedness,
upon the terms and conditions thereof; provided, however, that in no event shall
such interest rate ever exceed the Highest Lawful Rate. No such advance shall be
deemed to relieve Mortgagor from any default hereunder. All such advances shall
be included in the Indebtedness.
10.5. DEFENSE OF CLAIMS. Mortgagor will notify the Trustee and
Mortgagee, in writing, promptly of the commencement of any legal proceedings
affecting the lien hereof or the Mortgaged Property, or any part thereof, and
will take such action as may be necessary to preserve Mortgagor's, the Trustee's
and Mortgagee's rights affected thereby, and should Mortgagor fail or refuse to
take any such action, the Trustee or Mortgagee may, upon giving prior written
notice thereof to Mortgagor, take such action on behalf of and in the name of
Mortgagor and at Mortgagor's expense. Moreover, Mortgagee, or the Trustee on
behalf of Mortgagee, may take such independent action in connection therewith as
they may in their reasonable discretion deem proper, Mortgagor hereby agreeing
that all sums advanced or all expenses incurred in such actions plus interest at
an annual rate equal to the highest rate of interest from time to time accruing
on the Notes will, on demand, be reimbursed to Mortgagee, the Trustee or any
receiver appointed hereunder; provided, however, that in no event shall such
interest rate ever exceed the Highest Lawful Rate.
10.6. SURVIVAL OF COVENANTS AND LIENS. All of the covenants and
agreements of Mortgagor set forth herein shall survive the execution and
delivery of this Mortgage and shall continue in force until the Indebtedness is
paid in full. Accordingly, if Mortgagor shall perform faithfully each and all of
the covenants and agreements herein contained, then, and then only, this
conveyance shall become null and void and shall be released in due form, upon
Mortgagor's written request and at Mortgagor's expense; otherwise, it shall
remain in full force and effect. No release of this conveyance or the lien
thereof shall be valid unless executed by Mortgagee.
10.7. RENEWALS AND OTHER SECURITY. Renewals and extensions of the
Indebtedness may be given at any time, and Mortgagee may take or may now hold
other security for the Indebtedness without notice to or consent of Mortgagor.
The Trustee or Mortgagee may resort first to such other security or any part
thereof or first to the security herein given or any part thereof, or from time
to time to either or both, even to the partial or complete abandonment of either
security, and such action shall not be a waiver of any rights conferred by this
instrument, which shall continue as a perfected lien upon the Mortgaged Property
not expressly released until the Indebtedness secured hereby is fully paid.
10.8. INSTRUMENT AN ASSIGNMENT, ETC. This instrument shall be deemed to
be and may be enforced from time to time as an assignment, chattel mortgage,
hypothecation, contract, deed of trust, mortgage, conveyance, financing
statement, real estate mortgage, pledge or security agreement, and from time to
time as any one or more thereof.
10.9. NO USURY INTENDED. It is the intention of the parties hereto to
comply strictly with applicable usury laws; accordingly, notwithstanding any
provision to the contrary contained herein, in the Notes, or in any of the
documents securing or relating to any Indebtedness, in no event shall this
instrument,
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the Notes, or such documents require or permit the payment, charging, taking,
reserving, or receiving of any sums constituting interest under applicable laws
which exceed the maximum amount permitted by such laws. If any such excess
interest is contracted for, charged, taken, reserved, or received in connection
with this instrument or the Notes or in any of the documents securing or
relating to any Indebtedness, or in any communication by Mortgagee or any other
person to Mortgagor or any other person, or in the event all or part of the
Indebtedness shall be prepaid or accelerated, so that under any of such
circumstances or under any other circumstance whatsoever the amount of interest
contracted for, charged, taken, reserved, or received on the amount of principal
actually outstanding from time to time under this instrument or the Notes shall
exceed the maximum amount of interest permitted by applicable usury laws, then
in any such event it is agreed as follows: (i) the provisions of this Section
shall govern and control, (ii) any such excess shall be deemed an accidental and
bona fide error and canceled automatically to the extent of such excess, and
shall not be collected or collectible, (iii) any such excess which is or has
been paid or received notwithstanding this Section shall be credited against the
then unpaid principal balance hereof with the excess, if any, refunded to
Mortgagor, and (iv) the effective rate of interest shall be automatically
reduced to the maximum lawful rate allowed under applicable laws as construed by
courts having jurisdiction hereof or thereof. Without limiting the foregoing,
all calculations of the rate of interest contracted for, charged, taken,
reserved, or received in connection herewith which are made for the purpose of
determining whether such rate exceeds the maximum lawful rate shall be made to
the extent permitted by applicable laws by amortizing, prorating, allocating and
spreading during the period of the full term of the Notes, including all prior
and subsequent renewals and extensions, all interest at any time contracted for,
charged, taken, reserved, or received. The terms of this Section shall be deemed
to be incorporated in every document, security instrument, and communication
relating to this instrument and the Notes. The term "applicable usury laws"
shall mean such laws of the State of Texas or the laws of the United States,
whichever laws allow the higher rate of interest, as such laws now exist;
provided, however, that if such laws shall hereafter allow higher rates of
interest, then the applicable usury laws shall be the laws allowing the higher
rates to be effective as of the effective date of such laws. Mortgagor hereby
waives its rights under Texas Finance Code Section 305.006(d) and will, in
connection with any counterclaim alleging usurious interest, give Trustee and
Mortgagee the notice required in Texas Finance Code Section 305.006(b) prior to
filing such counterclaim and Trustee and Mortgagee shall have the right to
correct any violation as provided by Texas Finance Code Section 305.103.
10.10. SEPARABILITY. If any provision hereof or of the Notes is invalid
or unenforceable in any jurisdiction, the other provisions hereof or of the
Notes shall remain in full force and effect in such jurisdiction, and the
remaining provisions hereof shall be liberally construed in favor of the Trustee
and Mortgagee in order to effectuate the provisions hereof, and the invalidity
of any provision hereof in any jurisdiction shall not affect the validity or
enforceability of any such provision in any other jurisdiction.
10.11. RIGHTS CUMULATIVE. Each and every right, power and remedy herein
given to the Trustee or Mortgagee shall be cumulative and not exclusive, and
every right, power and remedy whether specifically herein given or otherwise
existing may be exercised from time to time and so often and in such order as
may be deemed expedient by the Trustee or Mortgagee, as the case may be, and the
exercise, or the beginning of the exercise, of any such right, power or remedy
shall not be deemed a waiver of the right to exercise, at the same time or
thereafter, any other right, power or remedy. No delay or omission by the
Trustee or Mortgagee in the exercise of any right, power or remedy shall impair
any such right, power or remedy or operate as a waiver thereof or of any other
right, power or remedy then or thereafter existing.
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10.12. BINDING EFFECT. This instrument is binding upon Mortgagor,
Mortgagor's successors and assigns, and shall inure to the benefit of the
Trustee, his successors and assigns and Mortgagee and its successors and
assigns, and the provisions hereof shall likewise constitute covenants running
with the land.
10.13. ARTICLE AND SECTION HEADINGS. The article and section headings
in this instrument are inserted for convenience and shall not be considered a
part of this instrument or used in its interpretation.
10.14. COUNTERPARTS. This instrument may be executed in any number of
counterparts, each of which shall for all purposes be deemed to be an original
and all of which are identical except that, to facilitate recordation, the
Schedules and Exhibits in any particular counterpart may omit the description of
properties situated in counties other than the county in which such counterpart
is to be recorded.
10.15. NOTICES. Except as otherwise provided in the Credit Agreement or
herein, any notice, request, demand or other instrument which may be required or
permitted to be given or served upon Mortgagor shall be sufficiently given when
made by hand delivery, by telex, by telecopier or registered or certified mail,
postage prepaid, return receipt requested and addressed to Mortgagor at the
address shown below the signatures at the end of this Mortgage or to such
different address as Mortgagor shall have designated by written notice received
by Mortgagee or the Trustee.
10.16. AMENDMENTS, MODIFICATIONS AND WAIVERS, ETC. Except as provided
in SECTION 10.1, this instrument may be amended, modified, revised, discharged,
released or terminated only by a written instrument or instruments executed by
Mortgagor and Mortgagee. Any alleged amendment, revision, discharge, release or
termination which is not so documented shall not be effective as to any party.
No waiver of any provision of this Mortgage nor consent to any departure by
Mortgagor therefrom shall in any event be effective unless the same shall be in
writing, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given.
10.17. SURVIVAL OF AGREEMENTS. All representations and warranties of
Mortgagor herein and all covenants and agreements herein not fully and finally
performed before the effective date or dates of this Mortgage shall survive such
date or dates. All covenants and obligations in this Mortgage are intended by
the parties to be, and shall be construed as, covenants running with the Lands.
10.18. GOVERNING LAW. This Mortgage and the Indebtedness arising in
connection herewith shall be governed by, and construed in accordance with, the
laws of the State of New York applicable to contracts made and performed in such
State (without regard to principles of conflict of laws except Section 5-1401 of
the New York General Obligations Law) and any applicable law of the United
States of America, including, without limiting the generality of the foregoing,
matters of construction, validity and performance, except that at all times the
provisions for the creation, perfection, and enforcement of the liens and
security interests created pursuant hereto shall be governed by and construed
according to the law of Texas.
10.19. SUBROGATION. To the extent the Indebtedness represents funds
utilized to satisfy certain outstanding indebtedness and obligations secured by
liens, rights and/or claims against the Mortgaged Property or any part thereof,
Mortgagee shall be subrogated to any and all liens, rights, superior titles and
equities owned or claimed by the holder of any such outstanding indebtedness or
obligation so satisfied, regardless of whether said liens, rights, superior
titles and equities are assigned to the Mortgagee by the holder(s) thereof or
released. Mortgagee shall be subrogated to all covenants and warranties
heretofore given or made with respect to the Mortgaged Property.
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10.20. DTPA WAIVER. Mortgagor acknowledges and agrees, on Mortgagor's
own behalf and on behalf of any permitted assigns and successors hereafter, that
the DTPA is not applicable to this transaction. Accordingly, Mortgagor's rights
and remedies with respect to the transaction contemplated under this Mortgage
and the Credit Agreement and with respect to all acts or practices of Mortgagee
and Trustee, past, present or future, in connection with such transaction, shall
be governed by legal principles other than the DTPA. In furtherance thereof,
Mortgagor agrees as follows:
(a) Mortgagor represents that Mortgagor has the knowledge and
experience in financial and business matters that enable Mortgagor to
evaluate the merits and risks of the business transaction that is the
subject of this Mortgage and the Credit Agreement. Mortgagor also
represents that Mortgagor is not in a significantly disparate
bargaining position in relation to Mortgagee and Trustee. Mortgagor has
negotiated the documents with Mortgagee and Trustee at arm's length and
have willingly entered into the documents.
(b) Mortgagor represents that (i) Mortgagor has been
represented by the firm of Gardere & Wynne, L.L.P. as legal counsel in
the transaction contemplated by this Mortgage and the Credit Agreement
and (ii) such legal counsel was not directly or indirectly identified,
suggested or selected by Mortgagee and Trustee or an agent of Mortgagee
and Trustee.
(c) This Mortgage and the Credit Agreement relate to a
transaction involving total consideration by Mortgagor of more than
$100,000.00 and does not involve the Mortgagor's residence.
Mortgagor agrees, on Mortgagor's own behalf and on behalf of Mortgagor's
permitted assigns and successors, that all of the Mortgagor's rights and
remedies under the DTPA are WAIVED AND RELEASED, including specifically, without
limitation, all rights and remedies under the DTPA resulting from or arising out
of any and all acts or practices of Mortgagee and Trustee in connection with
this transaction, whether such acts or practices occur before or after the
execution of this Mortgage.
In furtherance thereof, Mortgagor agrees that by signing this Mortgage,
Mortgagor and any permitted assigns and successors are bound by the following
waiver:
WAIVER OF CONSUMER RIGHTS. MORTGAGOR WAIVES ITS RIGHTS UNDER THE
DECEPTIVE TRADE PRACTICES--CONSUMER PROTECTION ACT, SECTION 17.41 ET
SEQ., BUSINESS & COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL
RIGHTS AND PROTECTION. AFTER CONSULTATION WITH AN ATTORNEY OF
MORTGAGOR'S OWN SELECTION, MORTGAGOR VOLUNTARILY CONSENTS TO THIS
WAIVER.
10.21 FINAL EXPRESSION. THIS MORTGAGE, THE CREDIT AGREEMENT, AND THE
OTHER DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
[Remainder of page intentionally blank; Signature page follows]
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IN WITNESS WHEREOF, Mortgagor has executed or caused to be executed
this Mortgage, Deed of Trust, Assignment of Production, Security Agreement and
Financing Statement on the date and year first set forth above.
The address of the MORTGAGOR:
Mortgagor/Debtor is:
TRANSTEXAS GAS CORPORATION,
1300 North Sam Houston a Delaware corporation
Parkway East, Suite 310
Houston, Texas 77032
By
--------------------------------
Ed Donahue, Vice President and
Chief Financial Officer
STATE OF TEXAS )
)
COUNTY OF DALLAS )
Before me, a Notary Public, on this day personally appeared Ed Donahue,
known to me to be the person and officer whose name is subscribed to the
foregoing instrument and acknowledged to me that the same was the act of
TRANSTEXAS GAS CORPORATION, and that he has executed the same on behalf of said
corporation for the purposes and consideration therein expressed, and in the
capacity therein stated.
Given under my hand and seal of office this ____ day of March, 2000.
-----------------------------------------------
Notary Public in and for the State of Texas
(PERSONALIZED SEAL)
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<PAGE> 1
EXHIBIT 4.40
TRANSTEXAS GAS CORPORATION
SECURITY AND PLEDGE AGREEMENT
This Security and Pledge Agreement (this "Agreement") is made and
entered into as of March 15, 2000 by and between TransTexas Gas Corporation, a
Delaware corporation (the "Borrower"), and GMAC Commercial Credit LLC
("GMACCC"), as agent for the Lenders (as hereafter defined) (GMACCC acting as
agent for the benefit of the Lenders shall be called the "Secured Party").
RECITALS
Borrower, Secured Party, GMACCC and various other financial
institutions (GMACCC and such other financial institutions which are now or
hereafter become parties to the Oil and Gas Agreement (as hereafter defined),
collectively, the "Lenders") have entered into that certain Oil & Gas Revolving
Credit and Term Loan Agreement dated as of March 15, 2000 (as amended, modified
or supplemented from time to time, the "Oil and Gas Agreement"); and
In order to secure the payment and performance in full of the
obligations of Borrower under the Oil and Gas Agreement, the parties hereto
desire to set forth their mutual understanding and certain agreements regarding
the terms and conditions of the grant of a security interest in Collateral (as
defined below);
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower and the Secured Party
hereby agree as follows:
Section 1. Definitions.
(a) As used in this Agreement, capitalized terms not otherwise defined
herein have the meanings set forth in the Oil and Gas Agreement, and the
following terms shall have the respective meanings set forth below (such
meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"Collateral" shall mean, collectively, the UCC Collateral and the
Pledged Securities.
"Contract Rights" shall mean all contracts, operating agreements,
mineral purchase agreements, rights of way, easements, surface leases,
permits, licenses, pooling or unitization agreements, pooling designations
and pooling orders and all other contracts or agreements pertaining to or
affecting the Collateral or which were executed in connection with the
drilling for, producing, processing, treating, handling, storing,
transporting or marketing oil, gas or other minerals from the Collateral or
from any properties unitized or pooled therewith, including - but not
limited to - the contracts listed on SCHEDULE 1, EXHIBIT D attached hereto.
<PAGE> 2
"Default" and "Event of Default" shall have the meanings assigned to
those terms in Section 6(a) of this Agreement.
"Equipment" shall mean and include all of Borrower's now owned or
hereafter acquired "equipment" as such term is defined in Article 9 of the
UCC, including without limitation, all furniture, fixtures, goods,
Vehicles, drilling rigs, workover rigs, fracture stimulation equipment,
well site compressors, rolling stock, assets constituting part of a natural
gas pipeline or the compression or dehydration equipment used in the
operation of any such pipeline and related equipment and other assets
accounted for as equipment by Borrower on its financial statements, all
proceeds thereof, and all documents of title, books, records, ledger cards,
files, correspondence and computer files, tapes, disks and related data
processing software that at any time evidence or contain information
relating to the foregoing.
"GAAP" means generally accepted accounting principles of the United
States of America, consistently applied.
"General Intangibles" shall mean and include any and all of Borrower's
now owned or hereafter acquired "general intangibles" as such term is
defined in Article 9 of the UCC, including without limitation, all
trademarks, tradenames, tradestyles, trade secrets, equipment formulation,
manufacturing procedures, quality control procedures, product
specifications, patents, patent applications, copyrights, registrations,
contract rights, choses in action, causes of action, tort claims, payment
intangibles, letter of credit rights, corporate or other business records,
inventions, designs, goodwill, claims under guarantees, licenses,
franchises, tax refunds, tax refund claims, computer programs, computer
data bases, computer program flow diagrams, source codes, object codes and
all other intangible property of every kind and nature.
"Hydrocarbons" shall mean oil, natural gas, condensate and natural gas
liquids.
"Inventory" shall mean and include all of Borrower's now owned or
hereafter acquired "inventory" as such term is defined in the UCC,
including, without limitation, all drill casing, drill pipe and other
supplies accounted for as inventory by Borrower on its financial statements
(excluding Hydrocarbons), all other goods, merchandise and other personal
property, wherever located, to be furnished under any contract of service
or held for sale or lease, all proceeds thereof, and all documents of
title, books, records, ledger cards, files, correspondence, and computer
files, tapes, disks and related data processing software that at any time
evidence or contain information relating to the foregoing.
"Investment Property" shall mean and include all of Borrower's now
owned or hereafter acquired "investment property" as such term is defined
in Article 9 of the UCC.
"Jefferies Documentation" shall mean the Mortgage, Deed of Trust,
Assignment, Security Agreement and Financing Statement, effective December
31, 1998, made by Galveston Bay Processing Corporation in favor of
Jefferies, the Promissory Note, dated
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<PAGE> 3
December 31, 1998 in the amount of $5,650,000, made by Borrower in favor of
Jefferies; and any amendments or supplements to the foregoing as of the
date hereof.
"Jefferies" means Jefferies Analytical Trading Group, Inc., a Delaware
Corporation.
"Jefferies Lien" shall mean pledge of the stock of Galveston Bay
Processing Company owned by Borrower in favor of Jefferies as security for
Borrower's obligations to Jefferies under the Jefferies Documentation.
"Lands" shall have the meaning set forth in the Mortgage.
"Leases" shall have the meaning set forth in the Mortgage.
"Mortgage" shall mean, collectively, those certain Mortgages, Deeds of
Trust, Assignments of Production, Security and Financing Statements executed by
Borrower for the benefit of Secured Party to grant a Lien on Borrower's Real
Property and/or Hydrocarbons, or any interest therein, to secure all of the
Obligations.
"Oil and Gas Leases" shall include oil, gas and mineral leases and
shall also include subleases and assignments of operating rights.
"Pipelines" shall mean the Pipeline Assets and all pipelines owned
and/or operated by Borrower for the gathering, transmission or distribution of
Hydrocarbons, and any interests in real property relating thereto.
"Pipeline Assets" shall mean all parts or aspects of the gas pipeline
system of Borrower now or hereafter situated on any of the Lands, Rights-of-Way
and Franchises, and all fixtures, improvements, equipment, surface or subsurface
machinery, facilities, supplies, replacement parts, vehicles of every
description, all process control computer systems and equipment or other
property of whatsoever kind or nature, including, without limitation, all
buildings, structures, machinery, gas processing plants, Pipelines, stations,
substations, compression or dehydration equipment, pumps, pumping stations,
meter houses, metering stations, regulator houses, ponds, tanks, scrapers and
scraper traps, fittings, valves, connections, cathodic or electrical protection
by-passes, regulators, drips, meters, pumps, pumping units, pumping stations,
storage or tankage facilities, engines, pipes, gates, telephone and telegraph
lines, electric power lines, poles, wires, casings, radio towers, fixtures,
mechanical equipment, electrical equipment, computer equipment and software,
machine shops and other equipment, used or useful in connection therewith;
together with all of Borrower's liquid hydrocarbons, carbon dioxide, natural gas
liquids, refined petroleum products and other inventory fuels, carbon,
chemicals, electric energy and other consumable materials or products
manufactured, processed, generated, produced, transmitted, stored (whether above
or below ground) or purchased by Borrower for sale, exchange, distribution,
consumption or transmission by Borrower, including, without limitation, all
system gas, drip gas and line fill.
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"Production Sale Contracts" shall mean, except to the extent that the
same constitute Receivables, all contracts now or hereafter in effect,
including, without limitation, any gas sales contracts, entered into by
Borrower, or Borrower's predecessors in interest, for the production, sale,
purchase, exchange or processing of Subject Minerals (as defined in the
Mortgage), including - but not limited to - any of the foregoing contracts
listed on SCHEDULE 1, EXHIBIT D, and the Contract Rights related thereto.
"Pledged Securities" shall have the meaning assigned to that term in
Section 2 of this Agreement.
"Receivables" shall mean and include, any and all of Borrower's now
owned or hereafter acquired "accounts" as such term is defined in Article 9 of
the UCC, all products and proceeds thereof, and all books, records, ledger
cards, files, correspondence, and computer files, tapes, disks or software that
at any time evidence or contain information relating to the foregoing.
"Rights-of-Way and Franchises" shall mean all leases, leaseholds,
easements, rights-of-way, licenses, franchises, privileges, permits, ordinances,
grants, rights, consents, servitudes, surface leases or rights, amendatory
grants and interests in land for the installation, maintenance and operation of
the Pipelines or the Pipeline Assets or any portion thereof, now owned or held
by Borrower, including, without limitation, those leases, leaseholds, easements,
rights-of-way, licenses, franchises, privileges, permits, ordinances, grants,
rights, consents, servitudes, surface leases or rights, amendatory grants and
interests in land applicable to the Pipelines or the Pipeline Assets owned or
held by Borrower and those leases, leaseholds, easements, rights-of-way,
licenses, franchises, privileges, permits, ordinances, grants, rights, consents,
servitudes, surfaces leases or rights, amendatory grants and interests in land
owned or held by Borrower and described in the Mortgage.
"Subject Interests" shall mean each kind and character of right, title,
interest or estate, whether now owned or hereafter acquired, which Borrower has
in, under or to the Leases and all right, title, interest or estate, whether now
owned or hereafter acquired, which Borrower has in and to the Lands (as defined
in the Mortgage), together with each kind and character of right, title,
interest or estate now or hereafter vested in Mortgagor in and to any and all
overriding royalty interests, mineral interests, leasehold interests, mineral
rights, royalty interests, net profits interests, oil payments, production
payments, carried interests and all other properties or interests of every kind
or character which relate to any of the Lands or Leases, whether such right,
title, interest or estate be under and by virtue of a Lease, a unitization or
pooling agreement, a unitization or pooling order, a mineral deed, a royalty
deed, an operating agreement, a revenue sharing agreement, a division order, a
transfer order, a farmout agreement, a fee simple conveyance or any other type
of contract, conveyance or instrument or under any other type of claim or title,
legal or equitable, recorded or unrecorded, all as the same shall be enlarged by
the discharge of any payments out of production or by the removal of any charges
or encumbrances to which any of same are subject.
"UCC" means the Uniform Commercial Code as in effect in the State of
New York.
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"UCC Collateral" shall have the meaning assigned to that term in
Section 2 of this Agreement.
"Vehicles" means all trucks, automobiles, trailers and other vehicles
covered by a certificate of title.
(b) All terms used in this Agreement which are defined in the UCC,
other than those which are defined in the Oil and Gas Agreement or
specifically defined in Section 1(a) above, shall have the same meaning
herein as in the UCC.
Section 2. Grant of Security Interest.
(a) Borrower hereby grants to the Secured Party, to secure the payment
and performance in full of the Obligations, a security interest in and a
lien on and so pledges and assigns to the Secured Party all of Borrower's
right, title and interest in, to and under any and all of the following
described property, assets and rights, in each case, wherever located,
whether now owned or hereafter acquired or arising, all accessions and
additions thereto, all substitutions and replacements therefor, and all
proceeds and products thereof and assigns all rights in and to all
collateral securing the following described property, assets and rights:
(i) all Receivables;
(ii) all Inventory;
(iii) all Equipment;
(iv) all General Intangibles;
(v) all Investment Property;
(vi) all Subject Interests, the Subject Minerals,
Hydrocarbons;
(vii) all Contract Rights and Production Sale
Contracts;
(viii) all Leases and the Lands;
(ix) all Pipelines;
(x) all Pipeline Assets;
(xi) all Rights-of-Way and Franchises;
(xii) all unitization, communitization, operating
agreements, pooling agreements and declarations of pooled
units and the properties covered and the
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units created thereby (including all units formed under
orders, regulations, rules or other official acts of any
federal, state or other governmental agency providing for
pooling or unitization, spacing orders or other well permits
and other instruments) which relate to or affect all or any
portion of the Subject Interests;
(xiii) all deposit accounts, contract rights, operating rights, general
intangibles, chattel paper, documents and instruments whether arising under any
of the foregoing or otherwise, including without limitation, the Production Sale
Contracts and all transmission contracts or other contracts now or hereafter in
effect with respect to the Pipelines or the Pipeline Assets;
(xiv) all subleases, farmout agreements, assignments of interests,
assignments of operating rights, contracts, operating agreements, bidding
agreements, advance payment agreements, rights-of-way, surface leases,
franchises, servitudes, privileges, permits, licenses, easements, tenements,
hereditaments, improvements, appurtenances and benefits now existing or in the
future obtained and incident and appurtenant to any of the foregoing;
(xv) all lease records, well records, production records and accounting
and other records and files which relate to any of the foregoing, and all maps,
data bases, manuals, information and data which relate to any of the foregoing,
including without limitation engineering, geological and geophysical data;
(xvi) all income, revenues, rents, profits and proceeds arising out of
the gathering, transportation, processing or sale of Hydrocarbons through the
Pipelines and other accounts, contract rights, operating rights, general
intangibles, chattel paper, documents, investment property and instruments
arising under any of the foregoing;
(xvii) any liens and security interests in the Subject Interests in
favor of Borrower securing payment of proceeds from the sale of the Subject
Minerals including, but not limited to, those liens and security interests
provided for in Tex. Bus. & Com. Code Ann. Section 9.319 (Tex. UCC) (Vernon
1968), as amended;
(xviii) all other rights, titles and interests of Borrower in, to and
under or derived from the Lands, the Leases, the Rights-of-Way and Franchises,
the Production Sale Contracts and/or other properties described in the Mortgage;
(xix) any property that may from time to time hereafter, by delivery or
by writing of any kind executed by or on behalf of Borrower, be subjected to the
lien and security interest hereof by Borrower or by anyone authorized on
Borrower's behalf, and Secured Party is hereby authorized to receive the same as
additional security;
(xx) all other property of every nature and kind and wheresoever
situated, now owned or hereafter acquired by Borrower or to which Borrower is
now or may hereafter be entitled at law or in equity; and
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(xxi) any and all proceeds, returns, rents, royalties, issues, profits,
products, revenues and other income arising from or by virtue of the sale, lease
or other disposition of, or from any condemnation, eminent domain or insurance
payable with respect to damage, loss or destruction of, the items described in
subparagraphs (i) through (xx) above;
together with any and all proceeds, products, increases, profits, substitutions,
replacements, renewals, additions, amendments and accessions of, to and for all
of the foregoing property. All the aforesaid properties, rights and interests
which are hereby subjected to the lien and/or security interest of this
instrument, together with any additions thereto which may be subjected to the
lien and/or security interest of this paragraph (a) by means of supplements
hereto or otherwise shall hereinafter be referred to as the "UCC Collateral."
(b) Borrower also pledges to the Secured Party, and grants to the
Secured Party a security interest in all of Borrower's right, title and interest
in, to and under any and all of the following described property, rights and
interests, in each case, wherever located, whether now owned or hereafter
acquired or arising, all accessions and additions thereto, all substitutions and
replacements therefor, and all proceeds and products thereof (collectively, the
"Pledged Securities"):
(i) all of the issued and outstanding shares of common stock
identified on Schedule 2(b) attached hereto of any Subsidiary of
Borrower presently existing or hereafter created or acquired (the
"Pledged Subsidiaries") therein set forth;
(ii) all other shares of common stock or other equity securities
now or hereafter acquired by Borrower in any manner issued by the
Pledged Subsidiaries, and the certificates representing such
securities, and any present or future options, warrants or other
rights to subscribe for or purchase any property described in Schedule
2(b)(i) or any notes, bonds, debentures or other evidences of
indebtedness now or hereafter owned or acquired by Borrower in any
manner that (A) are at any time convertible, exchangeable or
exercisable into capital stock or other equity securities of the
Pledged Subsidiaries or (B) have or at any time could by their terms
have voting rights with respect to any matter affecting the Pledged
Subsidiaries and all securities, certificates and instruments
representing or evidencing ownership of any of the property described
in Schedule 2(b) hereof; and
(iii) all proceeds and products of the foregoing and
distributions thereof or with respect thereto, including without
limitation dividends, distributions, cash, instruments and other
property or securities, now or hereafter at any time or from time to
time received or receivable or otherwise distributed or distributable
in respect of or in exchange for any or all of the foregoing.
Subject to any Liens in respect of First Lien Debt and the Jefferies
Lien, pursuant to the terms hereof, Borrower has endorsed, assigned and
delivered to the Secured Party or such other Person that the Secured Party has
designated as its agent to hold for perfection purposes all negotiable or
non-negotiable instruments (including
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certificated securities) and chattel paper pledged by it hereunder,
together with instruments of transfer or assignment duly executed in
blank as the Secured Party may have specified. In the event that
Borrower shall, after the date of this Agreement, acquire any other
negotiable or non-negotiable instruments (including certificated
securities) or chattel paper to be pledged by it hereunder, Borrower
shall, subject to any Liens in respect of First Lien Debt and the
Jefferies Lien, forthwith endorse, assign and deliver the same to the
Secured Party, accompanied by such instruments of transfer or
assignment duly executed in blank as the Secured Party may from time to
time specify. To the extent that any securities are uncertificated,
appropriate book-entry transfers reflecting the pledge of such
securities created hereby have been or, in the case of uncertificated
securities hereafter acquired by Borrower, will at the time of such
acquisition be, duly made for the account of the Secured Party or one
or more nominees of the Secured Party with the issuer of such
securities or other appropriate book-entry facility or financial
intermediary, with the Secured Party having at all times the right to
obtain definitive certificates (in the Secured Party's name or in the
name of one or more nominees of the Secured Party) where the issuer
customarily or otherwise issues certificates, all to be held as
Collateral hereunder. Borrower hereby acknowledges that the Secured
Party may, in its discretion, appoint one or more financial
institutions to act as the Secured Party's agent in holding in
custodial accounts instruments or other financial assets, including
securities, in which the Secured Party is granted a security interest
hereunder, including, without limitation, certificates of deposit and
other instruments evidencing short term obligations.
(c) Without limiting the security interest granted hereby,
Borrower hereby grants to Secured Party a limited license in Borrower's
trade names, trademarks and service marks, together with Borrower's
goodwill associated with such trade names, trademarks and service
marks, for purposes of allowing Secured Party to use the same in
connection with any foreclosure sale or any other disposition pursuant
to the UCC or this Agreement.
(d) The inclusion of proceeds in this Agreement does not
authorize Borrower to sell, dispose of or otherwise use the Collateral
in any manner not specifically authorized hereby or under the Oil and
Gas Agreement.
(e) This Agreement secures the prompt and complete payment of
all Obligations.
Section 3. Representations and Warranties. Borrower represents and
warrants, as of the date hereof, to the Secured Party as follows:
(a) The chief executive office and principal place of business
of Borrower is located at 1300 N. Sam Houston Parkway East, Suite 320,
Houston, Harris County, Texas 77032. Any and all Collateral not
delivered to the Secured Party or its designated agent is and will
continue to be located only in the States of Texas, Louisiana, Alabama,
Mississippi and North Dakota.
(b) Borrower is the legal and beneficial owner of all of the
Collateral free and clear of any lien, security interest, charge or
encumbrance of any kind or nature, except for the lien and security
interest created hereby, Permitted Liens and the Jefferies Lien,
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<PAGE> 9
and has not made any other pledge, assignment, mortgage, hypothecation
or transfer of the Collateral except as permitted hereunder or under
the Oil and Gas Agreement. Except for Permitted Liens, the Collateral
taken as a whole is free from any material credit, deduction,
allowance, defense, dispute, setoff or counterclaim and there is no
material extension or indulgence with respect thereto. The Pledged
Securities are not subject to any put, call, option or other right in
favor of any other person whatsoever.
(c) The Pledged Securities are accurately described in Schedule
2(b) hereto and have been duly authorized and validly issued and
non-assessable.
(d) This Agreement has been duly executed and delivered by
Borrower and creates a valid security interest in, and lien on, the
Collateral securing the payment of the Obligations. Upon the delivery
of physical certificates evidencing the Pledged Securities to the
Secured Party or its designated agent and the making of the filings
and the taking of all other actions necessary to perfect the security
interests created hereby, including, without limitation, those actions
specified in Section 2(b) and Section 4, the security interests
created by this Agreement will be duly perfected security interests
subject to no equal or prior lien, security interest or encumbrance of
any kind or nature other than the Jefferies Lien.
(e) Borrower has the requisite corporate power and authority to
pledge the Collateral in the manner hereby done or contemplated and to
defend its title thereto against the lawful claims of all persons
whomsoever.
(f) Neither the execution and delivery of this Agreement by
Borrower, the performance by Borrower of its obligations hereunder,
nor the transactions herein contemplated will (i) violate Borrower's
charter or bylaws, (ii) violate the terms of any agreement, indenture,
mortgage, deed of trust, equipment lease, instrument or other document
to which Borrower is a party, (iii) violate any law, order, rule or
regulation applicable to Borrower of any court or any government,
regulatory body or administrative agency or other governmental body
having jurisdiction over Borrower or its properties, or (iv) result in
or require the creation or imposition of any lien (other than the lien
contemplated hereby), upon or with respect to any of the property now
owned or hereafter acquired by Borrower, which violation or conflict
would have a material adverse effect on the financial condition,
business, assets or liabilities of Borrower or on the value of the
Collateral or a material adverse effect on the security interests
hereunder.
(g) The Pledged Securities includes the issued and outstanding
shares of Common Stock of the Pledged Subsidiaries as described in
Schedule 2(b) attached hereto, and as of the date of execution hereof,
there are no outstanding options, warrants or other rights to
subscribe for or purchase any property described in Schedule 2(b) or
any notes, bonds, debentures or other evidences of indebtedness that
(i) are at any time convertible into capital stock of the Pledged
Subsidiaries or (ii) have or at any time could by their terms have
voting rights with respect to any matters affecting the Pledged
Subsidiaries.
(h) No consent or approval which has not been obtained prior to
the date hereof of any other person or entity and no authorization,
approval or other action (other than delivery of physical certificates
evidencing the Pledged Securities) by, and no notice
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<PAGE> 10
to or filing with any governmental body (other than UCC filings),
regulatory authority or securities exchange, was or is necessary as a
condition to the validity of the pledge hereunder of the Collateral,
and such pledge is effective to vest in the Secured Party the rights
of the Secured Party in the Collateral as set forth herein. There are
no restrictions on the transferability of any of the Collateral
transferred or delivered by Borrower hereunder or, except for
restrictions related to federal and state securities laws governing
the sale of "restricted stock" or "control stock," with respect to the
foreclosure, transfer or disposition thereof by the Secured Party.
(i) As of the date hereof, Galveston Bay Processing Corporation
and Galveston Bay Pipeline Corporation are the only Material
Subsidiaries of Borrower.
(j) Other than clause (i) above, these representations and
warranties do not apply to TransTexas Energia de Mexico, S.A. de C.V.
or TransTexas Gas Corporation-Liberia.
Section 4. Covenants. During the term of this Agreement and until all
the Obligations have been fully and finally paid and discharged in full,
Borrower covenants and agrees with the Secured Party that:
(a) Except as permitted by the Oil and Gas Agreement or in the
ordinary course of business, Borrower will not make any compromise or
settlement with respect to the Collateral without notice to or consent
of the Secured Party.
(b) Subject to the Jefferies Lien and the Jefferies
Documentation, Borrower shall deliver to the Secured Party or its
designated agent concurrently with the execution of this Agreement or,
to the extent acquired subsequent to the date of execution hereof,
including without limitation Pledged Securities issued by a newly
created or acquired Subsidiary, immediately upon Borrower's
acquisition thereof: (i) all certificates and instruments representing
the Pledged Securities and a revised Schedule 2(b), and (ii) all
certificates and instruments representing each other item of
Collateral (including all certificates, instruments and notes
representing any such UCC Collateral). Any and all Pledged Securities
delivered to the Secured Party or its designated agent shall be
accompanied by undated duly executed powers in blank and by such other
instruments of transfer or documents as the Secured Party may
reasonably request. The Secured Party may hold the certificates
representing the Pledged Securities delivered to it in its own name or
in the name of its nominee, all in form and substance satisfactory to
the Secured Party.
(c) From time to time, Borrower shall, at its own expense,
promptly give, execute, deliver, file and/or otherwise formalize any
such notice, statement, instrument, document, agreement or other
papers, and do all such other acts and things, as may be necessary or
desirable, or as the Secured Party may reasonably request, in order to
create, evidence, preserve, perfect, validate or continue any lien or
security interest created pursuant to this Agreement or to enable the
Secured Party to exercise or enforce its rights hereunder with respect
to such lien or security interest, or otherwise further to effect the
purposes of this Agreement. Without limiting the generality of the
foregoing, Borrower shall, at any time or from time to time upon the
request of the Secured Party and at Borrower's own expense, execute,
acknowledge, witness, deliver, file and/or record such
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<PAGE> 11
financing and continuation statements, notices, additional assignments
and other documents or instruments (all of which shall be in form and
substance satisfactory to the Secured Party and its counsel) as the
Secured Party may from time to time reasonably request for the
perfection of the liens and security interests created hereby.
(d) Borrower shall promptly notify the Secured Party (i) of any
material changes in any fact or circumstance represented or warranted
by Borrower with respect to any material portion of the Collateral,
(ii) of any material impairment of the Collateral and (iii) of any
claim, action or proceeding affecting title to all or any of the
Collateral.
(e) Except for the liens and security interests created by this
Agreement and the Permitted Liens in the Collateral, Borrower shall at
its own expense defend the Collateral against any and all liens,
claims, security interests and other encumbrances or interests,
howsoever arising and shall maintain and preserve the security
interest granted hereunder with respect to the Collateral as long as
this Agreement shall remain in full force and effect. Borrower shall
not make any other pledge, assignment, mortgage, hypothecation or
transfer of the Collateral except as permitted hereunder or under the
Oil and Gas Agreement.
(f) Borrower shall at all times keep accurate and complete
records with respect to the Collateral, including, without limitation,
records of all payments made, credit granted and proceeds received in
connection therewith.
(g) Borrower shall not relocate its principal place of business
or chief executive office to a county or state other than that
specified in Section 3(a) of this Agreement unless Borrower gives 30
days' prior written notice to the Secured Party, which notice shall
specify the county and state into which such relocation is to be made.
The Collateral, to the extent not delivered to the Secured Party
pursuant to Section 2, will be kept at those locations listed on the
Perfection Certificate delivered to the Secured Party herewith in the
form attached as Exhibit A hereto and Borrower will not remove the
Collateral from such locations, without providing at least 30 days'
prior written notice to the Secured Party.
(h) Borrower will keep the Collateral in good order and repair,
except in situations where not to do so would not be material, and
will not use the same in violation of law or any policy of insurance
thereon. The Secured Party, or its designee, may inspect the
Collateral at any reasonable time, wherever located.
(i) The Secured Party, or its representative, shall at all times
have full and free access during normal business hours to all of the
books, correspondence and records of Borrower relating to the
Collateral (other than information that is privileged and
confidential) and the Secured Party and its representatives may
examine the same, make abstracts therefrom and make photocopies
thereof, and Borrower agrees to render to the Secured Party, at
Borrower's cost and expense, such clerical and other assistance as may
be reasonably requested by the Secured Party with regard thereto.
(j) Borrower shall not permit any of the Pledged Subsidiaries to
issue to Borrower any securities of the type required to be pledged
hereunder unless such
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securities are promptly pledged and delivered hereunder to the Secured
Party or its designated agent in accordance with Section 2(b).
(k) If, while this Agreement is in effect, any stock dividend,
stock split, reclassification, readjustment, reorganization, merger,
consolidation, exchange offer, tender offer or other change in the
capital structure, including the creation of any subscription or other
rights relating to the Pledged Securities, is declared or made, or
proposed to be declared or made, by any of the Pledged Subsidiaries or
any other issuer of the Collateral, all substituted and additional
securities or interest issued with respect to the Collateral and
evidenced by certificates shall be endorsed in blank by Borrower
promptly upon receipt thereof or otherwise appropriately transferred
to the Secured Party in negotiable form, and all certificates or
instruments evidencing such securities shall be delivered to the
Secured Party to be held under the terms of this Agreement in the same
manner as, and as a part of, the Collateral. All Pledged Securities
shall be evidenced by one or more certificates. Any securities that
may be issued upon exercise of any subscription or other rights
relating to the Pledged Securities shall be endorsed in blank and
delivered to the Secured Party with any necessary powers.
Section 5. Powers of the Secured Party.
(a) Borrower hereby irrevocably designates and appoints the
Secured Party as its attorney-in-fact, with full power of
substitution, for the purposes of carrying out the provisions of this
Agreement and taking any action and executing any instrument,
including, without limitation, any financing statement or continuation
statement, and taking any other action to maintain the validity,
perfection, priority and enforcement of the security interest intended
to be created hereunder, that the Secured Party may reasonably deem
necessary or advisable to accomplish the purposes hereof, which
appointment as attorney-in-fact is irrevocable and coupled with an
interest.
(b) Without limiting the generality of Section 5(a) hereof,
Borrower hereby irrevocably authorizes and empowers the Secured Party,
upon the occurrence and during the continuation of any Event of
Default, at the expense of Borrower, either in the Secured Party's own
name or in the name of Borrower, at any time and from time to time:
(i) to ask, demand, receive, issue a receipt for, give
acquittance for, settle and compromise any and all monies which
may be or become due or payable or remain unpaid at any time or
times to Borrower, and any and all other property which may be or
become deliverable at any time or times to Borrower, under or
with respect to the Collateral;
(ii) to endorse any drafts, checks, orders or other
instruments for the payment of money payable to Borrower on
account of the Collateral (including any such draft, check, order
or instrument issued by any insurance company payable jointly to
Borrower and the Secured Party); and
(iii) to settle, compromise, prosecute or defend any action,
claim or proceeding, or take any other action, all either in its
own name or in the name of Borrower or otherwise, which the
Secured Party may deem to be necessary or
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advisable for the purpose of exercising and enforcing its powers
and rights under this Agreement or in furtherance of the purposes
hereof, including any action which by the terms of this Agreement
is to be taken by Borrower.
(c) Nothing in this Agreement shall be construed as requiring or
obligating the Secured Party to make any commitment or to make any
inquiry as to the nature or sufficiency of any payment received by it,
or to present or file any claim or notice, or to take any other action
with respect to any of the Collateral or any part thereof or the
amounts due or to become due in respect thereof or any property
covered thereby, or to collect or enforce the payment of any amounts
assigned to it or to which it may otherwise be entitled hereunder at
any time or times other than to account for amounts or Collateral
received.
(d) The Secured Party shall be entitled at any time to file this
Agreement, or a carbon, photographic or any other reproduction of this
Agreement, as a financing statement, but the failure of the Secured
Party to do so shall not impair the validity or enforceability of this
Agreement. The Secured Party shall have no duty to comply with any
recording, filing or other legal requirements necessary to establish
or maintain the validity, priority or enforceability of, or the
Secured Party's rights in or to, any of the Collateral.
(e) In its discretion, the Secured Party may discharge taxes and
other encumbrances at any time levied or placed on any of the
Collateral, make repairs thereto and pay any necessary filing fees.
Borrower agrees to reimburse the Secured Party on demand for any and
all reasonable expenditures so made with interest on unpaid amounts at
the maximum rate permitted by law. The Secured Party shall have no
obligation to Borrower to make any such expenditures, nor shall the
making thereof relieve Borrower of any default.
(f) Anything herein to the contrary notwithstanding, Borrower
shall remain liable under each contract or agreement comprised in the
Collateral to be observed or performed by Borrower thereunder. The
Secured Party shall not have any obligation or liability under any
such contract or agreement by reason of or arising out of this
Agreement or the receipt by the Secured Party of any payment relating
to any of the Collateral, nor shall the Secured Party be obligated in
any manner to perform any of the obligations of Borrower under or
pursuant to any such contract or agreement, to make inquiry as to the
nature or sufficiency of any payment received by the Secured Party in
respect of the Collateral or as to the sufficiency of any performance
by any party under any such contract or agreement, to present or file
any claim, to take any action to enforce any performance or to collect
the payment of any amounts which may have been assigned to the Secured
Party or to which the Secured Party may be entitled at any time or
times other than to account for amounts or Collateral received, and no
action taken or omitted shall give rise to any defense, counterclaim
or right of action against the Secured Party, unless the Secured
Party's actions are taken or omitted to be taken with gross negligence
or bad faith or constitute willful misconduct. The Secured Party's
sole duty with respect to the custody, safe keeping and physical
preservation of the Collateral in its possession, under Section 9-207
of the UCC or otherwise, shall be to deal with such Collateral in the
same manner as the Secured Party deals with similar property for its
own account.
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(g) If an Event of Default has occurred and is continuing, the
Secured Party may at any time, at its option, transfer to itself or any
nominee any securities constituting the Pledged Securities, receive any
income thereon and hold such income as additional Collateral or apply
it to the Obligations. Regardless of whether any Obligations are due,
the Secured Party may demand, sue for, collect, or make any settlement
or compromise which it deems desirable with respect to the Collateral.
Regardless of the adequacy of Collateral or any other security for the
Obligations, any deposits or other sums at any time credited by or due
from the Secured Party to Borrower may at any time be applied to or set
off against any of the Obligations.
(h) If an Event of Default shall have occurred and be continuing,
Borrower shall, at the request of the Secured Party, notify obligors
on chattel paper and general intangibles of Borrower and obligors on
instruments for which Borrower is an obligee of the security interest
of the Secured Party in any chattel paper, general intangible or
instrument and that payment thereof is to be made directly to the
Secured Party or to any financial institution designated by the
Secured Party as the Secured Party's agent therefor, and the Secured
Party may itself, if an Event of Default shall have occurred and be
continuing, without notice to or demand upon Borrower, so notify said
obligors. After the making of such a request or the giving of any such
notification, Borrower shall hold any proceeds of collection of
chattel paper, general intangibles and instruments received by
Borrower as trustee for the Secured Party without commingling the same
with other funds of Borrower and shall turn the same over to the
Secured Party in the identical form received, together with any
necessary endorsements or assignments. The Secured Party shall apply
the proceeds of collection of chattel paper, general intangibles and
instruments received by the Secured Party to the Obligations, such
proceeds to be immediately entered after final payment in cash of the
items giving rise to them.
Section 6. Voting Rights, Dividends, Etc.
(a) Until an Event of Default shall have occurred and be
continuing:
(i) except as otherwise provided in this Agreement, Borrower
shall be entitled to exercise any and all voting or consensual
rights and powers, including subscription rights, in relation to
the Pledged Securities; provided, however, that no vote shall be
cast or consent, waiver or ratification given or action taken
which would materially impair the securities or the value thereof
or violate any provision of this Agreement, the Oil and Gas
Agreement or any other ancillary document;
(ii) except as otherwise provided in this Agreement,
Borrower shall be entitled to receive and retain any and all
dividends, distributions or other payments in respect of the
Pledged Securities and the Secured Party, upon receipt of any of
the foregoing, shall promptly pay or distribute the same to
Borrower, and, to the extent so permitted, any distributions
received by Borrower and transferred to other persons shall pass
free and clear of the lien and security interest hereof; and
(iii) the Secured Party shall execute and deliver to
Borrower or cause to be executed and delivered to Borrower, all
such proxies, powers of attorney, dividend orders and other
instruments as Borrower may reasonably request for the
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<PAGE> 15
purpose of enabling it to exercise the voting or consensual
rights and powers which Borrower is entitled to exercise pursuant
to the foregoing Section 6(a)(i) or to receive the dividends,
distributions or other payments which Borrower is authorized to
retain pursuant to the foregoing Section 6(a)(ii).
(b) Upon the occurrence and during the continuance of an Event of
Default, all rights of Borrower to exercise the voting or consensual
rights and powers which Borrower would otherwise be entitled to
exercise pursuant to Section 6(a)(i) and to receive the dividends,
distributions and other payments which the Pledgor would otherwise be
authorized to receive and retain pursuant to Section 6(a)(ii) shall
automatically cease, and all such rights shall thereupon become vested
in the Secured Party, which shall then have the sole and exclusive
right and authority to exercise, in its sole discretion, all such
voting and consensual rights and powers and to receive and retain as
Collateral all such dividends, distributions and other payments.
Without limiting the foregoing, in such event the Secured Party may
exercise all voting and corporate rights at any meeting of any
corporation issuing any such securities and any and all rights of
conversion, exchange, subscription or any other rights, privileges or
options pertaining to any such securities as if it were the absolute
owner thereof, including, without limitation, the rights to exchange
at its discretion, any and all such securities upon the merger,
consolidation, reorganization, recapitalization or other readjustment
of any corporation issuing any such securities or upon the exercise by
any such issuer or the Secured Party of any right, privilege or option
pertaining to any such securities, and, in connection therewith, to
deposit and deliver any and all securities with any committee,
depository, transfer agent, registrar or other designated agency upon
such terms and conditions as it may determine, all without liability
except to account for the property actually received by it, but the
Secured Party shall have no duty to exercise any of the aforesaid
rights, privileges or options and the Secured Party shall not be
responsible for any failure to do so or delay in so doing.
Section 7. Default.
(a) It shall constitute a Default or an Event of Default under
this Agreement if a "Default" or an "Event of Default" shall occur
under the Oil and Gas Agreement.
(b) If an Event of Default shall have occurred and is continuing
and if the Obligations are accelerated under the provisions of the Oil
and Gas Agreement, in addition to any other rights and remedies that
may be available to the Secured Party under the UCC or the Oil and Gas
Agreement or under Section 5(a) or 5(b) of this Agreement or otherwise
under this Agreement or at law, the Secured Party shall also have the
following rights and powers:
(i) The Secured Party may, without being required to give
any notice except as hereinafter provided, sell the Collateral,
or any part thereof, at public or private sale, for cash, upon
credit or for future delivery and at such price or prices as the
Secured Party deems satisfactory, and the Secured Party and/or
its collateral agent may be the purchaser of any or all of the
Collateral so sold and thereafter hold the same absolutely free
from any right or claim of whatsoever kind, and the Obligations
or any portion of the Obligations may be applied as a credit
against the purchase price.
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<PAGE> 16
(ii) Upon any such sale, the Secured Party shall have the
right to deliver, assign and transfer to the purchaser thereof
the Collateral so sold. Each purchaser at any such sale shall
hold the property sold absolutely free from any claim or right of
whatsoever kind by or on behalf of Borrower, including any equity
or rights of redemption of Borrower, and Borrower hereby
specifically waives, to the full extent permitted by applicable
law, all rights of redemption, stay or appraisal which it has or
may have under any rule or law or statute now existing or
hereafter adopted.
(iii) The Secured Party shall give Borrower ten (10)
business days' written notice (which Borrower agrees is
reasonable notification within the meaning of Section 9.504 of
the UCC) of its intention to make any such public or private
sale. Such notice, in case of public sale, shall state the time
and place fixed for such sale and, in case of a private sale,
shall state the date after which such sale is to be made.
(iv) Any such public sale shall be held at such time or
times within ordinary business hours and at such places as the
Secured Party may fix in the notices of such sale. At any such
sale the Collateral may be sold in one lot as an entirety or in
separate parcels, as the Secured Party may, in its sole
discretion, determine.
(v) The Secured Party shall not be obligated to make any
sale of the Collateral of any part thereof if it shall determine
not to do so, regardless of the fact that notice of sale of the
Collateral may have been given. The Secured Party may, without
notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement
at the time and place fixed for the sale, and such sale may,
without further notice, be made at any time or place to which the
same shall be so adjourned.
(vi) In case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so
sold may be retained by the Secured Party until the selling price
is paid by the purchaser thereof, but the Secured Party shall not
incur any liability in case of the failure of such purchaser to
take up and pay for the Collateral so sold and, in case of any
such failure, such Collateral may again be sold upon like notice.
(vii) The Secured Party, instead of exercising the power of
sale herein conferred upon it, may proceed by a suit or suits at
law or in equity to exercise its remedies regarding the
Collateral and sell the Collateral, or any portion thereof, under
a judgment or decree of a court or courts of competent
jurisdiction.
(viii) Borrower agrees that if any Event of Default shall
have occurred and be continuing, then the Secured Party shall
have the right to take possession of the Collateral, and for that
purpose the Secured Party may, so far as Borrower can give
authority therefor, enter upon any premises on which the
Collateral may be situated and remove the same therefrom with or
without notice or process of law. Borrower waives any and all
rights that it may have to a judicial hearing in
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<PAGE> 17
advance of the enforcement of any of the Secured Party's rights
hereunder, including, without limitation, its right following an
Event of Default to take immediate possession of the Collateral
and to exercise its rights with respect thereto. To the extent
that any of the Obligations are to be paid or performed by a
person other than Borrower, Borrower waives and agrees not to
assert any rights or privileges which it may have under Section
9-112 of the UCC.
(ix) If under mandatory requirements of applicable law, the
Secured Party shall be required to make disposition of the
Collateral within a period of time that does not permit the
giving of notice to Borrower as hereinbefore provided, the
Secured Party need give Borrower only such notice of disposition
as shall be reasonably practicable in view of such mandatory
requirements of law.
(x) The Secured Party may instruct the obligor or obligors
on any agreement, instrument or other obligation constituting the
Collateral to make any payment or render any performance required
by the terms of such agreement, instrument or obligation directly
to the Secured Party or its designee.
(c) The Secured Party shall incur no liability as a result of the
sale of the Collateral, or any part thereof, at any private sale other
than for its own gross negligence, willful misconduct or bad faith.
Borrower hereby waives, to the maximum extent permitted by applicable
law, any claims against the Secured Party arising by reason of the
fact that the price at which the Collateral may have been sold at such
private sale was less than the price which might have been obtained at
a public sale or was less than the aggregate amount of the
Obligations, even if the Secured Party accepts the first offer
received and does not offer such Collateral to more than one offeree.
(d) The Secured Party shall not be obligated to pursue or exhaust
its rights and remedies against any particular Collateral or other
security for the Obligations before pursuing or enforcing its rights
and remedies against any other Collateral or other security for the
Obligations.
(e) To the extent permitted by law, Borrower hereby waives (i)
any rights to require the Secured Party to proceed first against any
other Person, to exhaust its rights in the Collateral or other
security for the Obligations or to pursue any other right that the
Secured Party might have, (ii) with respect to the Notes, presentment
and demand for payment, protest, notice of protest and nonpayment,
notice of dishonor, notice of the intention to accelerate and notice
of acceleration (except as otherwise set forth in the Oil and Gas
Agreement), and (iii) all rights of marshaling in respect of any and
all of the Collateral.
(f) Without precluding any other methods of sale, Borrower
acknowledges that the sale of the Collateral shall have been made in a
commercially reasonable manner if conducted in conformity with
reasonable commercial practices of institutional lenders disposing of
similar property. The Secured Party shall not be liable for any
depreciation in the value of the Collateral.
(g) Borrower agrees that its obligation to deliver the Collateral
is of the essence of this Agreement and that accordingly, upon
application to a court of equity
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<PAGE> 18
having jurisdiction, the Secured Party shall be entitled to a decree
requiring specific performance by Borrower of such obligation.
(h) Remedies of the Secured Party are cumulative and the exercise
of any one or more of the remedies provided herein shall not be
construed as a waiver of any of the other remedies of the Secured
Party.
(i) If an Event of Default shall have occurred and be continuing,
the proceeds of any sale of or other realization upon all or any part
of the Collateral and any other amounts held by the Secured Party
under this Agreement shall be applied by the Secured Party as provided
in the Oil and Gas Agreement.
Any amounts remaining after such applications and the payment in
full of the Notes with respect to the Obligations shall be remitted to Borrower,
its successors or assigns, or as a court of competent jurisdiction may otherwise
direct.
Section 8. General Provisions.
(a) Continuing Security Interest; Binding Effect. This Agreement
shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until termination of the
obligations of Borrower under the Oil and Gas Agreement and the
indefeasible payment in full thereafter of the Obligations; (b) be
binding upon Borrower and its successors and assigns; and (c) inure to
the benefit of the Secured Party and its successors, transferees and
assigns. Without limiting the generality of the foregoing clause (c),
the Secured Party may assign or otherwise transfer any of its rights
under this Agreement to any other Person, and such Person shall
thereupon become vested with all the benefits in respect thereof
granted herein or otherwise to the Secured Party. Upon the termination
of the obligations of the Secured Party under the Oil and Gas
Agreement and the indefeasible payment in full thereafter of the
Obligations, Borrower shall be entitled to the return, upon its
request and at its expense, of such of the Collateral as is in the
Secured Party's possession and as shall not have been sold or
otherwise disposed of pursuant to the terms hereof.
(b) Security Interest Absolute. The lien and security interest
created hereunder and Borrower's obligations hereunder and the Secured
Party's rights hereunder shall not be released, diminished, impaired
or adversely affected by the occurrence of any one or more of the
following events:
(i) The taking or accepting of any other security or
assurance for any or all of the Obligations;
(ii) Any release, surrender, exchange, subordination or loss
of any security or assurance at any time existing in connection
with any or all of the Obligations;
(iii) The modification of, amendment to, or waiver of
compliance with any terms of the Oil and Gas Agreement or the
Notes;
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<PAGE> 19
(iv) Any renewal, extension and/or rearrangement of the
payment of any or all of the Obligations or any statement,
indulgence, forbearance or compromise that may be granted or
given by the Secured Party to Borrower or any other Person;
(v) any neglect, delay, omission, failure or refusal of the
Secured Party to take or prosecute any action in connection with
any agreement, document or other instrument evidencing, securing
or assuring the payment of any or all of the Obligations;
(vi) the illegality, invalidity or unenforceability of all
or any part of the Oil and Gas Agreement or the Notes; or
(vii) any other circumstance (other than payment in full of
the Obligations) that might otherwise constitute a defense
available to, or a discharge of, Borrower or any party to any
document in respect of the Obligations.
(c) Amendments. This Agreement or any term hereof may be amended
or changed only by an instrument in writing executed jointly by
Borrower and the Secured Party and in accordance with the Oil and Gas
Agreement.
(d) Remedies Cumulative. Each right, power and remedy herein
specifically granted to the Secured Party or otherwise available to it
or now or hereafter existing in law or in equity shall be cumulative
and concurrent, and shall be in addition to every other right, power
and remedy herein specifically given or now or hereafter existing at
law, in equity, or otherwise (including, without limitation, all
rights, powers and remedies granted to a secured party under the UCC),
and each such right, power and remedy, whether specifically granted
herein or otherwise existing, may be exercised at any time and from
time to time as often and in such order as may be deemed expedient by
the Secured Party in its sole and complete discretion. The provisions
of this Agreement may only be waived by an instrument in writing
signed by the Secured Party, and no failure on the part of the Secured
Party to exercise, and no delay in exercising, and no course of
dealing with respect to, any such right, power or remedy, shall
operate as a waiver thereof, nor shall any single or partial exercise
of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right. No notice to or
demand on Borrower hereunder shall, of itself, entitle Borrower to any
other or further notice or demand in the same or similar
circumstances.
(e) Assignment. Neither this Agreement nor any interest herein or
in the Collateral, or any part thereof, may be assigned by Borrower
without the prior written consent of the Secured Party, except as
expressly permitted herein or in the Oil and Gas Agreement.
(f) Headings. The descriptive headings of the several sections of
this Agreement are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
(g) Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent
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<PAGE> 20
of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity of
enforceability or such provision in any other jurisdiction.
(h) Survival. All representations and warranties contained
herein, in the Oil and Gas Agreement or made in writing by Borrower in
connection herewith or therewith, shall survive the execution and
delivery of this Agreement, the Oil and Gas Agreement and any
documents executed in connection herewith or therewith.
(i) Counterparts; Facsimiles. This Agreement may be executed in
any number of counterparts and by different parties in separate
counterparts, each of which when so executed and delivered shall be
deemed to be an original, but all of which when taken together shall
constitute one and the same instrument. A complete set of counterparts
shall be lodged with the Secured Party. Any signature delivered by fax
shall be deemed an original signature hereto.
(j) Waiver. To the extent permitted by applicable law Borrower
hereby waives promptness, diligence, notice of acceptance and any
other notice with respect to any of the Oil and Gas Agreement
obligations and this Agreement and any requirement that the Secured
Party protect, secure, perfect or insure any security interest or any
property subject thereto or exhaust any right or take any action
against Borrower or any other person or entity; provided however, that
the Secured Party shall in any event take such care in the handling of
any Collateral in its possession as it takes with respect to its own
property of a similar nature in its possession.
(k) Notices. Any notices or other communications required or
permitted hereunder shall be made in the manner provided in the Oil
and Gas Agreement.
(l) Conflicting Terms. In the event of any conflict or
inconsistency between the terms, covenants, conditions and provisions
set forth in this Agreement and the terms, covenants, conditions and
provisions set forth in the Oil and Gas Agreement, the terms,
covenants, conditions and provisions of the Oil and Gas Agreement
shall prevail.
(m) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW EXCEPT SECTION 5-1401
OF THE NEW YORK GENERAL OBLIGATIONS LAW. THE COMPANY HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT
SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY
FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW
YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION
OF THE AFORESAID COURTS. THE COMPANY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY
JURY AND ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT AND ANY
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<PAGE> 21
CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE COMPANY
IRREVOCABLY CONSENTS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO
UNDER APPLICABLE LAW, TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
THE COMPANY AT ITS SAID ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE 30
DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE
SECURED PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY
IN ANY OTHER JURISDICTION.
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<PAGE> 22
SECURITY AND PLEDGE AGREEMENT
IN WITNESS WHEREOF, Borrower and the Secured Party have executed this
Agreement as of the date first above written.
TRANSTEXAS GAS CORPORATION
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
GMAC COMMERCIAL CREDIT LLC, AS AGENT
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
22
<PAGE> 1
EXHIBIT 4.41
INTERCREDITOR AGREEMENT
Agreement dated as of March 15, 2000 by and among GMAC COMMERCIAL
CREDIT LLC ("Lender"), GMAC COMMERCIAL CREDIT LLC, as agent for itself and the
lenders under the Security Agreement (as hereafter defined) (in such capacity,
"Agent") and FIRSTAR BANK, N.A., in its capacity as Indenture Trustee under the
Indenture (as hereinafter defined) ("Trustee").
BACKGROUND
Whereas, TransTexas Gas Corporation, a Delaware corporation (the
"Company"), Agent, various lenders, Galveston Bay Pipeline Company ("Pipeline")
and Galveston Bay Processing Corporation ("Processing") (Pipeline and
Processing, collectively, "Guarantors") have entered into the Oil and Gas
Agreement (as defined below).
Whereas, the Company, Trustee and Guarantors have entered into the
Indenture (as defined below).
Whereas, the Company and Lender have entered into the Loan Agreement
(as defined below).
Whereas, Trustee has agreed to enter into this intercreditor agreement
to provide for subordination of the Trustee's "Liens" in the assets of Company
to the "Liens" in such assets granted to Agent, and Agent has agreed to enter
into this intercreditor agreement to provide for subordination of its "Liens" in
certain assets of Company to the "Liens" in such assets granted to Lender.
AGREEMENTS
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, the parties hereto agree as follows:
1. Definitions.
1.1 General Terms. For purposes of this Agreement, the
following terms shall have the following meanings:
"Agent Collateral" shall mean all of the property and
interests in property, tangible or intangible, real or personal, now owned or
hereafter acquired by the Company, in or upon which Agent at any time has a Lien
to secure the obligations of the Company under the Oil and Gas Facility
Agreements, and including, without limitation, all proceeds and products of such
property and interests in property.
"Collateral" shall mean (a) with respect to the Lender, the
Lender Collateral, (b) with respect to the Agent, the Agent Collateral, and (c)
with respect to the Trustee, the Trustee Collateral.
<PAGE> 2
"Agreements" shall mean, collectively, the Lender Agreements,
the Oil and Gas Facility Agreements and the Trustee Agreements.
"Company" shall mean TransTexas Gas Corporation, a Delaware
corporation, and its successors and assigns.
"Creditors" shall mean, collectively, Lender, Agent, the
lenders under the Oil and Gas Agreement and Trustee and their respective
successors and assigns.
"Indenture" shall mean the Indenture dated as of March 15,
2000 by Borrower, as Issuer, Galveston Bay Processing Corporation and Galveston
Bay Pipeline Company, as Guarantors, and Firstar Bank, N.A., as Trustee,
pursuant to which the Indenture Notes were issued, as the same may be amended,
supplemented or modified from time to time.
"Indenture Notes" shall mean the $200,000,000 of Senior
Secured Notes due 2005 issued pursuant to the Indenture.
"Lender" shall mean GMAC Commercial Credit LLC and its
successors and assigns.
"Lender Agreements" shall mean the Loan Agreement and the
Ancillary Agreements (as that term is defined in the Loan Agreement).
"Lender Collateral" shall mean the Collateral described on
Schedule 1.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, security interest, encumbrance
(including, but not limited to, easements, rights of way and the like), lien
(statutory or other), security agreement or transfer intended as security,
including without limitation, any conditional sale or other title retention
agreement, the interest of a lessor under a capital lease or any financing lease
having substantially the same economic effect as any of the foregoing.
"Loan Agreement" shall mean the Third Amended and Restated
Accounts Receivable Management and Security Agreement dated as of March 15, 2000
between Lender and the Company as the same may be amended, supplemented,
modified or restated from time to time.
"Notes" shall have the meaning set forth in the Oil and Gas
Agreement.
"Obligations" shall have the meaning set forth in the Loan
Agreement.
"Oil and Gas Agreement" shall mean the Oil & Gas Revolving
Credit and Term Loan Agreement dated as of March 15, 2000 by and among Agent,
the lenders which are or become parties thereto, and Company as the same may be
amended, supplemented, modified or restated from time to time.
<PAGE> 3
"Oil and Gas Facility Agreements" shall mean the Oil and Gas
Agreement, the Notes, the Security Agreement and the Ancillary Documents (as
that term is defined in the Oil and Gas Agreement).
"Person" shall mean an individual, a partnership, a limited
liability company, a corporation (including a business trust), a joint stock
company, a trust, an unincorporated association, a joint venture, or other
entity or a government or any agency, instrumentality or political subdivision
thereof.
"Security Agreement" shall mean the Security and Pledge
Agreement dated as of March 15, 2000 between Agent and Company as the same may
be amended, supplemented, modified or restated from time to time.
"Secured Lender Remedies" means any action which results in
the sale, foreclosure, realization upon, or a liquidation of any of the
Collateral, including without limitation, the exercise of any similar remedies
or rights of a "Secured Party" under Article 9 of the Uniform Commercial Code,
such as, without limitation, the notification of account debtors.
"Shared Collateral" shall mean any Collateral of any Creditor
that also secures obligations of the Company to another Creditor in connection
with the financings described herein.
"Trustee" shall mean Firstar Bank, N.A., and its successors
and assigns, in its capacity as Indenture Trustee under the Indenture.
"Trustee Agreements" shall mean, collectively, the Indenture,
the Indenture Notes and all agreements, documents and instruments now or at any
time hereafter executed and/or delivered by the Company or any other person to,
with or in favor of the Trustee in connection therewith or related thereto, as
all of the foregoing now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
"Trustee Collateral" shall mean all of the property and
interests in property, tangible or intangible, real or personal, new owned or
hereafter acquired by the Company, in or upon which Trustee at any time has a
Lien to secure the obligations of the Company under the Trustee Agreements and
including, without limitation, all proceeds and products of such property and
interests in property.
1.2 Other Terms. Capitalized terms not otherwise defined
herein shall have the meanings given to them in the Oil and Gas Agreement.
1.3 Certain Matters of Construction. The terms "herein",
"hereof" and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular section, paragraph or
subdivision. Any pronoun used shall be deemed to cover all genders. Wherever
appropriate in the context, terms used herein in the singular also include the
plural and vice versa. All references to statutes and related regulations shall
include any amendments of same and any successor statutes and regulations. All
references to any instruments or agreements, including, without limitation,
references to any of the Agreements
<PAGE> 4
shall include any and all modifications or amendments thereto and any and all
extensions or renewals thereof.
2. Intercreditor Provisions
2.1 Acknowledgment of Lien. Each Creditor hereby agrees and
acknowledges that each of the other Creditors may have been granted a Lien upon
certain of its respective Collateral, provided, however, that Trustee and Lender
do not share any Collateral, and Trustee disclaims any Lien upon the Lender
Collateral.
2.2 Priority. Notwithstanding the order or time of attachment,
or the order, time or manner of perfection, or the order or time of filing or
recordation of any document or instrument, or other method of perfecting a Lien
in favor of each Creditor in any Collateral, and notwithstanding any conflicting
terms or conditions which may be contained in any of the Agreements, (a) to the
extent that the Lender Collateral constitutes Shared Collateral, the Liens of
Lender upon the Lender Collateral have and shall have priority over the Liens of
Agent upon the Agent Collateral and such Liens of Agent are and shall be, in all
respects, subject and subordinate to the Liens of Lender therein to the full
extent of the Obligations outstanding from time to time under the Lender
Agreements, and (b) to the extent that the Agent Collateral constitutes Shared
Collateral, the Liens of the Agent upon the Agent Collateral have and shall have
priority over the Liens of Trustee upon the Trustee Collateral and such liens of
Trustee are and shall be, in all respects, subject and subordinated to the Liens
of Agent therein to the full extent of the obligations outstanding from time to
time under the Oil and Gas Facility Agreements. The maximum principal amount of
the obligations outstanding from time to time under the Oil and Gas Agreement
shall not exceed $52,500,000, except with the consent of the Trustee.
2.3 No Alteration of Priority. The Lien priorities provided in
Section 2.2 hereof shall not be altered or otherwise affected by any amendment,
modification, supplement, extension, renewal, restatement or refinancing of
either the Obligations, the indebtedness payable under the Oil and Gas Facility
Agreements or the indebtedness payable under the Trustee Agreements, nor by any
action or inaction which any Creditor may take or fail to take in respect of the
Collateral.
2.4 Perfection. (a) Each Creditor shall be solely responsible
for perfecting and maintaining the perfection of its Lien in and to each item
constituting the Collateral in which such Creditor has been granted a Lien. The
foregoing provisions of this Agreement are intended solely to govern the
respective Lien priorities as between the Creditors and shall not impose on
Lender (with respect to the Lender Collateral), Agent (with respect to the Agent
Collateral) or Trustee (with respect to the Trustee Collateral) any obligation
in respect of the disposition of proceeds of foreclosure on any Collateral which
would conflict with prior perfected claims therein in favor of any other Person.
(b) Agent and Trustee agree that they will not contest the
validity, perfection, priority or enforceability of the Liens of Lender upon the
Lender Collateral and that as between Lender on the one hand, and Agent and
Trustee on the other hand, the terms of this Agreement shall govern even if part
or all of the Obligations or the Liens securing payment and performance thereof
are avoided, disallowed, set aside or otherwise invalidated in any judicial
proceeding or
<PAGE> 5
otherwise; provided, however, that the terms, provisions and restrictions of
this Agreement in favor of Lender shall be void and of no further force and
effect upon the indefeasible payment and satisfaction in full of the Obligations
and the irrevocable termination of the Loan Agreement.
(c) Subject to the last sentence of Section 2.2 of this
Agreement, Trustee agrees that it will not contest the validity, perfection,
priority or enforceability of the Liens of Agent upon the Agent Collateral and
that as between Agent and Trustee, the terms of this Agreement shall govern even
if part or all of the obligations outstanding from time to time under the Oil
and Gas Facility Agreements or the Liens securing payment and performance
thereof are avoided, disallowed, set aside or otherwise invalidated in any
judicial proceeding or otherwise; provided, however, that the terms, provisions
and restrictions of this Agreement in favor of Agent shall be void and of no
further force and effect upon the indefeasible payment and satisfaction in full
of the obligations under the Oil and Gas Facility Agreements and the irrevocable
termination of the Oil and Gas Agreement.
(d) Lender and Agent agree that they will not contest the
validity, perfection or enforceability of the Liens of Trustee upon the Trustee
Collateral.
(e) Agent shall hold any Pledged Securities (as that term is
defined in the Security Agreement) of which it has possession for both its
benefit and the benefit of the lenders under the Oil and Gas Agreement and as
bailee for the benefit of Trustee. In the event the indebtedness under the Oil
and Gas Facility Agreements is repaid in full (other than pursuant to a
refinance in which event such refinancing party shall assume in writing the
obligations of Agent under this provision as a condition precedent to such
refinancing being effectuated) and the Oil and Gas Agreement is irrevocably
terminated. Agent shall deliver any Pledged Securities of which it has
possession in accordance with the written instructions of, and at the expense
of, the Trustee, or as otherwise may be required by law.
2.5 Management of Collateral. (a) Regardless of whether or not
the Lender Collateral constitutes Shared Collateral, Lender shall have the
exclusive right to manage, perform and enforce the terms of the Lender
Agreements with respect to the Lender Collateral and to exercise and enforce all
privileges and rights thereunder according to its discretion and the exercise of
its business judgment, including, without limitation, the exclusive right to
enforce or settle insurance claims, take or retake control or possession of such
Lender Collateral and to hold, prepare for sale, process, sell, lease, dispose
of, or liquidate such Collateral. In connection therewith, Agent and Trustee
each waives any and all rights to affect the method or challenge the
appropriateness of any action by Lender.
(b) Regardless of whether or not the Agent Collateral
constitutes Shared Collateral (but subject to the foregoing provisions of
subparagraph (a) above), Agent shall have the exclusive right to manage, perform
and enforce the terms of the Oil and Gas Facility Agreements with respect to the
Agent Collateral and to exercise and enforce all privileges and rights
thereunder according to its discretion and the exercise of its business
judgement including, without limitation, the exclusive right to enforce or
settle insurance claims, take or retake control or possession of such Agent
Collateral and to hold, prepare for sale, process, sell, lease, dispose of or
liquidate such Collateral. In connection therewith, Trustee waives any and all
rights to effect the method or challenge the appropriateness of any action by
Agent.
<PAGE> 6
2.6 Sale of Collateral. (a) Notwithstanding anything to the
contrary contained in any of the Agreements, until such time as the Obligations
have been paid in full and the Loan Agreement has been terminated, only Lender
shall have the right to restrict or permit, or approve or disapprove, the sale,
transfer or other disposition of Lender Collateral, even if such Lender
Collateral may constitute Shared Collateral. Agent will, immediately upon the
request of Lender, release or otherwise terminate its respective Liens, if any,
upon any Lender Collateral that constitutes Shared Collateral, to the extent
such Lender Collateral is sold or otherwise disposed of either by Lender or by
the Company with the consent of Lender, and Agent will immediately deliver such
release documents as Lender may require in connection therewith.
(b) Trustee will, promptly upon the request of Agent and
Company, release or otherwise terminate its Liens upon any Trustee Collateral
that constitutes Shared Collateral, to the extent provided for and in accordance
with the terms of the Indenture.
2.7 Secured Lender Remedies. (a) In no event shall Trustee
exercise any Secured Lender Remedies until such time the obligations under the
Oil and Gas Agreements shall have been paid in full in cash and the Agent and
Lenders shall no longer be obligated to make additional Advances (as defined in
the Oil and Gas Agreement). In the event Trustee shall receive pursuant to its
exercise of any Secured Lender Remedies any payment or distribution of any kind
representing proceeds of any Shared Collateral as to which its Lien in the
Collateral is or is required to be subordinated to the Lien of Agent, before the
obligations under the Oil and Gas Facility Agreements shall have been paid in
full in cash, and the Agent and Lenders shall no longer be obligated to make
additional Advances, such sums shall be held in trust by Trustee for the benefit
and on account of Agent, and such amounts shall be paid to Agent for application
to the then unpaid obligations under the Oil and Gas Facility Agreements, and
(b) in no event shall Agent exercise any Secured Lender Remedies with respect to
Lender Collateral until such time as the Obligations shall have been paid in
full in cash and the Agent and Lenders shall no longer be obligated to make
additional Advances under the Loan Agreement. In the event Agent shall receive
any payment or distribution of any kind representing proceeds of any Shared
Collateral as to which its Lien in the Collateral is or is required to be
subordinated to the Lien of Lender, before the Obligations shall have been paid
in full in cash and the Agent and Lenders shall no longer be obligated to make
Additional Advances, such sums shall be held in trust by Agent for the benefit
and or account of Lender, and such amounts shall be paid to Lender for
application to the then unpaid Obligations under the Lending Agreements.
Notwithstanding the foregoing provisions, in no event shall the Agent or the
Trustee (or the holders of the Notes (as the case may be)) be restricted in any
way in filing a proof of claim, voting or taking any other actions to protect
its interests in any bankruptcy proceeding.
2.8 Section 9-504 Notice and Waiver of Marshaling. Each
Creditor acknowledges that this Agreement shall constitute notice of its
respective interests in the Collateral as provided by Section 9-504 of the
Uniform Commercial Code and each hereby waive any right to compel any marshaling
of any of the Collateral.
<PAGE> 7
3. Miscellaneous.
3.1 Survival of Rights. The right of Lender or Agent to
enforce the provisions of this Agreement shall not be prejudiced or impaired by
any act or omitted act of the Company or Lender or Agent, including forbearance,
waiver, consent, compromise, amendment, extension, renewal, or taking or release
of security in respect of any Obligations or obligations under the Oil and Gas
Facility Agreements, as the case may be, or noncompliance by the Company with
such provisions, regardless of the actual or imputed knowledge.
3.2 Amendments to Lending Agreements. Nothing contained in
this Agreement, or in any other agreement or instrument binding upon any of the
parties hereto, shall:
(a) in any manner limit or restrict the ability of Lender from
increasing or changing the terms of the loans under the Lender Agreements, or to
otherwise waive, amend or modify the terms and conditions of the Lender
Agreements, in such manner as Lender and the Company shall mutually determine.
Agent hereby consents to any and all such waivers, amendments, modifications and
compromises, and any other renewals, extensions, indulgences, releases of Lender
Collateral or other accommodations granted by the Lender to the Company from
time to time, and Agent and Trustee (even though it does not expressly consent
to such occurrences) each agrees that none of such actions shall in any manner
affect or impair the relative Lien priorities and subordination established by
this Agreement, or
(b) in any manner limit or restrict the ability of Agent from
increasing (subject to the limitations in the last sentence of Section 2.2
hereof) or changing the terms of the loans under the Oil and Gas Facility
Agreements, or to otherwise waive, amend or modify the terms and conditions of
the Oil and Gas Facility Agreements, in such manner as Agent, the lenders under
the Oil and Gas Agreement (to the extent applicable), and the Company shall
mutually determine. Trustee (even though it does not expressly consent to such
occurrences) hereby agrees that none of such actions shall in any manner affect
or impair the relative Lien priorities and subordination established by this
Agreement.
3.3 Bankruptcy Financing Issues. This Agreement shall continue
in full force and effect after the filing of any petition ("Petition") by or
against the Company under the United States Bankruptcy Code (the "Code") and all
converted or succeeding cases in respect thereof. All references herein to the
Company shall be deemed to apply to the Company as debtor-in-possession and to
a trustee for the Company. If the Company shall become subject to a proceeding
under the Code, and if the Lender shall desire to permit the use of cash
collateral or to provide post-petition financing from the Lender to the Company
under the Code, Agent and Trustee agree no objection will be raised by Agent or
Trustee to any such use of cash collateral or such post-petition financing from
Lender on the grounds of a failure to provide adequate protection for Agent's or
Trustee's junior Lien, provided that (i) Lender is not seeking a lien on any
Collateral which does not constitute Lender Collateral,) (ii) the Trustee
obtains a lien on properties acquired by the Company after the filing of the
Petition consistent with its rights under the Indenture and subject to the prior
rights of Agent's lien upon such after acquired properties; and (iii) the
maximum amount of revolving credit to be extended by Lender to the Company, both
pre-petition and post-petition, does not exceed at any time or from time to time
the principal amount of $15,000,000.
<PAGE> 8
3.4 Notice of Default and Certain Events. Each Creditor shall
undertake in good faith to notify the other Creditors of the occurrence of any
of the following as applicable:
(a) the acceleration of amounts owing by the Company
under the Lender Agreements, Oil and Gas Facility Agreements, or Trustee
Agreements, as applicable;
(b) the payment in full by the Company (whether as a
result of refinancing or otherwise) of all amounts owing by the Company under
the Lender Agreements, Oil and Gas Facility Agreements, or Trustee Agreements,
as applicable; or
(c) the sale or liquidation of, or realization upon,
any of the Collateral.
The failure of any party to give such notice shall not affect the
relative Lien priorities as provided in this Agreement.
3.5 Notices. Any notice or other communication required or
permitted pursuant to this Agreement shall be deemed given (a) when personally
delivered to any officer of the party to whom it is addressed, (b) on the
earlier of actual receipt thereof or three days following posting thereof by
certified or registered mail, postage prepaid, or (c) upon actual receipt
thereof when sent by a recognized overnight delivery service or (d) upon actual
receipt thereof when sent by telecopier to the number set forth below with
electronic confirmation of receipt, in each case addressed to each party at its
address set forth below or at such other address as has been furnished in
writing by a party to the other by like notice:
If to Agent or to Lender: GMAC Commercial Credit LLC
1290 Avenue of the Americas
New York, New York 10104
Attention: Jack MacGowan
Telephone: (212) 408-7531
Telecopier: (212) 408-4384
If to Trustee: Firstar Bank, N.A.
Corporate Trust Department
101 East Fifth Street, 12th Floor
St. Paul, Minnesota 55101-1860
Attention: Frank P. Leslie III
Telephone: (651) 229-2600
Telecopier: (651) 229-6415
3.6 Binding Effect; Other. This Agreement shall be a
continuing agreement, shall be binding upon and shall inure to the benefit of
the parties hereto from time to time and their respective successors and
assigns, shall be irrevocable and shall remain in full force and effect until
the Obligations and indebtedness under the Oil and Gas Facility Agreements shall
have been satisfied or paid in full in cash and the Lender shall no longer be
obligated to make additional Revolving Credit Advances under the Loan Agreement
and Agent and Lenders shall no longer be obligated to make additional Advances
under the Oil and Gas Agreement, this Agreement shall continue to be effective,
or be reinstated, as the case may be, if at any time
<PAGE> 9
payment, or any part thereof, of any amount paid by or on behalf of the Company
with regard to the Obligations or the indebtedness under the Oil and Gas
Facility Agreements is rescinded or must otherwise be restored or returned upon
the insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Company, or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee, custodian, or similar officer, for the Company or
any substantial part of its property, or otherwise, all as though such payments
had not been made. Any waiver or amendment hereunder (including any amendment to
Schedule 1 hereto) must be evidenced by a signed writing of the party to be
bound thereby, and shall only be effective in the specific instance. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York. The headings in this Agreement are for convenience of
reference only, and shall not alter or otherwise affect the meaning hereof.
4. Representations and Warranties. (a) Trustee agrees that it shall not
assign or transfer any of the Liens other than as permitted under the Indenture.
Trustee agrees upon Lender's or Agent's request to execute and file an amendment
to any financing statement or mortgage, trust deed or other encumbrance now on
file which covers Trustee Collateral constituting Shared Collateral to the
effect that the same is subject to the terms of this Intercreditor Agreement,
and agrees to so mark any extension of such financing statements, or any
financing statement or mortgage, trust deed or other encumbrance filed by
Trustee on Trustee Collateral in the future. Relying upon the opinion letter of
Gardere & Wynne, L.L.P. rendered to Trustee, and the delivery of an Officer's
Certificate in form and substance satisfactory to Trustee, and having no actual
knowledge that reliance upon the matters set forth in such opinion letter and
Officer's Certificate is inappropriate, or that such representation is
incorrect, Trustee represents to Lender and Agent that it has full right, power
and authority pursuant to the Indenture, subject to the outcome of any pending
appeal relating to the Confirmation Order, to enter into this Intercreditor
Agreement.
(b) Lender and Agent each represents and warrants to Trustee
that Lender and Agent each is the holder of the Liens which secure or will
secure the Obligations and the indebtedness under the Oil and Gas Facility
Agreements, respectively. Lender and Agent each agrees that it shall not assign
or transfer any of the Liens on its respective Collateral that constitutes
Shared Collateral on which the Trustee has a Lien without (i) prior notice being
given to Trustee and (ii) such assignment or transfer being made expressly
subject to the terms and provisions of this Intercreditor Agreement. Lender and
Agent each further warrants to Trustee that it has full right, power and
authority to enter into this Intercreditor Agreement and, to the extent Lender
or Agent is an agent or trustee for other parties, that this Intercreditor
Agreement shall fully bind all such other parties.
5. Refinancing. In the event that the Obligations or the indebtedness
under the Oil and Gas Facility Agreements are refinanced in full, each of the
Trustee and the Lender or Agent, as the case may be, agrees at the request of
such refinancing party to enter into an intercreditor agreement on terms
substantially similar to this Intercreditor Agreement.
6. Proceedings. ANY JUDICIAL PROCEEDING BROUGHT BY OR AGAINST ANY
CREDITOR WITH RESPECT TO THIS OR ANY RELATED AGREEMENT MAY BE BROUGHT IN ANY
COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK, UNITED STATES OF
AMERICA, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT TRUSTEE, LENDER, AGENT
AND THE COMPANY ACCEPT FOR
<PAGE> 10
THEMSELVES AND IN CONNECTION WITH THEIR PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND
IRREVOCABLY AGREE TO BE BOUND BY ANY FINAL JUDGMENT RENDERED THEREBY IN
CONNECTION WITH THIS AGREEMENT. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE
PROCESS IN ANY MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE LENDER OR
AGENT TO BRING PROCEEDINGS AGAINST TRUSTEE IN ANY COURTS OF ANY OTHER
JURISDICTION. ANY JUDICIAL PROCEEDING BY TRUSTEE AGAINST THE LENDER OR AGENT
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER OR CLAIM IN ANY WAY ARISING OUT
OF, RELATED TO OR CONNECTED WITH THIS AGREEMENT OR ANY RELATED AGREEMENT, SHALL
BE BROUGHT ONLY IN A COURT LOCATED IN THE CITY OF NEW YORK, STATE OF NEW YORK;
PROVIDED THAT NOTWITHSTANDING THE FOREGOING, IF IN ANY JUDICIAL PROCEEDING BY OR
AGAINST TRUSTEE THAT IS BROUGHT IN ANY OTHER COURT SUCH COURT DETERMINES THAT
LENDER OR AGENT IS AN INDISPENSABLE PARTY, TRUSTEE SHALL BE ENTITLED TO JOIN OR
INCLUDE LENDER OR AGENT IN SUCH PROCEEDINGS IN SUCH OTHER COURT. EACH CREDITOR
WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED
HEREUNDER IN THE CITY OF NEW YORK, STATE OF NEW YORK AND SHALL NOT ASSERT ANY
DEFENSE BASED ON LACK OF JURISDICTION OR VENUE OR BASED UPON FORUM NON
CONVENIENS.
7. Waiver Of Jury Trial. TRUSTEE, AGENT AND LENDER HEREBY EXPRESSLY
WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
(A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF TRUSTEE, AGENT AND LENDER OR ANY ONE
OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENTS OR
AGREEMENT EXECUTED OR DELIVERED BY THEM IN CONNECTION HEREWITH, OR THE
TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND
TRUSTEE, AGENT AND LENDER HEREBY AGREE AND CONSENT THAT ANY CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT JURY, AND THAT
ANY OF THEM MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY
COURT AS WRITTEN EVIDENCE OF THEIR CONSENT TO THE WAIVER OF THEIR RIGHT TO TRIAL
BY JURY.
8. Counterparts; Telecopied Signatures. This Agreement may be executed
in any number of and by different parties hereto on separate counterparts, all
of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
<PAGE> 11
IN WITNESS WHEREOF, the undersigned have entered into this Agreement
this ___ day of March, 2000.
GMAC COMMERCIAL CREDIT LLC,
as Lender
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
FIRSTAR BANK, N.A.,
as Trustee
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
GMAC COMMERCIAL CREDIT LLC,
as Agent
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
COMPANY'S ACKNOWLEDGMENT
The undersigned Company hereby consents to the Intercreditor Agreement
and acknowledges and agrees that nothing therein shall be deemed to amend,
modify, waive, supersede or otherwise alter the terms of the respective
agreements between the undersigned and each Creditor, including without
limitation any provisions in the Indenture restricting the incurrence,
extension, renewal, replacement, refinancing or refunding of indebtedness by the
Company. The undersigned further agrees that the Intercreditor Agreement is
solely for the benefit of the Creditors and shall not give the undersigned, its
successors and assigns, or any other person, any rights vis-a-vis any Creditor.
TRANSTEXAS GAS CORPORATION,
Company
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
<PAGE> 12
STATE OF )
)
COUNTY OF )
On the __ day of March, 2000, before me personally came
_________________, to me known, who being by me duly sworn, did depose and say
that he is the ___________ of GMAC Commercial Credit LLC, the limited liability
company described in and which executed the foregoing instrument and that he was
authorized to sign his name thereto on behalf of said limited liability company.
--------------------------------------------
Notary Public
STATE OF )
)
COUNTY OF )
On the __ day of March, 2000, before me personally came
_________________, to me known, who being by me duly sworn, did depose and say
that he is the ___________ of GMAC Commercial Credit LLC, the limited liability
company described in and which executed the foregoing instrument and that he was
authorized to sign his name thereto on behalf of said limited liability company.
--------------------------------------------
Notary Public
STATE OF )
)
COUNTY OF )
On the __ day of March, 2000, before me personally came
_________________, to me known, who being by me duly sworn, did depose and say
that he is the ___________ of Firstar Bank, N.A., the national association
described in and which executed the foregoing instrument and that he was
authorized to sign his name thereto on behalf of said national association.
---------------------------------------------
Notary Public
<PAGE> 13
SCHEDULE I
LENDER COLLATERAL
Lender Collateral means and includes the following:
(a) all Inventory;
(b) all Receivables, and
(c) all products and proceeds of (a) and (b) above.
As used herein, the following terms shall have the meanings set forth
below:
"Inventory" means and includes any and all of Debtor's now owned or
hereafter acquired "inventory" as such term is defined in Article 9 of the
Uniform Commercial Code in the State of New York, including, without limitation,
all of Debtor's now owned or hereafter acquired casing, drill pipe and other
supplies accounted for as inventory (whether or not constituting equipment for
purposes of any applicable Uniform Commercial Code) by Debtor on its financial
statements (excluding any Hydrocarbons), all proceeds thereof, and all documents
of title, books, records, ledger cards, files, correspondence, and computer
files, tapes, disks and related data processing software that at any time
evidence or contain information relating to the foregoing.
"Receivables" means and includes any and all of Debtor's now owned or
hereafter acquired "accounts" as such term is defined in Article 9 of the
Uniform Commercial Code in the State of New York, all products and proceeds
thereof, and all books, records, ledger cards, files, correspondence, and
computer files, tapes, disks or software that at any time evidence or contain
information relating got the foregoing.
"Hydrocarbons" means oils, gas, condensate and natural gas liquids.
<PAGE> 1
EXHIBIT 4.42
WARRANT AGREEMENT
Dated as of
March 15, 2000
Between
TRANSTEXAS GAS CORPORATION
and
ChaseMellon Shareholder Services, L.L.C.,
as the Warrant Agent
-----------------------------
Warrants for
Class A Common Stock of
TransTexas Gas Corporation
-----------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - Definitions...........................................................................................1
SECTION 1.1 Definitions..................................................................................1
SECTION 1.2 Rules of Construction........................................................................3
ARTICLE II - Warrant Certificates.................................................................................3
SECTION 2.1 Form of Warrant Certificates.................................................................3
SECTION 2.2 Execution and Delivery of Warrant Certificates...............................................4
SECTION 2.3 Loss or Mutilation...........................................................................5
ARTICLE III - Exercise Terms......................................................................................5
SECTION 3.1 Exercise Price...............................................................................5
SECTION 3.2 Exercise Period..............................................................................5
SECTION 3.3 Expiration...................................................................................5
SECTION 3.4 Manner of Exercise...........................................................................5
SECTION 3.5 Issuance of Warrant Shares..................................................................6
SECTION 3.6 Fractional Warrant Shares....................................................................6
SECTION 3.7 Reservation of Warrant Shares................................................................6
SECTION 3.8 Cancellation.................................................................................7
SECTION 3.9 Compliance with Law..........................................................................7
ARTICLE IV - Antidilution Provisions..............................................................................8
SECTION 4.1 Adjustment of Exercise Price and Warrant Number..............................................8
SECTION 4.2 Adjustment for Change in Capital Stock.......................................................8
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 4.3 Adjustment for Rights Issue..................................................................9
SECTION 4.4 Adjustment for Other Distributions...........................................................9
SECTION 4.5 Adjustment for Common Stock Issue...........................................................10
SECTION 4.6 Adjustment for Convertible Securities Issue.................................................11
SECTION 4.7 Consideration Received......................................................................13
SECTION 4.8 When De Minimis Adjustment May Be Deferred..................................................13
SECTION 4.9 Adjustment to Exercise Price................................................................13
SECTION 4.10 When No Adjustment Required................................................................14
SECTION 4.11 Notice of Adjustment.......................................................................14
SECTION 4.12 Voluntary Reduction........................................................................14
SECTION 4.13 Reorganizations............................................................................14
SECTION 4.14 Form of Warrants...........................................................................15
SECTION 4.15 Other Dilutive Events......................................................................15
SECTION 4.16 Miscellaneous..............................................................................15
SECTION 4.17 Non-applicability of Article IV............................................................16
ARTICLE V - Transferability......................................................................................16
SECTION 5.1 Transfer and Exchange.......................................................................16
SECTION 5.2 Registration of Transfer and Exchange.......................................................17
SECTION 5.3 Surrender of Warrant Certificates...........................................................18
ARTICLE VI - Warrant Agent.......................................................................................19
SECTION 6.1 Appointment of Warrant Agent................................................................19
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
SECTION 6.2 Rights and Duties of Warrant Agent..........................................................19
SECTION 6.3 Individual Rights of Warrant Agent..........................................................20
SECTION 6.4 Warrant Agent's Disclaimer..................................................................20
SECTION 6.5 Compensation and Indemnity..................................................................20
SECTION 6.6 Successor Warrant Agent.....................................................................21
ARTICLE VII - Miscellaneous......................................................................................22
SECTION 7.1 Persons Benefitting.........................................................................22
SECTION 7.2 Rights of Holders...........................................................................22
SECTION 7.3 Amendment...................................................................................23
SECTION 7.4 Notices.....................................................................................23
SECTION 7.5 Governing Law...............................................................................24
SECTION 7.6 Successors..................................................................................24
SECTION 7.7 Multiple Originals..........................................................................24
SECTION 7.8 Table of Contents...........................................................................24
SECTION 7.9 Severability................................................................................25
SECTION 7.10 Further Assurances.........................................................................25
</TABLE>
iii
<PAGE> 5
THIS WARRANT AGREEMENT (this "Agreement"), dated as of March 15, 2000,
is between TRANSTEXAS GAS CORPORATION, a Delaware corporation (together with its
permitted successors and assigns, the "Company"), and CHASEMELLON SHAREHOLDER
SERVICES, L.L.C., a New Jersey limited liability company, as warrant agent
(together with its permitted successors and assigns, the "Warrant Agent").
WHEREAS, a plan of reorganization under Chapter 11 of the United Sates
Bankruptcy Code for the Company (the "Plan") was confirmed on February 7, 2000
by order of the United States Bankruptcy Court for the Southern District of
Texas in Case No. 99-21550-C-11 and has become effective concurrently with the
execution of this Agreement;
WHEREAS, the Plan provides for the execution and delivery of this
Agreement by the Company and the issuance of warrants (the "Warrants") to
purchase initially 625,000 shares (the "Warrant Shares") of the Company's Class
A Common Stock, $0.01 par value per share (the "Common Stock"), at an exercise
price of $120 per share, on the terms and subject to the conditions set forth
herein;
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company in connection with the issuances, division, transfer, exchange,
substitution and exercise of the Warrants, and the Warrant Agent is willing to
so act; and
NOW, THEREFORE, each party agrees as follows for the benefit of the
other party and for the equal and ratable benefit of the holders of Warrants
(each a "Holder"):
ARTICLE I
Definitions
SECTION 1.1 Definitions. Capitalized terms used but not
defined herein shall have the respective meanings given to such terms in the
Plan. As used in this Agreement, the following terms shall have the following
meanings:
"Affiliate" of any specified Person means (i) any other Person
which, directly or indirectly, is controlling or controlled by or under direct
or indirect common control with such specified Person, or (ii) any other Person
who is a director or executive officer (A) of such Person, (B) of any subsidiary
of such specified Person, or (C) of any Person described in clause (i) above.
For purposes of this definition, "control," when used with respect to any
specified Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. Affiliate shall also
mean any beneficial owner of shares representing 10% or more of the total voting
power of the Voting Stock (on a fully diluted basis) of the Company or warrants
to purchase such Voting Stock (whether or not currently exercisable) and any
Person who would be an Affiliate of any such beneficial owner pursuant to the
first sentence hereof.
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"Board" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board of Directors.
"Business Day" means any day other than (i) Saturday or
Sunday, (ii) or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to be closed.
"Common Stock" has the meaning given to such term in the
recitals to this Agreement.
"Company" has the meaning given to such term in the preamble
to this Agreement.
"Current Market Value" per share of Common Stock or any other
security at any date means, on any date of determination (a) the average of the
daily closing sale prices for each of 15 trading days immediately preceding such
date (or such shorter number of days during which such security has been listed
or traded), if the security has been listed on the New York Stock Exchange, the
American Stock Exchange or other national securities exchange or the NASDAQ
National Market for at least 10 trading days prior to such date, (b) if such
security is not so listed or traded, the average of the daily closing bid prices
for each of the 15 trading days immediately preceding such date (or such shorter
number of days during which such security had been quoted), if the security has
been quoted on a national over-the-counter market for at least 10 trading days,
and (c) otherwise, the value of the security most recently determined as of a
date within the six months preceding such day by the Board.
"Definitive Warrants" has the meaning given to such term in
Section 2.1.
"DTC" means The Depository Trust Company.
"Exercise Date" has the meaning given to such term in Section
3.2.
"Exercise Price" has the meaning given to such term in Section
3.1.
"Expiration Date" has the meaning given to such term in
Section 3.2.
"Global Warrant" has the meaning given to such term in Section
2.1.
"Holders" has the meaning given to such term in the recitals
to this Agreement.
"Issue Date" means March 15, 2000.
"Officer" means the Chief Executive Officer, the President,
the Chief Financial Officer, any Vice President or the Treasurer of the Company.
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<PAGE> 7
"Person" means any individual, corporation, company (including
any limited liability company), partnership, joint venture, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Redeemable Stock" means, with respect to any Person, any
capital stock that by its terms (or by the terms of any security into which it
is convertible or exchangeable) or otherwise (i) matures or is mandatorily
redeemable pursuant to a sinking fund obligation or otherwise, (ii) is or may
become redeemable or repurchasable at the option of the holder thereof, in whole
or in part, or (iii) is convertible or exchangeable for indebtedness.
"Securities Act" means the Securities Act of 1933, as amended.
"Stock Transfer Agent" has the meaning given to such term in
Section 3.5.
"Voting Stock" means all classes of capital stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
"Warrant Agent" has the meaning given to such term in the
Recitals.
"Warrant Certificates" has the meaning given to such term in
Section 2.1.
"Warrant Number" has the meaning given to such term in
Section 4.1
"Warrant Shares" means the Common Stock (and other securities)
issuable upon the exercise of the Warrants.
"Warrants" has the meaning given to such term in the Recitals.
SECTION 1.2 Rules of Construction. Unless the text otherwise
requires: (i) a term has the meaning assigned to it; (ii) an accounting term not
otherwise defined has the meaning assigned to it in accordance with generally
accepted accounting principles as in effect from time to time; (iii) "or" is not
exclusive; (iv) "including" means including, without limitation; (v) references
to "Section" and "Article" refer to Sections and Articles of this Agreement,
unless the context clearly requires otherwise; and (vi) words in the singular
include the plural and words in the plural include the singular.
ARTICLE II
Warrant Certificates
SECTION 2.1 Form of Warrant Certificates. The Warrants will be
issued (a) in global form (the "Global Warrant"), substantially in the form of
Exhibit A attached hereto (including the text accompanying the footnotes
thereto), and (b) in definitive form (the "Definitive Warrants"),
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<PAGE> 8
substantially in the form of Exhibit A (excluding the text accompanying the
footnotes thereto). The Global Warrant shall represent the aggregate amount of
outstanding Warrants from time to time endorsed thereon; provided that the
aggregate amount of outstanding Warrants represented thereby may from time to
time be reduced or increased, as appropriate, to reflect exercises, exchanges
and redemptions. Any endorsement of the Global Warrant to reflect the amount of
any increase or decrease in the amount of outstanding Warrants represented
thereby shall be made by the Warrant Agent in accordance with instructions given
by the holder thereof.
The depository with respect to the Global Warrant (the
"Depository") shall be The Depository Trust Company ("DTC") until a successor
shall be appointed by the Company and become such Depository. The Global Warrant
shall be registered in the name of the Depository, or the nominee of such
Depository. So long as the Depository or its nominee is the registered owner of
such Global Warrant it will be deemed the sole owner and holder of such Global
Warrant for all purposes hereunder and under such Global Warrant. The
certificates (the "Warrant Certificates") evidencing the Global Warrant and the
Definitive Warrants to be delivered pursuant to this Agreement shall be
substantially in the form set forth in Exhibit A attached hereto. Neither the
Company nor the Warrant Agent will have any responsibility or liability for any
aspects of the records relating to beneficial ownership interest of the Global
Warrant in the name of the Depository or its nominee or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Warrant Certificates shall contain such legends and endorsements as
the Warrant Agent may deem appropriate and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply with any rule or
regulation of any securities exchange on which the Warrants shall be listed, or
to conform to customary usage.
SECTION 2.2 Execution and Delivery of Warrant Certificates.
Warrant Certificates evidencing Warrants to purchase initially an aggregate of
up to 625,000 Warrant Shares may be executed, on or after the Issue Date, by the
Company and delivered to the Warrant Agent for countersignature, and the Warrant
Agent shall thereupon countersign and deliver such Warrant Certificates upon the
order and at the direction of the Company to the purchasers thereof on the date
of issuance. The Warrant Agent is hereby authorized to countersign and deliver
Warrant Certificates as required by this Agreement.
The Warrant Certificates shall be executed on behalf of the
Company by an Officer of the Company either manually or by facsimile signature
printed thereon. The Warrant Certificates shall be countersigned manually by the
Warrant Agent and shall not be valid for any purpose unless so countersigned. In
case any Officer of the Company whose signature shall have been placed upon any
of the Warrant Certificates shall cease to be such Officer of the Company before
countersignature by the Warrant Agent and issuance and delivery thereof, such
Warrant Certificates may, nevertheless, be countersigned by the Warrant Agent
and issued and delivered with the same force and effect as though such person
had not ceased to be such Officer of the Company.
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<PAGE> 9
SECTION 2.3 Loss or Mutilation. Upon receipt by the Company
and the Warrant Agent of evidence satisfactory to them of the ownership and the
loss, theft, destruction or mutilation of any Warrant Certificate and of
indemnity satisfactory to them and (in the case of mutilation) upon surrender
and cancellation thereof, then, in the absence of notice to the Company or the
Warrant Agent that the Warrants represented thereby have been acquired by a bona
fide purchaser, the Company shall execute and the Warrant Agent shall, subject
to Section 5.1, countersign and deliver to the registered Holder of the lost,
stolen, destroyed or mutilated Warrant Certificate, in exchange for or in lieu
thereof, a new Warrant Certificate of the same tenor and for a like aggregate
number of Warrants. Prior to the issuance of any new Warrant Certificate under
this Section 2.3, the Company may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and other expenses (including the reasonable fees and expenses of the
Warrant Agent and of counsel to the Company) in connection therewith. Every new
Warrant Certificate executed and delivered pursuant to this Section 2.3 in lieu
of any lost, stolen or destroyed Warrant Certificate shall constitute a
contractual obligation of the Company, whether or not the allegedly lost, stolen
or destroyed Warrant Certificates shall be at any time enforceable under
applicable law, and shall be entitled to the benefits of this Agreement equally
and proportionately with any and all other Warrant Certificates duly executed
and delivered hereunder. The provisions of this Section 2.3 are exclusive and
shall preclude (to the extent lawful) all other rights or remedies,
notwithstanding any law or statute existing or hereafter enacted to the
contrary, with respect to the replacement of mutilated, lost, stolen or
destroyed Warrant Certificates.
ARTICLE III
Exercise Terms
SECTION 3.1 Exercise Price. Each Warrant shall initially
entitle the Holder thereof, subject to adjustment pursuant to the terms of this
Agreement, to purchase one share of Common Stock for an exercise price of
$120.00 per share of Common Stock (the "Exercise Price"). The Warrant Number and
Exercise Price are both subject to adjustment as set forth in Article IV.
SECTION 3.2 Exercise Period. Subject to the terms and
conditions set forth herein, the Warrants shall only be exercisable at any time
or from time to time on any Business Day on or after the Issue Date (the
"Exercise Date") and on or prior to June 30, 2002 (the "Expiration Date").
SECTION 3.3 Expiration. A Warrant shall terminate and become
void as of the earlier of (i) the close of business on the Expiration Date or
(ii) the date such Warrant is exercised.
SECTION 3.4 Manner of Exercise. Warrants may be exercised at
any time on or after the Exercise Date by surrendering the Warrant Certificates
to the Warrant Agent at any office or agency maintained for that purpose,
together with the form of election to purchase Common Stock on the reverse
thereof duly completed and signed by the Holder thereof and paying in full the
Exercise Price for each Warrant exercised and any other amounts required to be
paid pursuant to
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<PAGE> 10
Section 5.1 hereof. Payment of the Exercise Price (and any other required
amounts) shall be made in the form of cash or a certified or official bank check
payable to the order of the Company. Subject to Section 3.2, the rights
represented by the Warrants shall be exercisable at the election of the Holders
thereof either in full at any time or from time to time in part and, in the
event that a Warrant Certificate is surrendered for exercise in respect of less
than all the Warrant Shares purchasable on such exercise at any time prior to
the expiration of the Exercise Period, a new Warrant Certificate exercisable for
the remaining Warrant Shares will be issued. The Warrant Agent shall countersign
and deliver the required new Warrant Certificate, and the Company, at the
Warrant Agent's request, shall supply the Warrant Agent with Warrant Certificate
duly signed on behalf of the Company for such purpose.
SECTION 3.5 Issuance of Warrant Shares. Upon the surrender of
Warrant Certificates, as set forth in Section 3.4, the Company shall issue and
cause the Warrant Agent or, if appointed, a transfer agent for the Common Stock
("Stock Transfer Agent") to countersign and deliver to or upon the written order
of the Holder and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Warrant Shares so purchased
upon the exercise of such Warrants or other securities or property to which it
is entitled, registered or otherwise, to the Person or Persons entitled to
receive the same, together with cash as provided in Section 3.6 in respect of
any fractional Warrant Shares otherwise issuable upon such exercise. Such
certificate or certificates shall be deemed to have been issued and any Person
so designated to be named therein shall be deemed to have become a holder of
record of such Warrant Shares as of the date of the surrender of such Warrant
Certificates and payment of the per share Exercise Price, as aforesaid.
SECTION 3.6 Fractional Warrant Shares. The Company shall not
be required to issue fractional Warrant Shares on the exercise of Warrants. If
more than one Warrant shall be exercised in full at the same time by the same
Holder, the number of full Warrant Shares which shall be issuable upon such
exercise shall be computed on the basis of the aggregate number of Warrant
Shares purchasable pursuant thereto. If any fraction of a Warrant Share would,
except for the provisions of this Section 3.6, be issuable on the exercise of
any Warrant (or specified portion thereof), the Company shall pay an amount in
cash equal to the same fraction of the Current Market Value for one share of
Common Stock less the portion of the Exercise Price attributable thereto,
rounded to the nearest whole cent. The Warrant Agent shall have no duty or
obligation with respect to this Section 3.6 unless and until it has received
specific instructions (and sufficient cash, if required) from the Company with
respect to its duties and obligations under such Section.
SECTION 3.7 Reservation of Warrant Shares. The Company shall
at all times keep reserved out of its authorized shares of Common Stock, a
number of shares of Common Stock sufficient to provide for the exercise of all
outstanding Warrants. The registrar for the Common Stock (the "Registrar") shall
at all times until the expiration of the Exercise Period reserve such number of
authorized shares as shall be required for such purpose. The Company will keep a
copy of this Agreement on file with the Stock Transfer Agent. The Company will
supply such Stock Transfer Agent with duly executed stock certificates for such
purpose and will itself provide or
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otherwise make available any cash which may be payable as provided in Section
3.6. The Company will furnish to such Stock Transfer Agent a copy of all notices
of adjustments and certificates related thereto transmitted to each Holder.
The Company covenants that all shares of Common Stock that may
be issued upon exercise of Warrants will, upon issue, be fully paid,
nonassessable, free of preemptive rights, free from all taxes and free from all
liens, charges and security interests, created by or through the Company, with
respect to the issue thereof.
SECTION 3.8 Cancellation. In the event the Company shall
purchase or otherwise acquire Warrants, the Warrant Certificates evidencing such
Warrants may thereupon be delivered to the Warrant Agent, and if so delivered,
shall be canceled by it and retired. The Warrant Agent shall cancel all Warrant
Certificates properly surrendered for exchange, substitution, transfer or
exercise. The Warrant Agent shall destroy canceled Warrant Certificates held by
it and deliver a certificate of destruction to the Company. The Warrant Agent
shall account promptly to the Company with respect to Warrants exercised and
concurrently pay to the Company all monies received by the Warrant Agent for the
purchase of Warrant Shares through the exercise of such Warrants.
SECTION 3.9 Compliance with Law. (a) Notwithstanding anything
in this Agreement to the contrary, in no event shall a Holder be entitled to
exercise a Warrant, unless (i) the Shelf Registration Statement filed under the
Securities Act in respect of the issuance of the Warrant Shares is then
effective, (ii) the issuance of the Warrant Shares is then registered or
qualified or exempt from the registration or qualification requirements under
the securities laws of the state or other jurisdiction where the exercising
Holder resides, (iii) the Company has notified the Warrant Agent, which notice
shall not have been withdrawn by it, that it is unable as of the Exercise Date
to deliver a then current Prospectus to the exercising Holders or (iv) in the
opinion of counsel addressed to the Warrant Agent an exemption from the
registration requirements is available under the Securities Act for the issuance
of the Warrant Shares (and the delivery of any other securities for which the
Warrants may at the time be exercisable) at the time of such exercise.
(b) If any shares of Common Stock required to be reserved for
purposes of exercise of Warrants require, under any Federal or state law or
applicable governing rule or regulation of any national securities exchange,
registration with or approval of any governmental authority, or listing on any
such national securities exchange before such shares may be issued upon
exercise, the Company will in good faith and as expeditiously as possible
endeavor also to cause such shares to be duly registered or approved by such
governmental authority or listed on the relevant national securities exchange,
as the case may be.
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ARTICLE IV
Antidilution Provisions
SECTION 4.1 Adjustment of Exercise Price and Warrant Number.
The number of shares of Common Stock issuable upon the exercise of each Warrant
(the "Warrant Number") is initially one. The Warrant Number is subject to
adjustment from time to time upon the occurrence of the events enumerated in, or
as otherwise provided in, this Article IV.
SECTION 4.2 Adjustment for Change in Capital Stock.
If the Company:
(1) pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock;
(2) subdivides or reclassifies its outstanding shares of
Common Stock into a greater number of shares;
(3) combines or reclassifies its outstanding shares of Common
Stock into a smaller number of shares;
(4) makes a distribution on Common Stock in shares of its
capital stock other than Common Stock; or
(5) issues by reclassification of its Common Stock any shares
of its capital stock (other than reclassifications arising solely as a
result of a change in the par value or no par value of the Common
Stock);
then the Warrant Number in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Company which it would have owned immediately following such action if such
Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
Such adjustment shall be made successively whenever any event
listed above shall occur. If the occurrence of any event listed above results in
an adjustment under Section 4.3 or 4.4 below, no further adjustment shall be
made under this Section 4.2.
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SECTION 4.3 Adjustment for Rights Issue.
If the Company distributes (and receives no consideration
therefor) any rights, options or warrants (whether or not immediately
exercisable) to holders of any class of its Common Stock entitling them to
purchase shares of Common Stock at a price per share less than the Current
Market Value per share on the record date relating to such distribution, the
Warrant Number shall be adjusted in accordance with the formula:
W'= W x O+N
---------
O + N x P
-----
M
where:
W' = the adjusted Warrant Number.
W = the Warrant Number immediately prior to the record
date for any such distribution.
O = the number of shares of Common Stock outstanding on
the record date for any such distribution.
N = the number of additional shares of Common Stock
issuable upon exercise of such rights, options or
warrants.
P = the exercise price per share of such rights, options
or warrants.
M = the Current Market Value per share of Common Stock
on the record date for any such distribution.
The adjustment shall be made successively whenever any such
rights, options or warrants are issued and shall become effective immediately
after the record date for the determination of stockholders entitled to receive
the rights, options or warrants. If at the end of the period during which such
rights, options or warrants are exercisable, not all rights, options or warrants
shall have been exercised, the adjusted Warrant Number shall be immediately
readjusted to what it would have been if "N" in the above formula had been the
number of shares actually issued.
SECTION 4.4 Adjustment for Other Distributions.
If the Company distributes to holders of any class of its
Common Stock (as such) (i) any evidences of indebtedness or preferred stock of
the Company or any of its subsidiaries, (ii) any assets of the Company or any of
its subsidiaries, or (iii) any rights, options or warrants to acquire any
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<PAGE> 14
of the foregoing or to acquire any other securities of the Company, the Warrant
Number shall be adjusted in accordance with the formula:
W' = W x M
-----
M - F
where:
W' = the adjusted Warrant Number.
W = the Warrant Number immediately prior to the record
date mentioned below.
M = the Current Market Value per share of Common Stock
on the record date mentioned below.
F = the fair market value on the record date mentioned
below of the shares, indebtedness, assets, rights,
options or warrants distributable to the holder of
one share of Common Stock.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
If an adjustment is made pursuant to this subsection (c) as a result of the
issuance of rights, options or warrants and at the end of the period during
which any such rights, options or warrants are exercisable, not all such rights,
options or warrants shall have been exercised, the adjusted Warrant Number shall
be immediately readjusted as if "F" in the above formula was the fair market
value on the record date of the indebtedness or assets actually distributed upon
exercise of such rights, options or warrants divided by the number of shares of
Common Stock outstanding on the record date.
In the event that "F" in the above formula is greater than or
equal to "M" in the above formula, then each Holder of the Warrants,
notwithstanding that such Holder's Warrants have not been exercised, shall
receive the distribution referred to in this Section 4.4 on the basis of the
number of Warrant Shares underlying the Warrants held by each such Holder.
This subsection does not apply to rights, options or warrants
referred to in Section 4.3.
SECTION 4.5 Adjustment for Common Stock Issue.
If the Company issues shares of Common Stock for a
consideration per share less than the Current Market Value per share on the date
the Company fixes the offering price of such additional shares, the Warrant
Number shall be adjusted in accordance with the formula:
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<PAGE> 15
W' = W x A
----
0+ P
-
M
where:
W' = the adjusted Warrant Number.
W = the Warrant Number immediately prior to any such
issuance.
O = the number of shares of Common Stock outstanding
immediately prior to the issuance of such additional
shares of Common Stock.
P = the aggregate consideration received for the
issuance of such additional shares of Common Stock.
M = the Current Market Value per share of Common Stock
on the date of issuance of such additional shares.
A = the number of shares of Common Stock outstanding
immediately after the issuance of such additional
shares of Common Stock.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
This Section 4.5 does not apply to (i) any of the transactions
described in Sections 4.3 and 4.4, or (ii) the exercise of the Warrants, or
conversion or exchange of other securities convertible into or exchangeable for
Common Stock.
SECTION 4.6 Adjustment for Convertible Securities Issue.
If the Company issues any options, warrants or other
securities (other than the Company's Series A Senior Preferred Stock and Series
A Junior Preferred Stock) convertible into or exchangeable or exercisable for
Common Stock (other than securities issued in transactions described in Sections
4.3 or 4.4) for a consideration per share of Common Stock initially deliverable
upon conversion, exchange or exercise of such securities less than the Current
Market Value per share on the date of issuance of such securities, the Warrant
Number shall be adjusted in accordance with this formula:
W' = W x O + D
-----
O + P
-
M
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<PAGE> 16
where:
W' = the adjusted Warrant Number.
W = the Warrant Number immediately prior to any such
issuance.
O = the number of shares of Common Stock outstanding
immediately prior to the issuance of such securities.
P = the sum of the aggregate consideration received for
the issuance of such securities and the aggregate
minimum consideration receivable by the Company for
issuance of Common Stock upon conversion or in
exchange for, or upon exercise of, such securities.
M = the Current Market Value per share of Common Stock
on the date of issuance of such securities.
D = the maximum number of shares of Common Stock
deliverable upon conversion or in exchange for or
upon exercise of such securities at the initial
conversion, exchange or exercise rate.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion,
exchange or exercise of such securities has not been issued when the conversion,
exchange or exercise rights of such securities have expired or been terminated,
then the adjusted Warrant Number shall promptly be readjusted to the adjusted
Warrant Number which would then be in effect had the adjustment upon the
issuance of such securities been made on the basis of the actual number of
shares of Common Stock issued upon conversion, exchange or exercise of such
securities. If the aggregate minimum consideration receivable by the Company for
issuance of Common Stock upon conversion or in exchange for, or upon exercise
of, such securities shall be increased by virtue of provisions therein contained
or upon the arrival of a specified date or the happening of a specified event,
then the Warrant Number shall promptly be readjusted to the Warrant Number which
would then be in effect had the adjustment upon the issuance of such securities
been made on the basis of such increased minimum consideration.
This Section 4.6 does not apply to the issuance of the
Warrants or to any of the transactions described in Section 4.3.
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<PAGE> 17
SECTION 4.7 Consideration Received.
For purposes of any computation respecting consideration
received pursuant to Sections 4.5 and 4.6, the following shall apply:
(1) in the case of the issuance of shares of Common
Stock for cash, the consideration shall be the amount of such cash
(without any deduction being made for any commissions, discounts or
other expenses incurred by the Company for any underwriting of the
issue or otherwise in connection therewith);
(2) in the case of the issuance of shares of Common
Stock for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair market
value thereof (irrespective of the accounting treatment thereof) as
determined in good faith by the Board; and
(3) in the case of the issuance of options, warrants
or other securities convertible into or exchangeable or exercisable for
shares of Common Stock, the aggregate consideration received therefor
shall be deemed to be the consideration received by the Company for the
issuance of such securities plus the additional minimum consideration,
if any, to be received by the Company upon the conversion, exchange or
exercise thereof (the consideration in each case to be determined in
the same manner as provided in clauses (1) and (2) of this subsection).
SECTION 4.8 When De Minimis Adjustment May Be Deferred.
No adjustment in the Warrant Number need be made unless the
adjustment would require an increase or decrease of at least 0. 5 % in the
Warrant Number. Any adjustment that is not made shall be carried forward and
taken into account in any subsequent adjustment, provided that no such
adjustment shall be deferred beyond the date on which a Warrant is exercised.
All calculations under this Article IV shall be made to the
nearest 1/100th of a share.
SECTION 4.9 Adjustment to Exercise Price.
Upon each adjustment to the Warrant Number pursuant to this
Article IV, the Exercise Price shall be adjusted so that it is equal to the
Exercise Price in effect immediately prior to such adjustment multiplied by a
quotient, the numerator of which is the Warrant Number in effect immediately
prior to such adjustment, and the denominator of which is the Warrant Number in
effect immediately after such adjustment; provided, that the Exercise Price
shall not be adjusted below the lesser of $0.01 per share of Common Stock and
the then par value per share of Common Stock.
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SECTION 4.10 When No Adjustment Required.
If an adjustment is made upon the establishment of a record
date for a distribution subject to Sections 4.2, 4.3 or 4.4 hereof and such
distribution is subsequently canceled, the Warrant Number and Exercise Price
then in effect shall be readjusted, effective as of the date when the Board
determines to cancel such distribution, to that which would have been in effect
if such record date had not been fixed.
To the extent the Warrants become convertible into cash, no
adjustment need be made thereafter as to the amount of cash into which such
Warrants are exercisable. Interest will not accrue on the cash.
SECTION 4.11 Notice of Adjustment.
Whenever the Warrant Number or Exercise Price is adjusted, the
Company shall provide the notices required by Section 7.4 hereof.
SECTION 4.12 Voluntary Reduction.
The Company from time to time may reduce the Exercise Price by
any amount for any period of time (including, without limitation, permanently)
if the period is at least 20 days and if the reduction is irrevocable during the
period.
Whenever the Exercise Price is reduced, the Company shall mail
to the Holders a notice of the reduction. The Company shall mail the notice at
least 15 days before the date the reduced Exercise Price takes effect. The
notice shall state the reduced Exercise Price and the period it will be in
effect.
A reduction of the Exercise Price under this Section 4.12
(other than a permanent reduction) does not change or adjust the Exercise Price
otherwise in effect for purposes of Sections 4.2, 4.3, 4.4, 4.5 or 4.6.
SECTION 4.13 Reorganizations.
In case of any capital reorganization, other than in the cases
referred to in Sections 4.2, 4.3, 4.4, 4.5 or 4.6 hereof, or the consolidation
or merger of the Company with or into another corporation (other than a merger
or consolidation in which the Company is the continuing corporation and which
does not result in any reclassification of the outstanding shares of Common
Stock into shares of other stock or other securities or property), or the sale
of all of the assets or substantially all of the assets of the Company
(collectively, such actions being hereinafter referred to as "Reorganizations"),
there shall thereafter be deliverable upon exercise of any Warrant (in lieu of
the number of shares of Common Stock theretofore deliverable) the amount of
cash, the number of shares of stock or other securities or property to which a
holder of the number of shares of
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Common Stock that would otherwise have been deliverable upon the exercise of
such Warrant would have been entitled upon such Reorganization if such Warrant
had been exercised in full immediately prior to such Reorganization. In case of
any Reorganization, appropriate adjustment, as determined in good faith by the
Board of the Company, whose determination shall be described in a duly adopted
resolution certified by the Company's Secretary or Assistant Secretary, shall be
made in the application of the provisions herein set forth with respect to the
rights and interests of Holders so that the provisions set forth herein shall
thereafter be applicable, as nearly as possible, in relation to any shares or
other property thereafter deliverable upon exercise of Warrants.
The Company shall not effect any such Reorganization unless
prior to or simultaneously with the consummation thereof the successor
corporation (if other than the Company) resulting from such Reorganization or
the corporation purchasing or leasing such assets or other appropriate
corporation or entity shall expressly assume, by a supplemental Warrant
Agreement or other acknowledgment executed and delivered to the Holder(s), the
obligation to deliver to each such Holder such cash, such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to purchase, and all other obligations and liabilities
under this Agreement.
SECTION 4.14 Form of Warrants.
Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
SECTION 4.15 Other Dilutive Events.
In case any event shall occur as to which the provisions of
this Article IV are not strictly applicable but the failure to make any
adjustment would not fairly protect the purchase rights represented by the
Warrants in accordance with the essential intent and principles of such
sections, then, in each such case, the Company shall make a good faith
adjustment to the Exercise Price and Warrant Number into which each Warrant is
exercisable in accordance with the intent of this Article IV and, shall appoint
a "big five" accounting firm of independent certified public accountants (which
may be the regular auditors of the Company), which shall give their opinion upon
the adjustment, if any, on a basis consistent with the essential intent and
principles established in this Article IV, necessary to preserve, without
dilution, the purchase rights represented by these Warrants. Upon receipt of
such opinion, the Company shall promptly mail a copy thereof to the Holder of
each Warrant and shall make the adjustments described therein.
SECTION 4.16 Miscellaneous.
For purpose of this Article IV the term "shares of Common
Stock" shall mean (i) shares of any class of stock designated as Common Stock of
the Company as of the date of this
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Agreement, (ii) shares of any other class of stock resulting from successive
changes or reclassification of such shares consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value and
(iii) shares of Common Stock of the Company issuable upon exercise of options,
warrants or rights to purchase Common Stock of the Company or upon conversion or
exchange of securities convertible into or exchangeable for shares of Common
Stock of the Company outstanding at the date of determination. In the event that
at any time, as a result of an adjustment made pursuant to this Article IV, the
holders of Warrants shall become entitled to purchase any securities of the
Company other than, or in addition to, shares of Common Stock, thereafter the
number or amount of such other securities so purchasable upon exercise of each
Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Warrant Shares contained in Sections 4.2 through 4.15 of this Article IV,
inclusive, and the provisions of this Agreement with respect to the Warrant
Shares or the Common Stock shall apply on like terms to any such other
securities.
SECTION 4.17 Non-applicability of Article IV.
The provisions of this Article IV do not apply to (i) a change
solely in the par value or no par value of the Common Stock, provided that the
Company shall not increase the par value to exceed the Exercise Price, (ii) the
conversion or exchange (other than pursuant to a reclassification), in any case
on a share-for-share basis, of Common Stock for non-voting common stock that has
rights (other than voting rights) identical to the Common Stock, or of such
non-voting stock for Common Stock, (iii) the issuance to employees of the
Company or any of its subsidiaries of stock or stock options in an amount which,
upon purchase or exercise, as the case may be, would represent in the aggregate,
less than 10 % of the Company's Common Stock on a fully-diluted basis, or (iv)
any exercise of Warrants.
ARTICLE V
Transferability
SECTION 5.1 Transfer and Exchange. The Company shall cause to
be kept at the office of the Warrant Agent designated for such purpose a
register in which, subject to such reasonable regulations as it may prescribe,
the Company shall provide for the registration of Warrant Certificates and
transfers or exchanges of Warrant Certificates as herein provided. All Warrant
Certificates issued upon any registration of transfer or exchange of Warrant
Certificates shall be the valid obligations of the Company, evidencing the same
obligations, and entitled to the same benefit under this Agreement, as the
Warrant Certificates surrendered for such registration of transfer or exchange.
A Holder may transfer its Warrants only by complying with the
terms of this Agreement. No such transfer shall be effected until, and such
transferee shall succeed to the rights of a Holder only upon, final acceptance
and registration of the transfer by the Warrant Agent in the
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register. Prior to the registration of any transfer of Warrants by a Holder as
provided herein, the Company, the Warrant Agent, any agent of the Company or the
Warrant Agent may treat the Person in whose name the Warrants are registered as
the owner thereof for all purposes and as the Person entitled to exercise the
rights represented thereby, any notice to the contrary notwithstanding.
Furthermore, any Holder of a Global Warrant shall, by acceptance of such Global
Warrant, agree that transfers of beneficial interests in such Global Warrant may
be effected only through a book-entry system maintained by the Holder of such
Global Warrant (or its agent), and that ownership of a beneficial interest in
the Warrants represented thereby shall be required to be reflected in a book
entry. When Warrant Certificates are presented to the Warrant Agent with a
request to register the transfer or to exchange them for an equal amount of
Warrants of other authorized denominations, the Warrant Agent shall register the
transfer or make the exchange in accordance with the provisions hereof.
To permit registrations of transfer and exchanges, the Company
shall make available to the Warrant Agent a sufficient number of executed
Warrant Certificates to effect such registrations of transfers and exchanges. No
service charge shall be made to the Holder for any registration of transfer or
exchange of Warrants, but the Company may require from the transferring or
exchanging Holder payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable upon exchanges pursuant to Section 2.3 and
exchanges in respect of portions of Warrants not exercised and the Company may
deduct such taxes or charges from any payment of money to be made and such
transfer or exchange shall not be consummated and the Warrant Agent shall have
no duty or obligation under this Section 5.1 or Section 2.3 unless and until the
Holder shall have paid to the Company the amount of such tax or charge or shall
have established to the satisfaction of the Company and the Warrant Agent that
such tax or charge has been paid.
SECTION 5.2 Registration of Transfer and Exchange.
(a) Transfer and Exchange of Definitive Warrants. When
Definitive Warrants are presented to the Warrant Agent with a request (i) to
register the transfer of the Definitive Warrant or (ii) to exchange such
Definitive Warrants for an equal number of Definitive Warrants of other
authorized denominations, the Warrant Agent shall register the transfer or make
the exchange as requested if the Warrant Agent's requirements for such
transactions are met; provided, however, that the Definitive Warrants so
presented have been duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Warrant Agent, duly executed by the holder
thereof or by such holder's attorney.
(b) Transfer of a Definitive Warrant for a Beneficial Interest
in Global Warrant. A Definitive Warrant may be exchanged for a beneficial
interest in the Global Warrant only upon receipt by the Warrant Agent of a
Definitive Warrant, duly endorsed or accompanied by appropriate instruments of
transfer, in form satisfactory to the Warrant Agent, together with written
instructions directing the Warrant Agent to make an endorsement on the Global
Warrant to reflect an increase in the number of Warrants and Warrant Shares
represented by the Global Warrant, and then the Warrant Agent shall cancel such
Definitive Warrant and cause the number of Warrants and Warrant
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<PAGE> 22
Shares represented by the Global Warrant to be increased accordingly. If no
Global Warrant is then outstanding, the Company shall issue and the Warrant
Agent shall countersign a new Global Warrant representing the appropriate number
of Warrants and Warrant Shares.
(c) Transfer and Exchange of Global Warrant. The transfer and
exchange of the Global Warrant or beneficial interests therein shall be effected
through the Depository, in accordance with this Warrant Agreement and the
procedures of the Depository therefor. Notwithstanding any other provisions of
this Warrant Agreement, the Global Warrant may not be transferred as a whole
except by the Depository to a nominee of the Depository or by a nominee of the
Depository to the Depository or another nominee of the Depository or by the
Depository or any such nominee to a successor Depository or a nominee of such
successor Depository: provided, that if:
(i) the Depository notifies the Company that the
Depository is unwilling or unable to continue as Depository for the
Global Warrant and a successor Depository for the Global Warrant is not
appointed by the Company within 90 days after delivery of such notice;
or
(ii) the Company, at its sole discretion, notifies
the Warrant Agent in writing that it elects to cause the issuance of
Definitive Warrants under this Warrant Agreement.
then the Company shall execute and the Warrant Agent shall countersign and
deliver to the Company, Definitive Warrants in an aggregate number equal to the
number of Warrants evidenced by the Global Warrant, in exchange for such Global
Warrant.
(d) Transfer of a Beneficial interest in Global Warrant for a
Definitive Warrant. Upon receipt by the Warrant Agent of written transfer
instructions (or such other form of instructions as is customary for the
Depository) from the Depository (or its nominee) on behalf of any person having
a beneficial interest in the Global Warrant, the Warrant Agent shall cause, in
accordance with the standing instructions and procedures existing between the
Depository and the Warrant Agent (the "Standing Instructions"), the number of
Warrants and Warrant Shares represented by the Global Warrant to be reduced and,
following such reduction, the Company shall execute and the Warrant Agent shall
countersign and deliver to the transferee, as the case may be, a Definitive
Warrant. Definitive Warrants issued in exchange for a beneficial interest in the
Global Warrant shall be registered in such names and in such authorized
denominations as the Depository shall instruct the Warrant Agent.
(e) Cancellation and/or Adjustment of Global Warrant. At such
time as all beneficial interests in the Global Warrant have either been
exchanged for Definitive Warrants, exercised or canceled, the Global Warrant
shall be returned to or retained and canceled by the Warrant Agent. At any time
prior to such cancellation, if any beneficial interest in the Global Warrant is
exchanged for Definitive Warrants, exercised or canceled, the number of Warrants
and Warrant Shares
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represented by such Global Warrant shall be reduced and an endorsement shall be
made on such Global Warrant by the Warrant Agent to reflect such reduction.
SECTION 5.3 Surrender of Warrant Certificates. Any Warrant
Certificate surrendered for registration of transfer, exchange, exercise or
repurchase of the Warrants represented thereby shall, if surrendered to the
Company, be delivered to the Warrant Agent, and all Warrant Certificates
surrendered or so delivered to the Warrant Agent shall be promptly canceled by
the Warrant Agent and shall not be reissued by the Company and, except as
provided in this Article V in case of an exchange or in Article III hereof in
case of the exercise or repurchase of less than all the Warrants represented
thereby or in case of a mutilated Warrant Certificate, no Warrant Certificate
shall be issued hereunder in lieu thereof. The Warrant Agent shall deliver to
the Company from time to time or otherwise dispose of such canceled Warrant
Certificates as the Company may direct in writing.
ARTICLE VI
Warrant Agent
SECTION 6.1 Appointment of Warrant Agent. The Company hereby
appoints the Warrant Agent to act as agent for the Company in accordance with
provisions of this Agreement and the Warrant Agent hereby accepts such
appointment.
SECTION 6.2 Rights and Duties of Warrant Agent.
(a) Agent for the Company. In acting under this Warrant
Agreement and in connection with the Warrant Certificates, the Warrant Agent is
acting solely as agent of the Company and does not assume any obligation or
relationship or agency or trust for or with any of the holders of Warrant
Certificates or beneficial owners of Warrants.
(b) Counsel. The Warrant Agent may consult with counsel
satisfactory to it, and the advice of such counsel shall be full and complete
authorization and protection and the Warrant Agent shall incur no liability for
or in respect of any action taken, suffered or omitted by it hereunder in good
faith and in accordance with the advice of such counsel. Reasonable fees and
expenses of such counsel shall be paid by the Company.
(c) Documents. The Warrant Agent shall be protected and shall
incur no liability for or in respect of any action taken, suffered or omitted by
it in reliance upon any Warrant Certificate, notice, direction, consent,
certificate, affidavit, statement or other paper or document believed by it to
be genuine and to have been presented or signed by the proper parties.
(d) No Implied Obligations. The Warrant Agent shall be
obligated to perform only such duties as are herein and in the Warrant
Certificates specifically set forth and no implied duties
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or obligations shall be read into this Agreement or the Warrant Certificates
against the Warrant Agent. The Warrant Agent shall not be under any obligation
to take any action hereunder which may cause it to incur any expense or
liability for which it does not receive indemnity. The Warrant Agent shall not
be accountable or under any duty or responsibility for the use by the Company of
any of the Warrant Certificates countersigned by the Warrant Agent and delivered
by it to the Holders or on behalf of the Holders pursuant to this Agreement or
for the application by the Company of the proceeds of the Warrants. The Warrant
Agent shall not be under any responsibility in respect of the validity of this
Agreement or the execution and delivery hereof (except the due execution hereof
by the Warrant Agent) or in respect of the validity or execution of any Warrant
Certificate (except its countersignature thereof). The Warrant Agent shall have
no duty or responsibility in case of any default by the Company in the
performance of its covenants or agreements contained herein or in the Warrant
Certificates or in the case of the receipt of any written demand from a Holder
with respect to such default, including any duty or responsibility to initiate
or attempt to initiate any proceedings at law or otherwise.
(e) Not Responsible for Adjustments or Validity of Stock. The
Warrant Agent shall not at any time be under any duty or responsibility to any
Holder to determine whether any facts exist that may require an adjustment of
the Warrant Number or the Exercise Price, or with respect to the nature or
extent of any adjustment when made, or with respect to the method employed, or
herein or in any supplemental agreement provided to be employed, in making the
same. The Warrant Agent shall not be accountable with respect to the validity or
value of any shares of Common Stock or of any securities or property which may
at any time be issued or delivered upon the exercise of any Warrant or upon any
adjustment pursuant to Article IV, and it makes no representation with respect
thereto. The Warrant Agent shall not be responsible for any failure of the
Company to make any cash payment or to issue, transfer or deliver any shares of
Common Stock or stock certificates upon the surrender of any Warrant Certificate
for the purpose of exercise or upon any adjustment pursuant to Article IV, or to
comply with any of the covenants of the Company contained in Article IV.
SECTION 6.3 Individual Rights of Warrant Agent. The Warrant
Agent and any stockholder, director, member, Affiliate, officer or employee of
the Warrant Agent may buy, sell or deal in any of the Warrants or other
securities of the Company or its affiliates or become pecuniarily interested in
transactions in which the Company or its affiliates may be interested, or
contract with or lend money to the Company or its affiliates or otherwise act as
fully and freely as though it were not the Warrant Agent under this Agreement.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
SECTION 6.4 Warrant Agent's Disclaimer. The Warrant Agent
shall not be responsible for and makes no representation as to the validity or
adequacy of this Agreement or the Warrant Certificates and it shall not be
responsible for any statement in this Agreement or the Warrant Certificates (all
such statements being deemed to have been made by the Company only) other than
its countersignature thereon.
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SECTION 6.5 Compensation and Indemnity. The Company agrees to
pay the Warrant Agent from time to time reasonable compensation for its services
and to reimburse the Warrant Agent upon request for all reasonable out-of-pocket
expenses incurred by it, including the reasonable compensation and expenses of
the Warrant Agent's agents and counsel, in connection with the preparation,
delivery, administration, execution and amendment of this Agreement and the
exercise and performance of its duties hereunder. The Company shall indemnify
the Warrant Agent for and hold it harmless against any loss, liability damage,
judgment, fine, penalty, claim, demand, settlement, cost or expense (including
reasonable agents' and attorneys' fees and expenses) incurred by it without
gross negligence or bad faith on its part for any action taken, suffered or
omitted by the Warrant Agent in connection with the acceptance and
administration of this Agreement, including the costs and expenses of defending
against any claim of liability in the premises. The indemnity provided herein
shall survive the termination of this Agreement and the termination and the
expiration of the Warrants. The costs and expenses incurred in enforcing this
right of indemnification shall be paid by the Company. The Warrant Agent shall
notify the Company promptly of any claim for which it seeks indemnity. The
Company need not reimburse any expense or indemnify against any loss or
liability incurred by the Warrant Agent through willful misconduct, gross
negligence or bad faith. The Company's payment obligations pursuant to this
Section 6.5 shall survive the termination of this Agreement. The Warrant Agent
shall be liable hereunder only for its own gross negligence, bad faith or
willful misconduct (as finally determined by a court of competent jurisdiction).
Anything in this Agreement to the contrary notwithstanding, in no event shall
the Warrant Agent be liable for special, punitive, indirect, incidental or
consequential loss or damage of any kind whatsoever (including, but not limited
to, lost profits), even if the Warrant Agent has been advised of the possibility
of such loss or damage. Any liability of the Warrant Agent under this Agreement
shall be limited to the amount of fees paid by the Company to the Warrant Agent.
To secure the Company's payment obligations under this
Agreement, the Warrant Agent shall have a lien prior to the Warrant Holders on
all money or property held or collected by the Warrant Agent.
Whenever in the performance of its duties under this Agreement
the Warrant Agent shall deem it necessary or desirable that any fact or matter
be proved or established by the Company prior to taking, suffering or omitting
any action hereunder, such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by an Officer and delivered to
the Warrant Agent; and such certificate shall be full authorization to the
Warrant Agent, and the Warrant Agent shall incur no liability for or in respect
of any action taken, suffered or omitted in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
The Warrant Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
Officer, and to apply to any Officer for advice or instructions in connection
with its duties hereunder, and such advice or instructions shall be full
authorization and protection to the Warrant Agent and the Warrant Agent shall
incur no
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liability for or in respect of any action taken, suffered or omitted by it in
good faith in accordance with the instructions of any Officer or for any delay
in acting while waiting for such instructions.
The Warrant Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents, and the Warrant Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company or any other Person
resulting from any such act, default, neglect or misconduct, absent gross
negligence or willful misconduct in the selection and continued employment
thereof.
No provision of this Agreement shall require the Warrant Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its rights
if it believes that repayment of such funds or adequate indemnification against
such risk or liability is not assured it.
SECTION 6.6 Successor Warrant Agent.
(a) The Company To Provide Warrant Agent. The Company agrees
for the benefit of the Holders that there shall at all times be a Warrant Agent
hereunder until all the Warrants have been exercised or are no longer
exercisable.
(b) Resignation and Removal. The Warrant Agent may at any time
resign by giving written notice to the Company of such intention on its part,
specifying the date on which its desired resignation shall become effective;
provided, however, that such date shall not be less than 30 days after the date
on which such notice is given unless the Company otherwise agrees. The Warrant
Agent hereunder may be removed at any time by the filing with it of an
instrument in writing signed by or on behalf of the Company and specifying such
removal and the date when it shall become effective, which date shall not be
less than 60 days after such notice is given unless the Warrant Agent otherwise
agrees. Any removal under this Section 6.6 shall take effect upon the
appointment by the Company as hereinafter provided of a successor Warrant Agent
and the acceptance of such appointment by such successor Warrant Agent.
(c) The Company To Appoint Successor. In case at any time the
Warrant Agent shall resign, or shall be removed, or shall become incapable of
acting, or shall be adjudged a bankrupt or insolvent, or shall commence a
voluntary case under the Federal bankruptcy laws, as now or hereafter
constituted, or under any other applicable Federal or state bankruptcy,
insolvency or similar law or shall consent to the appointment of or taking
possession by a receiver, custodian, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Warrant Agent or its property or affairs, or
shall make an assignment for the benefit of creditors, or shall admit in writing
its inability to pay its debts generally as they become due, or shall take
corporate action in furtherance of any such action, or a decree or order for
relief by a court having jurisdiction in the premises shall have been entered in
respect of the Warrant Agent in an involuntary case under the Federal bankruptcy
laws, as now or hereafter constituted, or any other applicable Federal or State
bankruptcy, insolvency
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or similar law; or a decree order by a court having jurisdiction in the premises
shall have been entered for the appointment of a receiver, custodian,
liquidator, assignee, trustee, sequestrator (or similar official) of the Warrant
Agent or of its property or affairs, or any public officer shall take charge or
control of the Warrant Agent or of its property or affairs for the purpose of
rehabilitation, conservation, winding up of or liquidation, a successor Warrant
Agent, qualified as aforesaid, shall be appointed by the Company by an
instrument in writing, filed with the successor Warrant Agent (or, in the
absence of such appointment within 60 days after the notice of resignation or
removal, either party hereto may petition the appointment of a successor by a
court of competent jurisdiction.) Upon the appointment as aforesaid of a
successor Warrant Agent and acceptance by the successor Warrant Agent of such
appointment, the Warrant Agent shall cease to be Warrant Agent hereunder;
provided, however, that in the event of the resignation of the Warrant Agent
under this subsection (c), such resignation shall be effective on the earlier of
(i) the date specified in the Warrant Agent's notice of resignation and (ii) the
appointment and acceptance of a successor Warrant Agent hereunder. As soon as
practicable after appointment of the successor Warrant Agent, the Company shall
cause written notice of the change in the Warrant Agent to be given to each of
the Holders in the manner provided for in Section 7.4 hereof. However, failure
to give any notice provided for in this clause (c) or any defect therein, shall
not affect the legality or validity of the resignation or removal of the Warrant
Agent or the appointment of the successor Warrant Agent, as the case may be.
(d) Successor Expressly To Assume Duties. Any successor
Warrant Agent appointed hereunder shall execute, acknowledge and deliver to its
predecessor and to the Company an instrument accepting such appointment
hereunder, and thereupon such successor Warrant Agent, without any further act,
deed or conveyance, shall become vested with all the rights and obligations of
such predecessor with like effect as if originally named as Warrant Agent
hereunder, and such predecessor, upon payment of its charges and disbursements
then unpaid, shall thereupon become obligated to transfer, deliver and pay over,
and such successor Warrant Agent shall be entitled to receive, all monies,
securities and other property on deposit with or held by such predecessor, as
Warrant Agent hereunder.
(e) Successor by Merger. Any Person into which the Warrant
Agent hereunder may be merged or consolidated, or any Person resulting from any
merger or consolidation to which the Warrant Agent shall be a party, or any
Person to which the Warrant Agent shall sell or otherwise transfer all or
substantially all of its shareholder services business; provided that it shall
be qualified as aforesaid, shall be the successor Warrant Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto.
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ARTICLE VII
Miscellaneous
SECTION 7.1 Persons Benefitting. Nothing in this Agreement is
intended or shall be construed to confer upon any Person other than the Company,
the Warrant Agent and the Holders any right, remedy or claim under or by reason
of this agreement or any part hereof.
SECTION 7.2 Rights of Holders. Except as expressly
contemplated herein, holders of unexercised Warrants are not entitled (i) to
receive dividends or other distributions, (ii) to receive notice of or vote at
any meeting of the stockholders, (iii) to consent to any action of the
stockholders, (iv) to exercise any preemptive right or to receive notice of any
other proceedings of the Company or (v) to exercise any other rights whatsoever
as stockholders of the Company.
SECTION 7.3 Amendment. This Agreement may be amended by the
parties hereto without the consent of any Holder for the purpose of curing any
ambiguity, or of curing, correcting or supplementing any defective provision
contained herein or making any other provisions with respect to matters or
questions arising under this Agreement as the Company and the Warrant Agent may
deem necessary or desirable; provided, however, that the Company determines, and
the Warrant Agent may rely on such determination, that such action shall not
affect adversely the rights of the Holders. Any amendment or supplement to this
Agreement that has a material adverse effect on the interests of the Holders
shall require the written consent of the Holders of a majority of the then
outstanding Warrants. The consent of each Holder affected shall be required for
any amendment pursuant to which the Exercise Price would be increased or the
number of Warrant Shares purchasable upon exercise of Warrants would be
decreased (other than pursuant to adjustments provided in Article IV as of the
Issue Date of the Warrants). In determining whether the Holders of the required
number of Warrants have concurred in any direction, waiver or consent, Warrants
owned by the Company or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company shall
be disregarded and deemed not to be outstanding, except that, for the purpose of
determining whether the Warrant Agent shall be protected in relying on any such
direction, waiver or consent, only Warrants which the Warrant Agent knows are so
owned shall be so disregarded. Also, subject to the foregoing, only Warrants
outstanding at the time shall be considered in any such determination.
SECTION 7.4 Notices. Any notice or communication shall be in
writing and delivered in Person or mailed by first-class mail addressed as
follows:
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if to the Company:
TransTexas Gas Corporation
1300 North Sam Houston Parkway East
Suite 310
Houston, Texas 77032-2949
Attention: Ed Donahue
Vice President
with a copy to:
Gardere & Wynne, L.L.P.
3000 Thanksgiving Tower
Dallas, Texas 75201
Attention: C. Robert Butterfield
if to the Warrant Agent:
ChaseMellon Shareholder Services, L.L.C.
2323 Bryan Street
Dallas, Texas 75201
Attention: Mona Vorhees
with a copy to:
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road, Overpeck Centre
Ridgefield Park, NJ 07660
Attention: General Counsel
The Company or the Warrant Agent by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Holder shall be mailed
to the Holder at the Holder's address as it appears on the register in which the
Company shall provide for the registration of Warrants and Warrant Shares and of
transfers and exchanges of Warrants and Warrant Shares and shall be sufficiently
given if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders. If
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
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SECTION 7.5 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK AS
APPLIED TO CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
SECTION 7.6 Successors. All agreements of the Company in this
Agreement and the Warrant Certificates shall bind its successors. All agreements
of the Warrant Agent in this Agreement shall bind its successors.
SECTION 7.7 Multiple Originals. The parties may sign any
number of copies of this Agreement. Each signed copy shall be an original, but
all of them together represent the same agreement. One signed copy is enough to
prove this Agreement.
SECTION 7.8 Table of Contents. The table of contents and
headings of the Articles and Sections of this Agreement have been inserted for
convenience of reference only, are not intended to be considered a part hereof
and shall not modify or restrict any of the terms or provisions hereof.
SECTION 7.9 Severability. The provisions of this Agreement are
severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
SECTION 7.10 Further Assurances. From time to time on and
after the date hereof, the Company shall deliver or cause to be delivered to the
Warrant Agent such further documents and instruments and shall do and cause to
be done such further acts as the Warrant Agent shall reasonably request (it
being understood that the Warrant Agent shall have no obligation to make such
request) to carry out more effectively the provisions and purposes of this
Agreement, to evidence compliance herewith or to assure itself that it is
protected hereunder.
26
<PAGE> 31
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
TRANSTEXAS GAS CORPORATION
By:
---------------------------------
Name:
Title:
CHASEMELLON SHAREHOLDER SERVICES,
L.L.C., as Warrant Agent
By:
---------------------------------
Name:
Title:
27
<PAGE> 32
EXHIBIT A
[FORM OF FACE OF WARRANT CERTIFICATE]
No. [ ] Certificate for ____ Warrants
[Unless and until it is exchanged in whole or in part for
Warrants in definitive form, this Warrant may not be transferred except as a
whole by the depository to a nominee of the depository or by a nominee of the
depository to the depository or another nominee of the depository or by the
depository or any such nominee to a successor depository or a nominee of such
successor depository. The Depository Trust Company ("DTC") (55 Water Street, New
York, New York) shall act as the depository until a successor shall be appointed
by the Company and the Warrant Agent. Unless this certificate is presented by an
authorized representative of DTC to the issuer or its agent for registration of
transfer, exchange or payment, and any certificate issued is registered in the
name of Cede & Co. or such other name as requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.]*
* To be included only if the Warrant is in global form.
A-1
<PAGE> 33
WARRANTS TO PURCHASE COMMON STOCK OF
TRANSTEXAS GAS CORPORATION
THIS CERTIFIES THAT, [ ], or its registered assigns, is the
registered holder of the number of Warrants set forth above (the "Warrants").
Each Warrant entitles the holder thereof (the "Holder"), at its option and
subject to the provisions contained herein and in the Warrant Agreement referred
to below, to purchase from TransTexas Gas Corporation, a Delaware corporation
(the "Company"), initially one share of Class A Common Stock, $0.01 par value,
of the Company (the "Common Stock") at the per share exercise price of $120.00
(the "Exercise Price"). This Warrant Certificate shall terminate and become void
as of the close of business on June 30, 2002 (the "Expiration Date") or upon the
exercise hereof as to all the shares of Common Stock subject hereto. The number
of shares purchasable upon exercise of the Warrants and the Exercise Price per
share shall be subject to adjustment from time to time as set forth in the
Warrant Agreement.
This Warrant Certificate is issued under and in accordance
with a Warrant Agreement dated as of March 15, 2000 (the "Warrant Agreement"),
between the Company and ChaseMellon Shareholder Services, L.L.C. (the "Warrant
Agent," which term includes any successor Warrant Agent under the Warrant
Agreement), and is subject to the terms and provisions contained in the Warrant
Agreement, to all of which terms and provisions the Holder of this Warrant
Certificate consents by acceptance hereof. The Warrant Agreement is hereby
incorporated herein by reference and made a part hereof. Reference is hereby
made to the Warrant Agreement for a full statement of the respective rights,
limitations of rights, duties and obligations of the Company, the Warrant Agent
and the Holders of the Warrants. Capitalized terms used but not defined herein
shall have the meanings ascribed thereto in the Warrant Agreement. A copy of the
Warrant Agreement may be obtained for inspection by the Holder hereof upon
written request to the Warrant Agent at 2323 Bryan Street, Suite 2300, Dallas,
Texas 75201, attention of Mona Vorhees.
Subject to the terms of the Warrant Agreement, the Warrants
may be exercised in whole or in part by presentation of this Warrant
Certificate.
As provided in the Warrant Agreement and subject to the terms
and conditions therein set forth, the Warrants shall be exercisable at any time
or from time to time on any Business Day; provided, however, that no Warrant
shall be exercisable after June 30, 2002.
The Company may require payment of a sum sufficient to pay all
taxes, assessments or other governmental charges in connection with the transfer
or exchange of the Warrant Certificates pursuant to Section 5.1 of the Warrant
Agreement but not with respect to the exercise of the Warrants or the Warrant
Shares.
Upon any partial exercise of the Warrants, there shall be
countersigned and issued to the Holder hereof a new Warrant Certificate in
respect of the shares of Common Stock as to which the Warrants shall not have
been exercised. This Warrant Certificate may be exchanged at the office
A-2
<PAGE> 34
of the Warrant Agent designated for such purpose by presenting this Warrant
Certificate properly endorsed with a request to exchange this Warrant
Certificate for other Warrant Certificates evidencing an equal number of
Warrants. No fractional Warrant Shares will be issued upon the exercise of the
Warrants, but the Company shall pay an amount in cash equal to the Market Price
for one Warrant Share on the trading day immediately preceding the date the
Warrant is exercised, multiplied by the fraction of a Warrant Share that would
be issuable on the exercise of any Warrant.
All shares of Common Stock issuable by the Company upon the
exercise of the Warrants shall, upon such issue, be duly and validly issued and
fully paid and nonassessable.
The Holder in whose name the Warrant Certificate is registered
may be deemed and treated by the Company and the Warrant Agent as the absolute
owner of the Warrant Certificate for all purposes whatsoever and neither the
Company nor the Warrant Agent shall be affected by notice to the contrary.
The Warrants do not entitle any holder hereof to any of the
rights of a stockholder of the Company.
A-3
<PAGE> 35
This Warrant Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Warrant Agent.
TRANSTEXAS GAS CORPORATION
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Attest:
- -----------------------------------
Secretary
DATED:
Countersigned:
ChaseMellon Shareholder Services, L.L.C.,
as Warrant Agent
By:
--------------------------------
Authorized Signatory
A-4
<PAGE> 36
SCHEDULE Of EXCHANGES OF DEFINITIVE WARRANTS*
The following exchanges of a part of this Global Warrant for Definitive Warrants
have been made:
<TABLE>
<CAPTION>
Amount of Number of
increase/ Warrants in this
decrease in Number Global Warrant Signature of
of Warrants in following such authorized officer
Date of Exchange this Global Warrant increase/ decrease of Warrant Agent
<S> <C> <C> <C>
</TABLE>
- --------
*To be included only if the Warrant is in global form.
A-5
<PAGE> 1
EXHIBIT 4.43
EXECUTION COPY
TRANSTEXAS GAS CORPORATION
$200,000,000
15% Senior Secured Notes Due 2005
REGISTRATION RIGHTS AGREEMENT
Dated: March 15, 2000
TransTexas Gas Corporation, a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated in the Second Amended,
Modified and Restated Plan of Reorganization dated January 25, 2000 and pursuant
to the Order dated February 7, 2000 of the United States Bankruptcy Court for
the Southern District of Texas (the "Plan"), to issue to the TEC Bondholders, as
defined in the Plan (the "Initial Holders"), $200,000,000 principal amount of
15% Senior Secured Notes Due 2005 (the "Notes"). The Notes will be issued
pursuant to an Indenture dated as of the date hereof (the "Indenture"), by and
between the Company, as issuer, and Firstar Bank, N.A., as Trustee. The Company
hereby agrees as follows:
1. Shelf Registration. The Company shall take the following actions:
(a) The Company will at its cost, within seventy-five (75) days after
the effective date of the Plan (the "Effective Date"), file with the
Securities and Exchange Commission (the "Commission") and have declared
effective as soon as practicable thereafter, a registration statement (the
"Shelf Registration Statement") on an appropriate form under the Securities
Act of 1933, as amended (the "Securities Act"), relating to the offer and
sale of Transfer Restricted Notes (as defined in Section 7 below) by the
Holders thereof from time to time in accordance with Rule 415 under the
Securities Act; provided, however, that no Holder (other than the Initial
Holders) shall be entitled to have the Notes held by it covered by such
Shelf Registration Statement unless such Holder agrees in writing to be
bound by all the provisions of this Agreement applicable to such Holder.
(b) The Company shall keep the Shelf Registration Statement
continuously effective in order to permit the prospectus included therein
to be lawfully delivered by the Holders of the relevant Notes until five
years from the Issue Date (as defined in the Indenture) or for such shorter
period that will terminate when all the Notes covered by the Shelf
Registration Statement have been sold pursuant thereto.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Company shall cause the Shelf Registration Statement, and the
related prospectus and any amendment or supplement thereto, as of the
effective date of the Shelf Registration Statement, or amendment or
supplement thereto, (i) to comply in all material respects
<PAGE> 2
with the applicable requirements of the Securities Act and the rules and
regulations of the Commission and (ii) not to contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
2. Registration Procedures. In connection with the registration
pursuant to Rule 415 under the Securities Act contemplated by Section 1 hereof
(the "Shelf Registration"), the following provisions shall apply:
(a) At least three (3) days prior to the filing thereof with the
Commission, the Company shall furnish to the Initial Holders a copy of the
proposed form of the Shelf Registration Statement and each amendment
thereto and each supplement, if any, to the prospectus included therein,
and shall in its reasonable judgment reflect in each such document, when so
filed with the Commission, such comments as such Initial Holders may
reasonably propose.
(b) The Company shall give written notice to the Holders (which notice
pursuant to clauses (ii) - (v) hereof shall be accompanied by an
instruction to suspend the use of the prospectus until the requisite
changes have been made):
(i) when the Shelf Registration Statement or any amendment thereto
has been filed with the Commission and when the Shelf Registration
Statement or any post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or supplements
to the Shelf Registration Statement or the prospectus included therein
or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Shelf Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of the
Notes for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose; and
(v) of the happening of any event that requires the Company to make
changes in the Shelf Registration Statement or the prospectus in order
that the Shelf Registration Statement or the prospectus does not
contain an untrue statement of a material fact nor omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.
(c) The Company shall make every reasonable effort to obtain the
withdrawal at the earliest possible time of any order suspending the
effectiveness of the Shelf Registration Statement.
<PAGE> 3
(d) The Company shall furnish to each Holder included within the
coverage of the Shelf Registration, without charge, at least one copy of
the Shelf Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, and, if the Holder so
requests in writing, all exhibits thereto (including those, if any,
incorporated by reference).
(e) The Company shall deliver to each Holder included within the
coverage of the Shelf Registration, without charge, as many copies of the
prospectus (including each preliminary prospectus) included in the Shelf
Registration Statement and any amendment or supplement thereto as such
person may reasonably request. The Company consents, subject to the
provisions of this Agreement, to the use of the prospectus or any amendment
or supplement thereto included in the Shelf Registration Statement by each
of the selling Holders in connection with the offering and sale of the
Notes covered by such prospectus or any such amendment or supplement.
(f) Prior to any public offering of the Notes pursuant to the Shelf
Registration, the Company shall register or qualify or cooperate with the
Holders of Notes included therein and their respective counsel in
connection with the registration or qualification of the Notes for offer
and sale under the securities or "blue sky" laws of such states of the
United States as any Holder reasonably requests in writing and do any and
all other acts or things necessary or advisable to enable the offer and
sale in such jurisdictions of the Notes covered by the Shelf Registration
Statement; provided, however, that the Company shall not be required to (i)
qualify generally to do business in any jurisdiction where it is not then
so qualified or (ii) take any action which would subject it to general
service of process or to taxation in any jurisdiction where it is not then
so subject.
(g) The Company shall cooperate with the Holders to facilitate the
timely preparation and delivery of certificates representing the Notes to
be sold pursuant to the Shelf Registration Statement free of any
restrictive legends and in such denominations and registered in such names
as such Holders may request a reasonable period of time prior to sales of
the Notes pursuant to the Shelf Registration Statement.
(h) Upon the occurrence of any event contemplated by paragraphs (ii)
through (v) of Section 2(b) above during the period for which the Company
is required to maintain an effective Shelf Registration Statement, the
Company shall promptly prepare and file a post-effective amendment to the
Shelf Registration Statement or a supplement to the related prospectus and
any other required document so that, as thereafter delivered to Holders,
the prospectus will not contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading. If the Company notifies the Holders in
accordance with paragraphs (ii) through (v) of Section 2(b) above to
suspend the use of the prospectus until the requisite changes to the
prospectus have been made, then the Holders shall suspend use of such
prospectus, and the period of effectiveness of the Shelf Registration
Statement provided for in Section 1(b) above shall be extended by the
number of days from and including the date of the
<PAGE> 4
giving of such notice to and including the date when the Holders shall have
received such amended or supplemented prospectus pursuant to this Section
2(h).
(i) The Company will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the Shelf
Registration and will make generally available to its security holders (or
otherwise provide in accordance with Section 11(a) of the Securities Act)
an earnings statement satisfying the provisions of Section 11(a) of the
Securities Act, no later than 45 days after the end of a 12-month period
(or 90 days, if such period is a fiscal year) beginning with the first
month of the Company's first fiscal quarter commencing after the effective
date of the Shelf Registration Statement, which statement shall cover such
12-month period.
(j) The Company may require each Holder of Notes to be sold pursuant to
the Shelf Registration Statement to furnish to the Company such information
regarding such Holder and the distribution of the Notes as the Company may
from time to time reasonably require for inclusion in the Shelf
Registration Statement, and the Company may exclude from such Shelf
Registration Statement the Notes of any Holder that unreasonably fails to
furnish such information within a reasonable time after receiving such
request.
(k) The Company shall enter into such customary agreements (including,
if requested, an underwriting agreement in customary form) and take all
such other action, if any, as any Holder shall reasonably request in order
to facilitate the disposition of the Notes pursuant to the Shelf
Registration in an underwritten offering or otherwise.
(l) The Company shall: (i) make reasonably available for inspection by
the Holders, any underwriter participating in any disposition pursuant to
the Shelf Registration Statement and any attorney, accountant or other
agent retained by the Holders or any such underwriter, all relevant
financial and other records, pertinent corporate documents and properties
of the Company and (ii) cause the Company's officers, directors, employees,
accountants and auditors to supply all relevant information reasonably
requested by the Holders or any such underwriter, attorney, accountant or
agent in connection with the Shelf Registration Statement, in each case as
shall be reasonably necessary, in the judgment of such Holder or any such
underwriter, attorney, accountant or agent referred to in this paragraph,
to conduct a reasonable investigation within the meaning of Section 11 of
the Securities Act; provided, however, that the foregoing inspection and
information gathering shall be coordinated by the Initial Holders and on
behalf of the other parties by counsel designated by and on behalf of such
other parties as described in Section 3 hereof.
Until the Shelf Registration Statement is filed with the Commission,
the Company may require each Holder to agree to keep confidential any
non-public information, relating to the Company, received by such Holder in
accordance with this Section 2(l) and not disclose such information (other
than to an affiliate or prospective purchaser who agrees to respect the
confidentiality provisions of this Section 2(l)); provided that each Holder
shall be released from its confidentiality obligations hereunder to the
extent necessary to permit such Holder to trade its Notes in compliance
with the securities laws
<PAGE> 5
if the Company breaches its obligations to timely file the Shelf
Registration Statement and each Holder shall be relieved of its
confidentiality obligations hereunder if the release of such information is
required by law or necessary to respond to inquiries of regulatory
authorities; provided, however, that no Holder shall be relieved of its
confidentiality obligation with respect to any such information otherwise
permitted to be released pursuant to this Section 2 (l) that is not
material to the Company. The foregoing requirement shall exclude
information which (i) is or becomes generally available to the public other
than as a result of disclosure by the Holder or the Holder's
Representatives, or (ii) becomes available to the Holder or any of the
Holder's Representatives on a non-confidential basis from a source other
than the Company or its affiliates or Representatives, provided that
neither the Holder or any of the Holder's Representatives is aware that
such source is under an obligation (whether contractual, legal or
fiduciary) to the Company or its affiliates or Representatives to keep such
information confidential. For purposes hereof, the "Representatives" of any
entity means such entity's directors, officers, employees, legal and
financial advisors, accounts and other agents and representatives.
(m) The Company, if requested by any Holder of the Notes covered
thereby, shall cause (i) its counsel to deliver an opinion and updates
thereof relating to the Notes in customary form addressed to the selling
Holders of the applicable Notes or the managing underwriters, if any,
thereof and dated, in the case of the initial opinion, the effective date
of such Shelf Registration Statement, it being agreed that the matters to
be covered by such opinion shall include, without limitation, the due
incorporation and good standing of the Company and its subsidiaries; the
due authorization, execution and delivery of the relevant agreement of the
type referred to in Section 3(k) hereof; the due authorization, execution,
authentication and issuance, and the validity and enforceability, of the
Notes; the absence of material legal or governmental proceedings involving
the Company; the absence of governmental approvals required to be obtained
in connection with the Shelf Registration Statement, the offering and sale
of the Notes or any agreement of the type referred to in Section 3(k)
hereof; the compliance as to form of such Shelf Registration Statement and
any documents incorporated by reference therein and of the Indenture with
the requirements of the Securities Act and the Trust Indenture Act,
respectively; and, as of the date of the opinion and as of the effective
date of the Shelf Registration Statement or most recent post effective
amendment thereto, as the case may be, the absence from such Shelf
Registration Statement and the prospectus included therein, as then amended
or supplemented, and from any documents incorporated by reference therein,
of an untrue statement of a material fact or the omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading (in the case of any such documents, in
the light of the circumstances existing at the time that such documents
were filed with the Commission under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), all subject to customary assumptions and
qualifications and otherwise in form and content customary for similar
opinions; (ii) its officers to execute and deliver all customary documents
and certificates and updates thereof requested by the selling Holders of
the applicable Notes or any underwriters of the applicable Notes; and (iii)
its independent public accountants to provide to the selling Holders of the
applicable Notes and any underwriter therefor a comfort letter in customary
form and covering matters of the type customarily covered in
<PAGE> 6
comfort letters in connection with primary underwritten offerings, subject
to receipt of appropriate documentation as contemplated, and only if
permitted, by Statement of Auditing Standards No. 72.
(n) The Company shall use commercially reasonable efforts to cause the
Notes covered by the Shelf Registration Statement to be rated (or to have
any existing rating confirmed) with the appropriate rating agencies, if so
requested by the managing underwriters or by the Holders of a majority in
aggregate principal amount of the Notes covered by the Shelf Registration
Statement.
(o) The Company and the Subsidiary Guarantors shall use their best
efforts to take all other steps necessary to effect the registration of the
Notes covered by the Shelf Registration Statement contemplated hereby.
3. Registration Expenses. The Company shall bear all fees and expenses
incurred in connection with the performance of its obligations under Sections 1
and 2 hereof, whether or not the Shelf Registration is filed or becomes
effective, and, shall bear or reimburse the Holders of the Notes covered
thereby, for the reasonable fees and disbursements of one firm of counsel
designated by the Holders of a majority in principal amount of the Notes covered
thereby to act as counsel for the Holders in connection therewith.
4. Indemnification.
(a) The Company shall indemnify and hold harmless each Holder and each
person, if any, who controls such Holder within the meaning of the Exchange
Act (each such Holder and each such controlling person being referred to
collectively as the "Indemnified Parties") from and against any losses,
claims, damages or liabilities, joint or several, or any actions in respect
thereof (including, but not limited to, any losses, claims, damages,
liabilities or actions relating to purchases and sales of the Notes) to
which each Indemnified Party may become subject under the Securities Act,
the Exchange Act or otherwise, insofar as such losses, claims, damages,
liabilities or actions arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the Shelf
Registration Statement or any prospectus included therein or in any
amendment or supplement thereto, or arise out of, or are based upon, the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading. The Company shall reimburse, as incurred, each Indemnified
Party for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such loss, claim, damage,
liability or action in respect thereof. The Company shall not, however, be
liable in any such case to the extent that such loss, claim, damage,
liability or action arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in the Shelf
Registration Statement or any prospectus included therein or in any
amendment or supplement thereto or in any preliminary prospectus relating
to the Shelf Registration in reliance upon and in conformity with written
information pertaining to such Holder and furnished to the Company by or on
behalf of such Holder specifically for inclusion therein. The Company shall
also indemnify underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution (in
<PAGE> 7
each case as described in the Shelf Registration Statement), their officers
and directors and each person who controls such persons within the meaning
of the Securities Act or the Exchange Act to the same extent as provided
above with respect to the indemnification of the Holders if requested by
such Holders.
(b) Each Holder, severally and not jointly, will indemnify and hold
harmless the Company and each person, if any, who controls the Company
within the meaning of the Securities Act or the Exchange Act from and
against any losses, claims, damages, liabilities or actions in respect
thereof to which the Company or any such controlling person may become
subject under the Securities Act, the Exchange Act or otherwise, insofar as
such losses, claims, damages, liabilities or actions arise out of or are
based upon any untrue statement or alleged untrue statement of a material
fact contained in the Shelf Registration Statement or any prospectus
included therein or in any amendment or supplement thereto or in any
preliminary prospectus relating to the Shelf Registration, or arise out of
or are based upon the omission or alleged omission to state therein a
material fact necessary to make the statements therein not misleading, but
in each case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information pertaining to such Holder and furnished
to the Company by or on behalf of such Holder specifically for inclusion
therein; and, subject to the limitation set forth immediately preceding
this clause, shall reimburse, as incurred, the Company for any legal or
other expenses reasonably incurred by the Company or any controlling person
in connection with investigating or defending any loss, claim, damage,
liability or action in respect thereof. This indemnity agreement will be in
addition to any liability which such Holder may otherwise have to the
Company and any of their controlling persons.
(c) Promptly after receipt by an Indemnified Party under this Section 4
of notice of the commencement of any action or proceeding (including a
governmental investigation), such Indemnified Party will, if a claim in
respect thereof is to be made against any person (the "Indemnifying Party")
under this Section 4, notify the Indemnifying Party of the commencement
thereof; but the omission so to notify the Indemnifying Party will not, in
any event, relieve the Indemnifying Party from any obligations to any
Indemnified Party including the indemnification obligation provided in
paragraph (a) or (b) above. In case any such action is brought against any
Indemnified Party, and it notifies the Indemnifying Party of the
commencement thereof, the Indemnifying Party will be entitled to
participate therein and, to the extent that it may wish, jointly with any
other Indemnifying Party similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such Indemnified Party (who shall
not, except with the consent of the Indemnified Party, be counsel to the
Indemnifying Party), and after notice from the Indemnifying Party to such
Indemnified Party of its election to assume the defense thereof, the
Indemnifying Party will not be liable to such Indemnified Party under this
Section 4 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such Indemnified Party in
connection with the defense thereof. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement
of any pending or threatened action in respect of which any Indemnified
Party is or could have been a party and indemnity could have been sought
hereunder by such Indemnified Party unless such settlement includes an
<PAGE> 8
unconditional release of such Indemnified Party from all liability on any
claims that are the subject matter of such action.
(d) If the indemnification provided for in this Section 4 is
unavailable or insufficient to hold harmless an Indemnified Party, then
each Indemnified Party shall contribute to the amount paid or payable to
such Indemnifying Party as a result of the losses, claims, damages or
liabilities referred to in this Section 4 an amount or additional amount,
as the case may be, in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party or parties on the one hand and the
Indemnified Party on the other in connection with the statements or
omission which resulted in such loses, claims, demands or liabilities as
well as any other relevant equitable considerations. The relative fault
shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Indemnifying Party or parties on the one hand or the Indemnified Party on
the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The amount paid to an Indemnified Party as a result of the
losses, claims, damages or liabilities referred to in the first sentence of
this Section 4 shall be deemed to include any legal or other expenses
reasonably incurred by such Indemnified Party in connection with
investigating or defending any action or claim which is the subject of this
Section 4. No person guilty of fraudulent misrepresentation within the
meaning of Section 11(f) of the Securities Act shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) The agreements contained in this Section 4 shall survive the sale
of the Notes pursuant to the Shelf Registration Statement and shall remain
in full force and effect, regardless of any termination or cancellation of
this Agreement or any investigation made by or on behalf of any indemnified
party.
5. Rules 144 and 144A. The Company shall use commercially reasonable
efforts to file the reports required to be filed by it under the Securities Act
and the Exchange Act in a timely manner and, if at any time the Company is not
required to file such reports, it will, upon the request of any Holder of
Transfer Restricted Notes (as defined below), make publicly available other
information so long as necessary to permit sales of their Notes pursuant to
Rules 144 and 144A. The Company covenants that it will take such further action
as any Holder of Transfer Restricted Notes may reasonably request, all to the
extent required from time to time to enable such Holder to sell Transfer
Restricted Notes without registration under the Securities Act within the
limitation of the exemptions provided by Rules 144 and 144A (including the
requirements of Rule 144A (d) (4)). The Company will provide a copy of this
Agreement to prospective purchasers of Transfer Restricted Notes identified to
the Company upon request. Upon the request of any Holder of Transfer Restricted
Notes, the Company shall deliver to such Holder a written statement as to
whether the Company has complied with such requirements.
6. Underwritten Registrations. If any of the Transfer Restricted Notes
covered by the Shelf Registration are to be sold in an underwritten offering,
the managing underwriters will be selected by the Holders of a majority in
aggregate principal amount of such Transfer Restricted Notes to be included in
such offering.
<PAGE> 9
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted Notes on
the basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements.
7. Definitions:
"Holder" means the Initial Holders and any person or entity to whom
Transfer Restricted Notes are validly transferred by an Initial Holder or a
Holder pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144 promulgated under the Securities Act.
"Transfer Restricted Notes" means each Note until (i) the date on which
such Note has been effectively registered under the Securities Act and disposed
of in accordance with the Shelf Registration Statement or (ii) the date on which
such Note is distributed to the public pursuant to Rule 144 under the Securities
Act.
8. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, except by the Company and with
the written consent of the Holders of 75% in aggregate principal amount of
then outstanding Notes affected by such amendment, modification,
supplement, waiver or consent.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class
mail, facsimile transmission, or air courier which guarantees overnight
delivery:
(1) if to a Holder, at the most current address given by such Holder to
the Company in accordance with the provisions of this Section 8(b), which
address initially is, with respect to each Holder, the address of such
Holder to which confirmation of the sale of such Notes to such Holder was
first sent by the Company with copies in like manner to you as follows:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Fax No.:(212) 504-6666
Attention: Brian Hoffmann
<PAGE> 10
(2) if to the Company at the Company's address as follows:
TransTexas Gas Corporation
1300 North Sam Houston Parkway East
Houston, Texas 77032-2949
Fax No.: (281) 986-8877
Attention: Secretary
with a copy to:
Gardere & Wynne, L.L.P.
3000 Thanksgiving Tower
1601 Elm Street, Suite 3000
Dallas, TX 75201
Fax No.: (214) 999-3534
Attention: C. Robert Butterfield
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three
business days after being deposited in the mail, postage prepaid, if
mailed; when receipt is acknowledged by recipient's facsimile machine
operator, if sent by facsimile transmission; and on the day delivered, if
sent by overnight air courier guaranteeing next day delivery.
(c) No Inconsistent Agreements. The Company has not, as of the date
hereof, entered into, nor shall it, on or after the date hereof, enter
into, any agreement with respect to its Notes that is inconsistent with the
rights granted to the Holders herein or otherwise conflicts with the
provisions hereof.
(d) Successors and Assigns. This Agreement shall be binding upon the
Company and its respective successors and assigns; provided however, that
no successor or assign may exercise any rights under this Agreement unless
such successor or assign agrees in writing to be bound by the provisions
hereof.
(e) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(f) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
(g) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid,
illegal or unenforceable, the validity, legality and enforceability of any
such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
<PAGE> 11
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to TransTexas a counterpart hereof, whereupon
this Agreement will become a binding agreement among the Company and the Initial
Holders in accordance with its terms.
Very truly yours,
TRANSTEXAS GAS CORPORATION
By:
--------------------------------------
Name:
Title:
<PAGE> 12
The foregoing Registration Rights
Agreement is hereby confirmed and
accepted as of the date first above
written.
Initial Holders
CREDIT SUISSE FIRST BOSTON CORPORATION
By:
--------------------------------------
Name:
Title
OAKTREE CAPITAL MANAGEMENT, LLC as
general partner and investment manager of
certain funds and accounts it manages
By:
--------------------------------------
Name:
Title
By:
--------------------------------------
Name:
Title
ANGELO GORDON & CO., L.P.
By:
--------------------------------------
Name:
Title
<PAGE> 1
EXHIBIT 4.44
EXECUTION COPY
TRANSTEXAS GAS CORPORATION
Class A Common Stock
REGISTRATION RIGHTS AGREEMENT
March 15, 2000
TransTexas Gas Corporation, a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated in the Second Amended,
Modified and Restated Plan of Reorganization dated January 25, 2000 and pursuant
to the Order dated February 7, 2000 of the United States Bankruptcy Court for
the Southern District of Texas (the "Plan"), to issue to the TEC Bondholders, as
defined in the Plan (the "Initial Holders"), certain shares of the Company's
Class A Common Stock (the "Common Stock"). The Company hereby agrees as follows:
1. Shelf Registration. The Company shall take the following actions:
(a) The Company will at its cost, within seventy-five (75) days after
the effective date of the Plan (the "Effective Date"), file with the
Securities and Exchange Commission (the "Commission") and have declared
effective as soon as practicable thereafter, a registration statement (the
"Shelf Registration Statement") on an appropriate form under the Securities
Act of 1933, as amended (the "Securities Act"), relating to the offer and
sale of Transfer Restricted Stock (as defined in Section 7 below) by the
Holders thereof from time to time in accordance with Rule 415 under the
Securities Act; provided, however, that no Holder (other than the Initial
Holders) shall be entitled to have the Common Stock held by it covered by
such Shelf Registration Statement unless such Holder agrees in writing to
be bound by all the provisions of this Agreement applicable to such Holder.
(b) The Company shall keep the Shelf Registration Statement
continuously effective in order to permit the prospectus included therein
to be lawfully delivered by the Holders of the relevant shares of the
Common Stock until five years from the date hereof or for such shorter
period that will terminate when all the Common Stock covered by the Shelf
Registration Statement has been sold pursuant thereto.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Company shall cause the Shelf Registration Statement, and the
related prospectus and any amendment or supplement thereto, as of the
effective date of the Shelf Registration Statement, or amendment or
supplement thereto, (i) to comply in all material respects with the
applicable requirements of the Securities Act and the rules and regulations
of the Commission and (ii) not to contain any untrue statement of a
material fact or omit to state
<PAGE> 2
a material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
2. Registration Procedures. In connection with the registration
pursuant to Rule 415 under the Securities Act contemplated by Section 1 hereof
(the "Shelf Registration"), the following provisions shall apply:
(a) At least three (3) days prior to the filing thereof with the
Commission, the Company shall furnish to the Initial Holders a copy of the
proposed form of the Shelf Registration Statement and each amendment
thereto and each supplement, if any, to the prospectus included therein,
and shall in its reasonable judgment reflect in each such document, when so
filed with the Commission, such comments as such Initial Holders may
reasonably propose.
(b) The Company shall give written notice to the Holders (which notice
pursuant to clauses (ii) - (v) hereof shall be accompanied by an
instruction to suspend the use of the prospectus until the requisite
changes have been made):
(i) when the Shelf Registration Statement or any amendment thereto
has been filed with the Commission and when the Shelf Registration
Statement or any post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or supplements
to the Shelf Registration Statement or the prospectus included therein
or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Shelf Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of the
Common Stock for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires the Company to make
changes in the Shelf Registration Statement or the prospectus in order
that the Shelf Registration Statement or the prospectus does not
contain an untrue statement of a material fact nor omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.
(c) The Company shall make every reasonable effort to obtain the
withdrawal at the earliest possible time of any order suspending the
effectiveness of the Shelf Registration Statement.
(d) The Company shall furnish to each Holder included within the
coverage of the Shelf Registration, without charge, at least one copy of
the Shelf Registration Statement and any post-effective amendment thereto,
including financial statements and
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<PAGE> 3
schedules, and, if the Holder so requests in writing, all exhibits thereto
(including those, if any, incorporated by reference).
(e) The Company shall deliver to each Holder included within the
coverage of the Shelf Registration, without charge, as many copies of the
prospectus (including each preliminary prospectus) included in the Shelf
Registration Statement and any amendment or supplement thereto as such
person may reasonably request. The Company consents, subject to the
provisions of this Agreement, to the use of the prospectus or any amendment
or supplement thereto included in the Shelf Registration Statement by each
of the selling Holders in connection with the offering and sale of the
Common Stock covered by such prospectus or any such amendment or
supplement.
(f) Prior to any public offering of the Common Stock pursuant to the
Shelf Registration, the Company shall register or qualify or cooperate with
the Holders of Common Stock included therein and their respective counsel
in connection with the registration or qualification of the Common Stock
for offer and sale under the securities or "blue sky" laws of such states
of the United States as any Holder reasonably requests in writing and do
any and all other acts or things necessary or advisable to enable the offer
and sale in such jurisdictions of the Common Stock covered by the Shelf
Registration Statement; provided, however, that the Company shall not be
required to (i) qualify generally to do business in any jurisdiction where
it is not then so qualified or (ii) take any action which would subject it
to general service of process or to taxation in any jurisdiction where it
is not then so subject.
(g) The Company shall cooperate with the Holders to facilitate the
timely preparation and delivery of certificates representing the shares of
Common Stock to be sold pursuant to the Shelf Registration Statement free
of any restrictive legends and in such denominations and registered in such
names as such Holders may request a reasonable period of time prior to
sales of the Common Stock pursuant to the Shelf Registration Statement.
(h) Upon the occurrence of any event contemplated by paragraphs (ii)
through (v) of Section 2(b) above during the period for which the Company
is required to maintain an effective Shelf Registration Statement, the
Company shall promptly prepare and file a post-effective amendment to the
Shelf Registration Statement or a supplement to the related prospectus and
any other required document so that, as thereafter delivered to Holders,
the prospectus will not contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading. If the Company notifies the Holders in
accordance with paragraphs (ii) through (v) of Section 2(b) above to
suspend the use of the prospectus until the requisite changes to the
prospectus have been made, then the Holders shall suspend use of such
prospectus, and the period of effectiveness of the Shelf Registration
Statement provided for in Section 1(b) above shall be extended by the
number of days from and including the date of the giving of such notice to
and including the date when the Holders shall have received such amended or
supplemented prospectus pursuant to this Section 2(h).
3
<PAGE> 4
(i) The Company will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the Shelf
Registration and will make generally available to its security holders (or
otherwise provide in accordance with Section 11(a) of the Securities Act)
an earnings statement satisfying the provisions of Section 11(a) of the
Securities Act, no later than 45 days after the end of a 12-month period
(or 90 days, if such period is a fiscal year) beginning with the first
month of the Company's first fiscal quarter commencing after the effective
date of the Shelf Registration Statement, which statement shall cover such
12-month period.
(j) The Company may require each Holder of shares of Common Stock to be
sold pursuant to the Shelf Registration Statement to furnish to the Company
such information regarding such Holder and the distribution of such shares
as the Company may from time to time reasonably require for inclusion in
the Shelf Registration Statement, and the Company may exclude from such
Shelf Registration Statement the shares of Common Stock of any Holder that
unreasonably fails to furnish such information within a reasonable time
after receiving such request.
(k) The Company shall enter into such customary agreements (including,
if requested, an underwriting agreement in customary form) and take all
such other action, if any, as any Holder shall reasonably request in order
to facilitate the disposition of shares of the Common Stock pursuant to the
Shelf Registration in an underwritten offering or otherwise.
(l) The Company shall: (i) make reasonably available for inspection by
the Holders, any underwriter participating in any disposition pursuant to
the Shelf Registration Statement and any attorney, accountant or other
agent retained by the Holders or any such underwriter, all relevant
financial and other records, pertinent corporate documents and properties
of the Company and (ii) cause the Company's officers, directors, employees,
accountants and auditors to supply all relevant information reasonably
requested by the Holders or any such underwriter, attorney, accountant or
agent in connection with the Shelf Registration Statement, in each case as
shall be reasonably necessary, in the judgment of such Holder or any such
underwriter, attorney, accountant or agent referred to in this paragraph,
to conduct a reasonable investigation within the meaning of Section 11 of
the Securities Act; provided, however, that the foregoing inspection and
information gathering shall be coordinated by the Initial Holders and on
behalf of the other parties by counsel designated by and on behalf of such
other parties as described in Section 3 hereof.
Until the Shelf Registration Statement is filed with the Commission,
the Company may require each Holder to agree to keep confidential any
non-public information, relating to the Company, received by such Holder in
accordance with this Section 2(l) and not disclose such information (other
than to an affiliate or prospective purchaser who agrees to respect the
confidentiality provisions of this Section 2(l)); provided that each Holder
shall be released from its confidentiality obligations hereunder to the
extent necessary to permit such Holder to trade its Common Stock in
compliance with the securities laws if the Company breaches its obligations
to timely file the Shelf Registration Statement and each Holder shall be
relieved of its confidentiality obligations
4
<PAGE> 5
hereunder if the release of such information is required by law or
necessary to respond to inquiries of regulatory authorities; provided,
however, that no Holder shall be relieved of its confidentiality obligation
with respect to any such information otherwise permitted to be released
pursuant to this Section 2(l) that is not material to the Company. The
foregoing requirement shall exclude information which (i) is or becomes
generally available to the public other than as a result of disclosure by
the Holder or the Holder's Representatives, or (ii) becomes available to
the Holder or any of the Holder's Representatives on a non-confidential
basis from a source other than the Company or its affiliates or
Representatives, provided that neither the Holder or any of the Holder's
Representatives is aware that such source is under an obligation (whether
contractual, legal or fiduciary) to the Company or its affiliates or
Representatives to keep such information confidential. For purposes hereof,
the "Representatives" of any entity means such entity's directors,
officers, employees, legal and financial advisors, accounts and other
agents and representatives.
(m) The Company, if requested by any Holder of shares of the Common
Stock covered thereby, shall cause (i) its counsel to deliver an opinion
and updates thereof relating to the Common Stock in customary form
addressed to the selling Holders of the applicable Common Stock or the
managing underwriters, if any, thereof and dated, in the case of the
initial opinion, the effective date of such Shelf Registration Statement,
it being agreed that the matters to be covered by such opinion shall
include, without limitation, the due incorporation and good standing of the
Company and its subsidiaries; the due authorization, execution and delivery
of the relevant agreement of the type referred to in Section 3(k) hereof;
the due authorization and issuance of the Common Stock; the absence of
material legal or governmental proceedings involving the Company; the
absence of governmental approvals required to be obtained in connection
with the Shelf Registration Statement, the offering and sale of the Common
Stock or any agreement of the type referred to in Section 3(k) hereof; the
compliance as to form of such Shelf Registration Statement and any
documents incorporated by reference therein and of the Indenture with the
requirements of the Securities Act, respectively; and, as of the date of
the opinion and as of the effective date of the Shelf Registration
Statement or most recent post effective amendment thereto, as the case may
be, the absence from such Shelf Registration Statement and the prospectus
included therein, as then amended or supplemented, and from any documents
incorporated by reference therein, of an untrue statement of a material
fact or the omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading (in the
case of any such documents, in the light of the circumstances existing at
the time that such documents were filed with the Commission under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), all
subject to customary assumptions and qualifications and otherwise in form
and content customary for similar opinions; (ii) its officers to execute
and deliver all customary documents and certificates and updates thereof
requested by the selling Holders of the applicable shares of Common Stock
or any underwriters of the applicable shares of Common Stock; and (iii) its
independent public accountants to provide to the selling Holders of the
applicable Common Stock and any underwriter therefor a comfort letter in
customary form and covering matters of the type customarily covered in
comfort letters in connection with primary underwritten offerings,
5
<PAGE> 6
subject to receipt of appropriate documentation as contemplated, and only
if permitted, by Statement of Auditing Standards No. 72.
(n) The Company and the Subsidiary Guarantors shall use their best
efforts to take all other steps necessary to effect the registration of the
Common Stock covered by the Shelf Registration Statement contemplated
hereby.
3. Registration Expenses. The Company shall bear all fees and expenses
incurred in connection with the performance of its obligations under Sections 1
and 2 hereof, whether or not the Shelf Registration is filed or becomes
effective, and, shall bear or reimburse the Holders of the Common Stock covered
thereby, for the reasonable fees and disbursements of one firm of counsel
designated by the Holders of a majority of the outstanding shares of the Common
Stock covered thereby to act as counsel for the Holders in connection therewith.
4. Indemnification.
(a) The Company shall indemnify and hold harmless each Holder and each
person, if any, who controls such Holder within the meaning of the Exchange
Act (each such Holder and each such controlling person being referred to
collectively as the "Indemnified Parties") from and against any losses,
claims, damages or liabilities, joint or several, or any actions in respect
thereof (including, but not limited to, any losses, claims, damages,
liabilities or actions relating to purchases and sales of the Common Stock)
to which each Indemnified Party may become subject under the Securities
Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Shelf Registration Statement or any prospectus included therein or in any
amendment or supplement thereto, or arise out of, or are based upon, the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading. The Company shall reimburse, as incurred, each Indemnified
Party for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such loss, claim, damage,
liability or action in respect thereof. The Company shall not, however, be
liable in any such case to the extent that such loss, claim, damage,
liability or action arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in the Shelf
Registration Statement or any prospectus included therein or in any
amendment or supplement thereto or in any preliminary prospectus relating
to the Shelf Registration in reliance upon and in conformity with written
information pertaining to such Holder and furnished to the Company by or on
behalf of such Holder specifically for inclusion therein. The Company shall
also indemnify underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution (in
each case as described in the Shelf Registration Statement), their officers
and directors and each person who controls such persons within the meaning
of the Securities Act or the Exchange Act to the same extent as provided
above with respect to the indemnification of the Holders if requested by
such Holders.
(b) Each Holder, severally and not jointly, will indemnify and hold
harmless the Company and each person, if any, who controls the Company
within the meaning of
6
<PAGE> 7
the Securities Act or the Exchange Act from and against any losses, claims,
damages, liabilities or actions in respect thereof to which the Company or
any such controlling person may become subject under the Securities Act,
the Exchange Act or otherwise, insofar as such losses, claims, damages,
liabilities or actions arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the Shelf
Registration Statement or any prospectus included therein or in any
amendment or supplement thereto or in any preliminary prospectus relating
to the Shelf Registration, or arise out of or are based upon the omission
or alleged omission to state therein a material fact necessary to make the
statements therein not misleading, but in each case only to the extent that
the untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written
information pertaining to such Holder and furnished to the Company by or on
behalf of such Holder specifically for inclusion therein; and, subject to
the limitation set forth immediately preceding this clause, shall
reimburse, as incurred, the Company for any legal or other expenses
reasonably incurred by the Company or any controlling person in connection
with investigating or defending any loss, claim, damage, liability or
action in respect thereof. This indemnity agreement will be in addition to
any liability which such Holder may otherwise have to the Company and any
of their controlling persons.
(c) Promptly after receipt by an Indemnified Party under this Section 4
of notice of the commencement of any action or proceeding (including a
governmental investigation), such Indemnified Party will, if a claim in
respect thereof is to be made against any person (the "Indemnifying Party")
under this Section 4, notify the Indemnifying Party of the commencement
thereof; but the omission so to notify the Indemnifying Party will not, in
any event, relieve the Indemnifying Party from any obligations to any
Indemnified Party including the indemnification obligation provided in
paragraph (a) or (b) above. In case any such action is brought against any
Indemnified Party, and it notifies the Indemnifying Party of the
commencement thereof, the Indemnifying Party will be entitled to
participate therein and, to the extent that it may wish, jointly with any
other Indemnifying Party similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such Indemnified Party (who shall
not, except with the consent of the Indemnified Party, be counsel to the
Indemnifying Party), and after notice from the Indemnifying Party to such
Indemnified Party of its election to assume the defense thereof, the
Indemnifying Party will not be liable to such Indemnified Party under this
Section 4 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such Indemnified Party in
connection with the defense thereof. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement
of any pending or threatened action in respect of which any Indemnified
Party is or could have been a party and indemnity could have been sought
hereunder by such Indemnified Party unless such settlement includes an
unconditional release of such Indemnified Party from all liability on any
claims that are the subject matter of such action.
(d) If the indemnification provided for in this Section 4 is
unavailable or insufficient to hold harmless an Indemnified Party, then
each Indemnified Party shall contribute to the amount paid or payable to
such Indemnifying Party as a result of the losses, claims, damages or
liabilities referred to in this Section 4 an amount or additional
7
<PAGE> 8
amount, as the case may be, in such proportion as is appropriate to reflect
the relative fault of the Indemnifying Party or parties on the one hand and
the Indemnified Party on the other in connection with the statements or
omission which resulted in such loses, claims, demands or liabilities as
well as any other relevant equitable considerations. The relative fault
shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Indemnifying Party or parties on the one hand or the Indemnified Party on
the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The amount paid to an Indemnified Party as a result of the
losses, claims, damages or liabilities referred to in the first sentence of
this Section 4 shall be deemed to include any legal or other expenses
reasonably incurred by such Indemnified Party in connection with
investigating or defending any action or claim which is the subject of this
Section 4. No person guilty of fraudulent misrepresentation within the
meaning of Section 11(f) of the Securities Act shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) The agreements contained in this Section 4 shall survive the sale
of the Common Stock pursuant to the Shelf Registration Statement and shall
remain in full force and effect, regardless of any termination or
cancellation of this Agreement or any investigation made by or on behalf of
any indemnified party.
5. Rules 144 and 144A. The Company shall use commercially reasonable
efforts to file the reports required to be filed by it under the Securities Act
and the Exchange Act in a timely manner and, if at any time the Company is not
required to file such reports, it will, upon the request of any Holder of
Transfer Restricted Stock (as defined below), make publicly available other
information so long as necessary to permit sales of their Common Stock pursuant
to Rules 144 and 144A. The Company covenants that it will take such further
action as any Holder of Transfer Restricted Stock may reasonably request, all to
the extent required from time to time to enable such Holder to sell Transfer
Restricted Stock without registration under the Securities Act within the
limitation of the exemptions provided by Rules 144 and 144A (including the
requirements of Rule 144A(d)(4)). The Company will provide a copy of this
Agreement to prospective purchasers of Transfer Restricted Stock identified to
the Company upon request. Upon the request of any Holder of Transfer Restricted
Stock, the Company shall deliver to such Holder a written statement as to
whether the Company has complied with such requirements.
6. Underwritten Registrations. If any of the Transfer Restricted Stock
covered by the Shelf Registration is to be sold in an underwritten offering, the
managing underwriters will be selected by the Holders of a majority in aggregate
principal amount of such Transfer Restricted Stock to be included in such
offering.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted Stock on
the basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities,
8
<PAGE> 9
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
7. Definitions:
"Holder" means the Initial Holders and any person or entity to whom
Transfer Restricted Stock is validly transferred by an Initial Holder or a
Holder pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144 promulgated under the Securities Act.
"Transfer Restricted Stock" means shares of Common Stock issuable to
the Initial Holders under the Plan until (i) the date on which such Common Stock
has been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (ii) the date on which such
Common Stock is distributed to the public pursuant to Rule 144 under the
Securities Act.
8. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, except by the Company and with
the written consent of the Holders of 75% of then outstanding shares of the
Common Stock affected by such amendment, modification, supplement, waiver
or consent.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class
mail, facsimile transmission, or air courier which guarantees overnight
delivery:
(1) if to a Holder, at the most current address given by such Holder to
the Company in accordance with the provisions of this Section 8(b), which
address initially is, with respect to each Holder, the address of such
Holder to which confirmation of the sale of such Common Stock to such
Holder was first sent by the Company with copies in like manner to you as
follows:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Fax No.: (212) 504-6666
Attention: Brian Hoffmann
(2) if to the Company at the Company's address as follows:
TransTexas Gas Corporation
1300 North Sam Houston Parkway East
Houston, Texas 77032-2949
Fax No.: (281) 986-8877
Attention: Secretary
9
<PAGE> 10
with a copy to:
Gardere & Wynne, L.L.P.
3000 Thanksgiving Tower
1601 Elm Street, Suite 3000
Dallas, TX 75201
Fax No.: (214) 999-3534
Attention: C. Robert Butterfield
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three
business days after being deposited in the mail, postage prepaid, if
mailed; when receipt is acknowledged by recipient's facsimile machine
operator, if sent by facsimile transmission; and on the day delivered, if
sent by overnight air courier guaranteeing next day delivery.
(c) No Inconsistent Agreements. The Company has not, as of the date
hereof, entered into, nor shall it, on or after the date hereof, enter
into, any agreement with respect to its Common Stock that is inconsistent
with the rights granted to the Holders herein or otherwise conflicts with
the provisions hereof.
(d) Successors and Assigns. This Agreement shall be binding upon the
Company and its respective successors and assigns; provided however, that
no successor or assign may exercise any rights under this Agreement unless
such successor or assign agrees in writing to be bound by the provisions
hereof.
(e) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(f) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
(g) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid,
illegal or unenforceable, the validity, legality and enforceability of any
such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
10
<PAGE> 11
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to TransTexas a counterpart hereof, whereupon
this Agreement will become a binding agreement among the Company and the Initial
Holders in accordance with its terms.
Very truly yours,
TRANSTEXAS GAS CORPORATION
By:
--------------------------------------
Name:
Title:
<PAGE> 12
The foregoing Registration Rights Agreement
is hereby confirmed and accepted as of the
date first above written.
Initial Holders
CREDIT SUISSE FIRST BOSTON CORPORATION
By:
-----------------------------------------
Name:
Title:
OAKTREE CAPITAL MANAGEMENT, LLC as general
partner and investment manager of certain
funds and accounts it manages
By:
-----------------------------------------
Name:
Title:
By:
-----------------------------------------
Name:
Title:
ANGELO GORDON & CO., L.P.
By:
-----------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.45
Execution Copy
TRANSTEXAS GAS CORPORATION
Series A Senior Preferred Stock
REGISTRATION RIGHTS AGREEMENT
March 15, 2000
TransTexas Gas Corporation, a Delaware corporation (the
"Company"), proposes, subject to the terms and conditions stated in the Second
Amended, Modified and Restated Plan of Reorganization dated January 25, 2000 and
pursuant to the Order dated February 7, 2000 of the United States Bankruptcy
Court for the Southern District of Texas (the "Plan"), to issue to the TEC
Bondholders, as defined in the Plan, named on the signature page hereto (the
"Initial Holders") certain shares of the Company's Series A Senior Preferred
Stock (the "Preferred Stock"). The Company hereby agrees as follows:
1. Shelf Registration. The Company shall take the following
actions:
(a) The Company will at its cost, within seventy-five (75)
days after the effective date of the Plan (the "Effective Date"), file
with the Securities and Exchange Commission (the "Commission") and have
declared effective as soon as practicable thereafter, a registration
statement (the "Shelf Registration Statement") on an appropriate form
under the Securities Act of 1933, as amended (the "Securities Act"),
relating to the offer and sale of Transfer Restricted Stock (as defined
in Section 7 below) by the Holders thereof from time to time in
accordance with Rule 415 under the Securities Act; provided, however,
that no Holder (other than the Initial Holders) shall be entitled to
have the Preferred Stock held by it covered by such Shelf Registration
Statement unless such Holder agrees in writing to be bound by all the
provisions of this Agreement applicable to such Holder.
(b) The Company shall keep the Shelf Registration Statement
continuously effective in order to permit the prospectus included
therein to be lawfully delivered by the Holders of the relevant shares
of the Preferred Stock until five years from the date hereof or for
such shorter period that will terminate when all the Preferred Stock
covered by the Shelf Registration Statement has been sold pursuant
thereto.
(c) Notwithstanding any other provisions of this Agreement to
the contrary, the Company shall cause the Shelf Registration Statement,
and the related prospectus and any amendment or supplement thereto, as
of the effective date of the Shelf Registration Statement, or amendment
or supplement thereto, (i) to comply in all material respects with the
applicable requirements of the Securities Act and the rules and
regulations of the Commission and (ii) not to contain any untrue
statement of a material fact or omit to state
<PAGE> 2
a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading.
2. Registration Procedures. In connection with the
registration pursuant to Rule 415 under the Securities Act contemplated by
Section 1 hereof (the "Shelf Registration"), the following provisions shall
apply:
(a) At least three (3) days prior to the filing thereof with
the Commission, the Company shall furnish to the Initial Holders a copy
of the proposed form of the Shelf Registration Statement and each
amendment thereto and each supplement, if any, to the prospectus
included therein, and shall in its reasonable judgment reflect in each
such document, when so filed with the Commission, such comments as such
Initial Holders may reasonably propose.
(b) The Company shall give written notice to the Holders
(which notice pursuant to clauses (ii) - (v) hereof shall be
accompanied by an instruction to suspend the use of the prospectus
until the requisite changes have been made):
(i) when the Shelf Registration Statement or any
amendment thereto has been filed with the Commission and when
the Shelf Registration Statement or any post-effective
amendment thereto has become effective;
(ii) of any request by the Commission for amendments
or supplements to the Shelf Registration Statement or the
prospectus included therein or for additional information;
(iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Shelf Registration
Statement or the initiation of any proceedings for that
purpose;
(iv) of the receipt by the Company or its legal
counsel of any notification with respect to the suspension of
the qualification of the Preferred Stock for sale in any
jurisdiction or the initiation or threatening of any
proceeding for such purpose; and
(v) of the happening of any event that requires the
Company to make changes in the Shelf Registration Statement or
the prospectus in order that the Shelf Registration Statement
or the prospectus does not contain an untrue statement of a
material fact nor omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading.
(c) The Company shall make every reasonable effort to obtain
the withdrawal at the earliest possible time of any order suspending
the effectiveness of the Shelf Registration Statement.
(d) The Company shall furnish to each Holder included within
the coverage of the Shelf Registration, without charge, at least one
copy of the Shelf Registration Statement and any post-effective
amendment thereto, including financial statements and
2
<PAGE> 3
schedules, and, if the Holder so requests in writing, all exhibits thereto
(including those, if any, incorporated by reference).
(e) The Company shall deliver to each Holder included within
the coverage of the Shelf Registration, without charge, as many copies
of the prospectus (including each preliminary prospectus) included in
the Shelf Registration Statement and any amendment or supplement
thereto as such person may reasonably request. The Company consents,
subject to the provisions of this Agreement, to the use of the
prospectus or any amendment or supplement thereto included in the Shelf
Registration Statement by each of the selling Holders in connection
with the offering and sale of the Preferred Stock covered by such
prospectus or any such amendment or supplement.
(f) Prior to any public offering of the Preferred Stock
pursuant to the Shelf Registration, the Company shall register or
qualify or cooperate with the Holders of Preferred Stock included
therein and their respective counsel in connection with the
registration or qualification of the Preferred Stock for offer and sale
under the securities or "blue sky" laws of such states of the United
States as any Holder reasonably requests in writing and do any and all
other acts or things necessary or advisable to enable the offer and
sale in such jurisdictions of the Preferred Stock covered by the Shelf
Registration Statement; provided, however, that the Company shall not
be required to (i) qualify generally to do business in any jurisdiction
where it is not then so qualified or (ii) take any action which would
subject it to general service of process or to taxation in any
jurisdiction where it is not then so subject.
(g) The Company shall cooperate with the Holders to facilitate
the timely preparation and delivery of certificates representing the
shares of Preferred Stock to be sold pursuant to the Shelf Registration
Statement free of any restrictive legends and in such denominations and
registered in such names as such Holders may request a reasonable
period of time prior to sales of the Preferred Stock pursuant to the
Shelf Registration Statement.
(h) Upon the occurrence of any event contemplated by
paragraphs (ii) through (v) of Section 2(b) above during the period for
which the Company is required to maintain an effective Shelf
Registration Statement, the Company shall promptly prepare and file a
post-effective amendment to the Shelf Registration Statement or a
supplement to the related prospectus and any other required document so
that, as thereafter delivered to Holders, the prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. If the Company notifies the Holders in accordance
with paragraphs (ii) through (v) of Section 2(b) above to suspend the
use of the prospectus until the requisite changes to the prospectus
have been made, then the Holders shall suspend use of such prospectus,
and the period of effectiveness of the Shelf Registration Statement
provided for in Section 1(b) above shall be extended by the number of
days from and including the date of the giving of such notice to and
including the date when the Holders shall have received such amended or
supplemented prospectus pursuant to this Section 2(h).
3
<PAGE> 4
(i) The Company will comply with all rules and regulations of
the Commission to the extent and so long as they are applicable to the
Shelf Registration and will make generally available to its security
holders (or otherwise provide in accordance with Section 11(a) of the
Securities Act) an earnings statement satisfying the provisions of
Section 11(a) of the Securities Act, no later than 45 days after the
end of a 12-month period (or 90 days, if such period is a fiscal year)
beginning with the first month of the Company's first fiscal quarter
commencing after the effective date of the Shelf Registration
Statement, which statement shall cover such 12-month period.
(j) The Company may require each Holder of shares of Preferred
Stock to be sold pursuant to the Shelf Registration Statement to
furnish to the Company such information regarding such Holder and the
distribution of such shares as the Company may from time to time
reasonably require for inclusion in the Shelf Registration Statement,
and the Company may exclude from such Shelf Registration Statement the
shares of Preferred Stock of any Holder that unreasonably fails to
furnish such information within a reasonable time after receiving such
request.
(k) The Company shall enter into such customary agreements
(including, if requested, an underwriting agreement in customary form)
and take all such other action, if any, as any Holder shall reasonably
request in order to facilitate the disposition of shares of the
Preferred Stock pursuant to the Shelf Registration in an underwritten
offering or otherwise.
(l) The Company shall: (i) make reasonably available for
inspection by the Holders, any underwriter participating in any
disposition pursuant to the Shelf Registration Statement and any
attorney, accountant or other agent retained by the Holders or any such
underwriter, all relevant financial and other records, pertinent
corporate documents and properties of the Company and (ii) cause the
Company's officers, directors, employees, accountants and auditors to
supply all relevant information reasonably requested by the Holders or
any such underwriter, attorney, accountant or agent in connection with
the Shelf Registration Statement, in each case as shall be reasonably
necessary, in the judgment of such Holder or any such underwriter,
attorney, accountant or agent referred to in this paragraph, to conduct
a reasonable investigation within the meaning of Section 11 of the
Securities Act; provided, however, that the foregoing inspection and
information gathering shall be coordinated by the Initial Holders and
on behalf of the other parties by counsel designated by and on behalf
of such other parties as described in Section 3 hereof.
Until the Shelf Registration Statement is filed with the
Commission, the Company may require each Holder to agree to keep
confidential any non-public information, relating to the Company,
received by such Holder in accordance with this Section 2(l) and not
disclose such information (other than to an affiliate or prospective
purchaser who agrees to respect the confidentiality provisions of this
Section 2(l)); provided that each Holder shall be released from its
confidentiality obligations hereunder to the extent necessary to permit
such Holder to trade its Preferred Stock in compliance with the
securities laws if the Company breaches its obligations to timely file
the Shelf Registration Statement and each Holder shall be relieved of
its confidentiality obligations
4
<PAGE> 5
hereunder if the release of such information is required by law or
necessary to respond to inquiries of regulatory authorities; provided,
however, that no Holder shall be relieved of its confidentiality
obligation with respect to any such information otherwise permitted to
be released pursuant to this Section 2 (l) that is not material to the
Company. The foregoing requirement shall exclude information which (i)
is or becomes generally available to the public other than as a result
of disclosure by the Holder or the Holder's Representatives, or (ii)
becomes available to the Holder or any of the Holder's Representatives
on a non-confidential basis from a source other than the Company or its
affiliates or Representatives, provided that neither the Holder or any
of the Holder's Representatives is aware that such source is under an
obligation (whether contractual, legal or fiduciary) to the Company or
its affiliates or Representatives to keep such information
confidential. For purposes hereof, the "Representatives" of any entity
means such entity's directors, officers, employees, legal and financial
advisors, accounts and other agents and representatives.
(m) The Company, if requested by any Holder of shares of the
Preferred Stock covered thereby, shall cause (i) its counsel to deliver
an opinion and updates thereof relating to the Preferred Stock in
customary form addressed to the selling Holders of the applicable
Preferred Stock or the managing underwriters, if any, thereof and
dated, in the case of the initial opinion, the effective date of such
Shelf Registration Statement, it being agreed that the matters to be
covered by such opinion shall include, without limitation, the due
incorporation and good standing of the Company and its subsidiaries;
the due authorization, execution and delivery of the relevant agreement
of the type referred to in Section 3(k) hereof; the due authorization
and issuance of the Preferred Stock; the absence of material legal or
governmental proceedings involving the Company; the absence of
governmental approvals required to be obtained in connection with the
Shelf Registration Statement, the offering and sale of the Preferred
Stock or any agreement of the type referred to in Section 3(k) hereof;
the compliance as to form of such Shelf Registration Statement and any
documents incorporated by reference therein and of the Indenture with
the requirements of the Securities Act, respectively; and, as of the
date of the opinion and as of the effective date of the Shelf
Registration Statement or most recent post effective amendment thereto,
as the case may be, the absence from such Shelf Registration Statement
and the prospectus included therein, as then amended or supplemented,
and from any documents incorporated by reference therein, of an untrue
statement of a material fact or the omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading (in the case of any such documents,
in the light of the circumstances existing at the time that such
documents were filed with the Commission under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), all subject to customary
assumptions and qualifications and otherwise in form and content
customary for similar opinions; (ii) its officers to execute and
deliver all customary documents and certificates and updates thereof
requested by the selling Holders of the applicable shares of Preferred
Stock or any underwriters of the applicable shares of Preferred Stock;
and (iii) its independent public accountants to provide to the selling
Holders of the applicable Preferred Stock and any underwriter therefor
a comfort letter in customary form and covering matters of the type
customarily covered in comfort letters in connection with primary
underwritten offerings, subject to receipt of appropriate documentation
as contemplated, and only if permitted, by Statement of Auditing
Standards No. 72.
5
<PAGE> 6
(n) The Company and the Subsidiary Guarantors shall use their
best efforts to take all other steps necessary to effect the
registration of the Preferred Stock covered by the Shelf Registration
Statement contemplated hereby.
3. Registration Expenses. The Company shall bear all fees and
expenses incurred in connection with the performance of its obligations under
Sections 1 and 2 hereof, whether or not the Shelf Registration is filed or
becomes effective, and, shall bear or reimburse the Holders of the Preferred
Stock covered thereby, for the reasonable fees and disbursements of one firm of
counsel designated by the Holders of a majority of the outstanding shares of the
Preferred Stock covered thereby to act as counsel for the Holders in connection
therewith.
4. Indemnification.
(a) The Company shall indemnify and hold harmless each Holder
and each person, if any, who controls such Holder within the meaning of
the Exchange Act (each such Holder and each such controlling person
being referred to collectively as the "Indemnified Parties") from and
against any losses, claims, damages or liabilities, joint or several,
or any actions in respect thereof (including, but not limited to, any
losses, claims, damages, liabilities or actions relating to purchases
and sales of the Preferred Stock) to which each Indemnified Party may
become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such losses, claims, damages, liabilities or actions arise
out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Shelf Registration
Statement or any prospectus included therein or in any amendment or
supplement thereto, or arise out of, or are based upon, the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading. The
Company shall reimburse, as incurred, each Indemnified Party for any
legal or other expenses reasonably incurred by it in connection with
investigating or defending any such loss, claim, damage, liability or
action in respect thereof. The Company shall not, however, be liable in
any such case to the extent that such loss, claim, damage, liability or
action arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in the Shelf
Registration Statement or any prospectus included therein or in any
amendment or supplement thereto or in any preliminary prospectus
relating to the Shelf Registration in reliance upon and in conformity
with written information pertaining to such Holder and furnished to the
Company by or on behalf of such Holder specifically for inclusion
therein. The Company shall also indemnify underwriters, selling
brokers, dealer managers and similar securities industry professionals
participating in the distribution (in each case as described in the
Shelf Registration Statement), their officers and directors and each
person who controls such persons within the meaning of the Securities
Act or the Exchange Act to the same extent as provided above with
respect to the indemnification of the Holders if requested by such
Holders.
(b) Each Holder, severally and not jointly, will indemnify and
hold harmless the Company and each person, if any, who controls the
Company within the meaning of
6
<PAGE> 7
the Securities Act or the Exchange Act from and against any losses,
claims, damages, liabilities or actions in respect thereof to which the
Company or any such controlling person may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages, liabilities or actions arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact
contained in the Shelf Registration Statement or any prospectus
included therein or in any amendment or supplement thereto or in any
preliminary prospectus relating to the Shelf Registration, or arise out
of or are based upon the omission or alleged omission to state therein
a material fact necessary to make the statements therein not
misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information
pertaining to such Holder and furnished to the Company by or on behalf
of such Holder specifically for inclusion therein; and, subject to the
limitation set forth immediately preceding this clause, shall
reimburse, as incurred, the Company for any legal or other expenses
reasonably incurred by the Company or any controlling person in
connection with investigating or defending any loss, claim, damage,
liability or action in respect thereof. This indemnity agreement will
be in addition to any liability which such Holder may otherwise have to
the Company and any of their controlling persons.
(c) Promptly after receipt by an Indemnified Party under this
Section 4 of notice of the commencement of any action or proceeding
(including a governmental investigation), such Indemnified Party will,
if a claim in respect thereof is to be made against any person (the
"Indemnifying Party") under this Section 4, notify the Indemnifying
Party of the commencement thereof; but the omission so to notify the
Indemnifying Party will not, in any event, relieve the Indemnifying
Party from any obligations to any Indemnified Party including the
indemnification obligation provided in paragraph (a) or (b) above. In
case any such action is brought against any Indemnified Party, and it
notifies the Indemnifying Party of the commencement thereof, the
Indemnifying Party will be entitled to participate therein and, to the
extent that it may wish, jointly with any other Indemnifying Party
similarly notified, to assume the defense thereof, with counsel
reasonably satisfactory to such Indemnified Party (who shall not,
except with the consent of the Indemnified Party, be counsel to the
Indemnifying Party), and after notice from the Indemnifying Party to
such Indemnified Party of its election to assume the defense thereof,
the Indemnifying Party will not be liable to such Indemnified Party
under this Section 4 for any legal or other expenses, other than
reasonable costs of investigation, subsequently incurred by such
Indemnified Party in connection with the defense thereof. No
Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending or threatened
action in respect of which any Indemnified Party is or could have been
a party and indemnity could have been sought hereunder by such
Indemnified Party unless such settlement includes an unconditional
release of such Indemnified Party from all liability on any claims that
are the subject matter of such action.
(d) If the indemnification provided for in this Section 4 is
unavailable or insufficient to hold harmless an Indemnified Party, then
each Indemnified Party shall contribute to the amount paid or payable
to such Indemnifying Party as a result of the losses, claims, damages
or liabilities referred to in this Section 4 an amount or additional
7
<PAGE> 8
amount, as the case may be, in such proportion as is appropriate to
reflect the relative fault of the Indemnifying Party or parties on the
one hand and the Indemnified Party on the other in connection with the
statements or omission which resulted in such loses, claims, demands or
liabilities as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by the Indemnifying Party or parties on the one
hand or the Indemnified Party on the other and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid to an
Indemnified Party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this Section 4 shall
be deemed to include any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending
any action or claim which is the subject of this Section 4. No person
guilty of fraudulent misrepresentation within the meaning of Section
11(f) of the Securities Act shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
(e) The agreements contained in this Section 4 shall survive
the sale of the Preferred Stock pursuant to the Shelf Registration
Statement and shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement or any investigation made
by or on behalf of any indemnified party.
5. Rules 144 and 144A. The Company shall use commercially
reasonable efforts to file the reports required to be filed by it under the
Securities Act and the Exchange Act in a timely manner and, if at any time the
Company is not required to file such reports, it will, upon the request of any
Holder of Transfer Restricted Stock (as defined below), make publicly available
other information so long as necessary to permit sales of their Preferred Stock
pursuant to Rules 144 and 144A. The Company covenants that it will take such
further action as any Holder of Transfer Restricted Stock may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Transfer Restricted Stock without registration under the Securities Act
within the limitation of the exemptions provided by Rules 144 and 144A
(including the requirements of Rule 144A (d) (4)). The Company will provide a
copy of this Agreement to prospective purchasers of Transfer Restricted Stock
identified to the Company upon request. Upon the request of any Holder of
Transfer Restricted Stock, the Company shall deliver to such Holder a written
statement as to whether the Company has complied with such requirements.
6. Underwritten Registrations. If any of the Transfer
Restricted Stock covered by the Shelf Registration is to be sold in an
underwritten offering, the managing underwriters will be selected by the Holders
of a majority in aggregate principal amount of such Transfer Restricted Stock to
be included in such offering.
No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such person's Transfer
Restricted Stock on the basis reasonably provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
8
<PAGE> 9
7. Definitions:
"Holder" means the Initial Holders and any person or entity to
whom Transfer Restricted Stock is validly transferred by an Initial Holder or a
Holder pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144 promulgated under the Securities Act.
"Transfer Restricted Stock" means shares of Preferred Stock
issuable to the Initial Holders under the Plan, additional shares of Preferred
Stock payable as dividends thereon, if applicable, and common stock into which
the Preferred Stock is convertible until (i) the date on which such Preferred
Stock or common stock, as applicable, has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (ii) the date on which such Preferred Stock or common stock, as
applicable, is distributed to the public pursuant to Rule 144 under the
Securities Act.
8. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, except by
the Company and with the written consent of the Holders of 75% of then
outstanding shares of the Preferred Stock affected by such amendment,
modification, supplement, waiver or consent.
(b) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand delivery,
first-class mail, facsimile transmission, or air courier which
guarantees overnight delivery:
(1) if to a Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this Section
8(b), which address initially is, with respect to each Holder, the
address of such Holder to which confirmation of the sale of such
Preferred Stock to such Holder was first sent by the Company with
copies in like manner to you as follows:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Fax No.: (212) 504-6666
Attention: Brian Hoffmann
9
<PAGE> 10
(2) if to the Company at the Company's address as follows:
TransTexas Gas Corporation
1300 North Sam Houston Parkway East
Houston, Texas 77032-2949
Fax No.:(281) 986-8877
Attention: Secretary
with a copy to:
Gardere & Wynne, L.L.P.
3000 Thanksgiving Tower
1601 Elm Street, Suite 3000
Dallas, TX 75201
Fax No.: (214) 999-3534
Attention: C. Robert Butterfield
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally
delivered; three business days after being deposited in the mail,
postage prepaid, if mailed; when receipt is acknowledged by recipient's
facsimile machine operator, if sent by facsimile transmission; and on
the day delivered, if sent by overnight air courier guaranteeing next
day delivery.
(c) No Inconsistent Agreements. The Company has not, as of the
date hereof, entered into, nor shall it, on or after the date hereof,
enter into, any agreement with respect to its Preferred Stock that is
inconsistent with the rights granted to the Holders herein or otherwise
conflicts with the provisions hereof.
(d) Successors and Assigns. This Agreement shall be binding
upon the Company and its respective successors and assigns; provided
however, that no successor or assign may exercise any rights under this
Agreement unless such successor or assign agrees in writing to be bound
by the provisions hereof.
(e) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(f) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
(g) Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
10
<PAGE> 11
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to TransTexas a counterpart
hereof, whereupon this Agreement will become a binding agreement among
the Company and the Initial Holders in accordance with its terms.
Very truly yours,
TRANSTEXAS GAS CORPORATION
By:
-------------------------------------
Name:
Title:
<PAGE> 12
The foregoing Registration Rights Agreement
is hereby confirmed and accepted as of the
date first above written.
Initial Holders
CREDIT SUISSE FIRST BOSTON CORPORATION
By:
---------------------------------------------------
Name:
Title
OAKTREE CAPITAL MANAGEMENT, LLC as general
partner and investment manager of certain
funds and accounts it manages
By:
---------------------------------------------------
Name:
Title
By:
---------------------------------------------------
Name:
Title
ANGELO GORDON & CO., L.P.
By:
---------------------------------------------------
Name:
Title
<PAGE> 1
EXHIBIT 4.46
EXECUTION COPY
TRANSTEXAS GAS CORPORATION
Series A Junior Preferred Stock
REGISTRATION RIGHTS AGREEMENT
March 15, 2000
TransTexas Gas Corporation, a Delaware corporation (the
"Company"), proposes, subject to the terms and conditions stated in the Second
Amended, Modified and Restated Plan of Reorganization dated January 25, 2000 and
pursuant to the Order dated February 7, 2000 of the United States Bankruptcy
Court for the Southern District of Texas (the "Plan"), to issue to the holders
of TransTexas Subordinated Notes, as defined in the Plan, named on the signature
page hereto (the "Initial Holders") certain shares of the Company's Series A
Junior Preferred Stock (the "Preferred Stock"). The Company hereby agrees as
follows:
1. Shelf Registration. The Company shall take the following
actions:
(a) The Company will at its cost, within seventy-five (75)
days after the effective date of the Plan (the "Effective Date"), file
with the Securities and Exchange Commission (the "Commission") and have
declared effective as soon as practicable thereafter, a registration
statement (the "Shelf Registration Statement") on an appropriate form
under the Securities Act of 1933, as amended (the "Securities Act"),
relating to the offer and sale of Transfer Restricted Stock (as defined
in Section 7 below) by the Holders thereof from time to time in
accordance with Rule 415 under the Securities Act; provided, however,
that no Holder (other than the Initial Holders) shall be entitled to
have the Preferred Stock held by it covered by such Shelf Registration
Statement unless such Holder agrees in writing to be bound by all the
provisions of this Agreement applicable to such Holder.
(b) The Company shall keep the Shelf Registration Statement
continuously effective in order to permit the prospectus included
therein to be lawfully delivered by the Holders of the relevant shares
of the Preferred Stock until five years from the date hereof or for
such shorter period that will terminate when all the Preferred Stock
covered by the Shelf Registration Statement has been sold pursuant
thereto.
(c) Notwithstanding any other provisions of this Agreement to
the contrary, the Company shall cause the Shelf Registration Statement,
and the related prospectus and any amendment or supplement thereto, as
of the effective date of the Shelf Registration Statement, or amendment
or supplement thereto, (i) to comply in all material respects with the
applicable requirements of the Securities Act and the rules and
regulations of the Commission and (ii) not to contain any untrue
statement of a material fact or omit to state
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a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading.
2. Registration Procedures. In connection with the
registration pursuant to Rule 415 under the Securities Act contemplated by
Section 1 hereof (the "Shelf Registration"), the following provisions shall
apply:
(a) At least three (3) days prior to the filing thereof with
the Commission, the Company shall furnish to the Initial Holders a copy
of the proposed form of the Shelf Registration Statement and each
amendment thereto and each supplement, if any, to the prospectus
included therein, and shall in its reasonable judgment reflect in each
such document, when so filed with the Commission, such comments as such
Initial Holders may reasonably propose.
(b) The Company shall give written notice to the Holders
(which notice pursuant to clauses (ii) - (v) hereof shall be
accompanied by an instruction to suspend the use of the prospectus
until the requisite changes have been made):
(i) when the Shelf Registration Statement or any
amendment thereto has been filed with the Commission and when
the Shelf Registration Statement or any post-effective
amendment thereto has become effective;
(ii) of any request by the Commission for amendments
or supplements to the Shelf Registration Statement or the
prospectus included therein or for additional information;
(iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Shelf Registration
Statement or the initiation of any proceedings for that
purpose;
(iv) of the receipt by the Company or its legal
counsel of any notification with respect to the suspension of
the qualification of the Preferred Stock for sale in any
jurisdiction or the initiation or threatening of any
proceeding for such purpose; and
(v) of the happening of any event that requires the
Company to make changes in the Shelf Registration Statement or
the prospectus in order that the Shelf Registration Statement
or the prospectus does not contain an untrue statement of a
material fact nor omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading.
(c) The Company shall make every reasonable effort to obtain
the withdrawal at the earliest possible time of any order suspending
the effectiveness of the Shelf Registration Statement.
(d) The Company shall furnish to each Holder included within
the coverage of the Shelf Registration, without charge, at least one
copy of the Shelf Registration Statement and any post-effective
amendment thereto, including financial statements and
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schedules, and, if the Holder so requests in writing, all exhibits
thereto (including those, if any, incorporated by reference).
(e) The Company shall deliver to each Holder included within
the coverage of the Shelf Registration, without charge, as many copies
of the prospectus (including each preliminary prospectus) included in
the Shelf Registration Statement and any amendment or supplement
thereto as such person may reasonably request. The Company consents,
subject to the provisions of this Agreement, to the use of the
prospectus or any amendment or supplement thereto included in the Shelf
Registration Statement by each of the selling Holders in connection
with the offering and sale of the Preferred Stock covered by such
prospectus or any such amendment or supplement.
(f) Prior to any public offering of the Preferred Stock
pursuant to the Shelf Registration, the Company shall register or
qualify or cooperate with the Holders of Preferred Stock included
therein and their respective counsel in connection with the
registration or qualification of the Preferred Stock for offer and sale
under the securities or "blue sky" laws of such states of the United
States as any Holder reasonably requests in writing and do any and all
other acts or things necessary or advisable to enable the offer and
sale in such jurisdictions of the Preferred Stock covered by the Shelf
Registration Statement; provided, however, that the Company shall not
be required to (i) qualify generally to do business in any jurisdiction
where it is not then so qualified or (ii) take any action which would
subject it to general service of process or to taxation in any
jurisdiction where it is not then so subject.
(g) The Company shall cooperate with the Holders to facilitate
the timely preparation and delivery of certificates representing the
shares of Preferred Stock to be sold pursuant to the Shelf Registration
Statement free of any restrictive legends and in such denominations and
registered in such names as such Holders may request a reasonable
period of time prior to sales of the Preferred Stock pursuant to the
Shelf Registration Statement.
(h) Upon the occurrence of any event contemplated by
paragraphs (ii) through (v) of Section 2(b) above during the period for
which the Company is required to maintain an effective Shelf
Registration Statement, the Company shall promptly prepare and file a
post-effective amendment to the Shelf Registration Statement or a
supplement to the related prospectus and any other required document so
that, as thereafter delivered to Holders, the prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. If the Company notifies the Holders in accordance
with paragraphs (ii) through (v) of Section 2(b) above to suspend the
use of the prospectus until the requisite changes to the prospectus
have been made, then the Holders shall suspend use of such prospectus,
and the period of effectiveness of the Shelf Registration Statement
provided for in Section 1(b) above shall be extended by the number of
days from and including the date of the giving of such notice to and
including the date when the Holders shall have received such amended or
supplemented prospectus pursuant to this Section 2(h).
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(i) The Company will comply with all rules and regulations of
the Commission to the extent and so long as they are applicable to the
Shelf Registration and will make generally available to its security
holders (or otherwise provide in accordance with Section 11(a) of the
Securities Act) an earnings statement satisfying the provisions of
Section 11(a) of the Securities Act, no later than 45 days after the
end of a 12-month period (or 90 days, if such period is a fiscal year)
beginning with the first month of the Company's first fiscal quarter
commencing after the effective date of the Shelf Registration
Statement, which statement shall cover such 12-month period.
(j) The Company may require each Holder of shares of Preferred
Stock to be sold pursuant to the Shelf Registration Statement to
furnish to the Company such information regarding such Holder and the
distribution of such shares as the Company may from time to time
reasonably require for inclusion in the Shelf Registration Statement,
and the Company may exclude from such Shelf Registration Statement the
shares of Preferred Stock of any Holder that unreasonably fails to
furnish such information within a reasonable time after receiving such
request.
(k) The Company shall enter into such customary agreements
(including, if requested, an underwriting agreement in customary form)
and take all such other action, if any, as any Holder shall reasonably
request in order to facilitate the disposition of shares of the
Preferred Stock pursuant to the Shelf Registration in an underwritten
offering or otherwise.
(l) The Company shall: (i) make reasonably available for
inspection by the Holders, any underwriter participating in any
disposition pursuant to the Shelf Registration Statement and any
attorney, accountant or other agent retained by the Holders or any such
underwriter, all relevant financial and other records, pertinent
corporate documents and properties of the Company and (ii) cause the
Company's officers, directors, employees, accountants and auditors to
supply all relevant information reasonably requested by the Holders or
any such underwriter, attorney, accountant or agent in connection with
the Shelf Registration Statement, in each case as shall be reasonably
necessary, in the judgment of such Holder or any such underwriter,
attorney, accountant or agent referred to in this paragraph, to conduct
a reasonable investigation within the meaning of Section 11 of the
Securities Act; provided, however, that the foregoing inspection and
information gathering shall be coordinated by the Initial Holders and
on behalf of the other parties by counsel designated by and on behalf
of such other parties as described in Section 3 hereof.
Until the Shelf Registration Statement is filed with the
Commission, the Company may require each Holder to agree to keep
confidential any non-public information, relating to the Company,
received by such Holder in accordance with this Section 2(l) and not
disclose such information (other than to an affiliate or prospective
purchaser who agrees to respect the confidentiality provisions of this
Section 2(l)); provided that each Holder shall be released from its
confidentiality obligations hereunder to the extent necessary to permit
such Holder to trade its Preferred Stock in compliance with the
securities laws if the Company breaches its obligations to timely file
the Shelf Registration Statement and each Holder shall be relieved of
its confidentiality obligations
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hereunder if the release of such information is required by law or
necessary to respond to inquiries of regulatory authorities; provided,
however, that no Holder shall be relieved of its confidentiality
obligation with respect to any such information otherwise permitted to
be released pursuant to this Section 2 (l) that is not material to the
Company. The foregoing requirement shall exclude information which (i)
is or becomes generally available to the public other than as a result
of disclosure by the Holder or the Holder's Representatives, or (ii)
becomes available to the Holder or any of the Holder's Representatives
on a non-confidential basis from a source other than the Company or its
affiliates or Representatives, provided that neither the Holder or any
of the Holder's Representatives is aware that such source is under an
obligation (whether contractual, legal or fiduciary) to the Company or
its affiliates or Representatives to keep such information
confidential. For purposes hereof, the "Representatives" of any entity
means such entity's directors, officers, employees, legal and financial
advisors, accounts and other agents and representatives.
(m) The Company, if requested by any Holder of shares of the
Preferred Stock covered thereby, shall cause (i) its counsel to deliver
an opinion and updates thereof relating to the Preferred Stock in
customary form addressed to the selling Holders of the applicable
Preferred Stock or the managing underwriters, if any, thereof and
dated, in the case of the initial opinion, the effective date of such
Shelf Registration Statement, it being agreed that the matters to be
covered by such opinion shall include, without limitation, the due
incorporation and good standing of the Company and its subsidiaries;
the due authorization, execution and delivery of the relevant agreement
of the type referred to in Section 3(k) hereof; the due authorization
and issuance of the Preferred Stock; the absence of material legal or
governmental proceedings involving the Company; the absence of
governmental approvals required to be obtained in connection with the
Shelf Registration Statement, the offering and sale of the Preferred
Stock or any agreement of the type referred to in Section 3(k) hereof;
the compliance as to form of such Shelf Registration Statement and any
documents incorporated by reference therein and of the Indenture with
the requirements of the Securities Act, respectively; and, as of the
date of the opinion and as of the effective date of the Shelf
Registration Statement or most recent post effective amendment thereto,
as the case may be, the absence from such Shelf Registration Statement
and the prospectus included therein, as then amended or supplemented,
and from any documents incorporated by reference therein, of an untrue
statement of a material fact or the omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading (in the case of any such documents,
in the light of the circumstances existing at the time that such
documents were filed with the Commission under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), all subject to customary
assumptions and qualifications and otherwise in form and content
customary for similar opinions; (ii) its officers to execute and
deliver all customary documents and certificates and updates thereof
requested by the selling Holders of the applicable shares of Preferred
Stock or any underwriters of the applicable shares of Preferred Stock;
and (iii) its independent public accountants to provide to the selling
Holders of the applicable Preferred Stock and any underwriter therefor
a comfort letter in customary form and covering matters of the type
customarily covered in comfort letters in connection with primary
underwritten offerings,
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subject to receipt of appropriate documentation as contemplated, and
only if permitted, by Statement of Auditing Standards No. 72.
(n) The Company and the Subsidiary Guarantors shall use their
best efforts to take all other steps necessary to effect the
registration of the Preferred Stock covered by the Shelf Registration
Statement contemplated hereby.
3. Registration Expenses. The Company shall bear all fees and
expenses incurred in connection with the performance of its obligations under
Sections 1 and 2 hereof, whether or not the Shelf Registration is filed or
becomes effective, and, shall bear or reimburse the Holders of the Preferred
Stock covered thereby, for the reasonable fees and disbursements of one firm of
counsel designated by the Holders of a majority of the outstanding shares of the
Preferred Stock covered thereby to act as counsel for the Holders in connection
therewith.
4. Indemnification.
(a) The Company shall indemnify and hold harmless each Holder
and each person, if any, who controls such Holder within the meaning of
the Exchange Act (each such Holder and each such controlling person
being referred to collectively as the "Indemnified Parties") from and
against any losses, claims, damages or liabilities, joint or several,
or any actions in respect thereof (including, but not limited to, any
losses, claims, damages, liabilities or actions relating to purchases
and sales of the Preferred Stock) to which each Indemnified Party may
become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such losses, claims, damages, liabilities or actions arise
out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Shelf Registration
Statement or any prospectus included therein or in any amendment or
supplement thereto, or arise out of, or are based upon, the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading. The
Company shall reimburse, as incurred, each Indemnified Party for any
legal or other expenses reasonably incurred by it in connection with
investigating or defending any such loss, claim, damage, liability or
action in respect thereof. The Company shall not, however, be liable in
any such case to the extent that such --------- ------- loss, claim,
damage, liability or action arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission
made in the Shelf Registration Statement or any prospectus included
therein or in any amendment or supplement thereto or in any preliminary
prospectus relating to the Shelf Registration in reliance upon and in
conformity with written information pertaining to such Holder and
furnished to the Company by or on behalf of such Holder specifically
for inclusion therein. The Company shall also indemnify underwriters,
selling brokers, dealer managers and similar securities industry
professionals participating in the distribution (in each case as
described in the Shelf Registration Statement), their officers and
directors and each person who controls such persons within the meaning
of the Securities Act or the Exchange Act to the same extent as
provided above with respect to the indemnification of the Holders if
requested by such Holders.
(b) Each Holder, severally and not jointly, will indemnify and
hold harmless the Company and each person, if any, who controls the
Company within the meaning of
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the Securities Act or the Exchange Act from and against any losses,
claims, damages, liabilities or actions in respect thereof to which the
Company or any such controlling person may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages, liabilities or actions arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact
contained in the Shelf Registration Statement or any prospectus
included therein or in any amendment or supplement thereto or in any
preliminary prospectus relating to the Shelf Registration, or arise out
of or are based upon the omission or alleged omission to state therein
a material fact necessary to make the statements therein not
misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information
pertaining to such Holder and furnished to the Company by or on behalf
of such Holder specifically for inclusion therein; and, subject to the
limitation set forth immediately preceding this clause, shall
reimburse, as incurred, the Company for any legal or other expenses
reasonably incurred by the Company or any controlling person in
connection with investigating or defending any loss, claim, damage,
liability or action in respect thereof. This indemnity agreement will
be in addition to any liability which such Holder may otherwise have to
the Company and any of their controlling persons.
(c) Promptly after receipt by an Indemnified Party under this
Section 4 of notice of the commencement of any action or proceeding
(including a governmental investigation), such Indemnified Party will,
if a claim in respect thereof is to be made against any person (the
"Indemnifying Party") under this Section 4, notify the Indemnifying
Party of the commencement thereof; but the omission so to notify the
Indemnifying Party will not, in any event, relieve the Indemnifying
Party from any obligations to any Indemnified Party including the
indemnification obligation provided in paragraph (a) or (b) above. In
case any such action is brought against any Indemnified Party, and it
notifies the Indemnifying Party of the commencement thereof, the
Indemnifying Party will be entitled to participate therein and, to the
extent that it may wish, jointly with any other Indemnifying Party
similarly notified, to assume the defense thereof, with counsel
reasonably satisfactory to such Indemnified Party (who shall not,
except with the consent of the Indemnified Party, be counsel to the
Indemnifying Party), and after notice from the Indemnifying Party to
such Indemnified Party of its election to assume the defense thereof,
the Indemnifying Party will not be liable to such Indemnified Party
under this Section 4 for any legal or other expenses, other than
reasonable costs of investigation, subsequently incurred by such
Indemnified Party in connection with the defense thereof. No
Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending or threatened
action in respect of which any Indemnified Party is or could have been
a party and indemnity could have been sought hereunder by such
Indemnified Party unless such settlement includes an unconditional
release of such Indemnified Party from all liability on any claims that
are the subject matter of such action.
(d) If the indemnification provided for in this Section 4 is
unavailable or insufficient to hold harmless an Indemnified Party, then
each Indemnified Party shall contribute to the amount paid or payable
to such Indemnifying Party as a result of the losses, claims, damages
or liabilities referred to in this Section 4 an amount or additional
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amount, as the case may be, in such proportion as is appropriate to
reflect the relative fault of the Indemnifying Party or parties on the
one hand and the Indemnified Party on the other in connection with the
statements or omission which resulted in such loses, claims, demands or
liabilities as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by the Indemnifying Party or parties on the one
hand or the Indemnified Party on the other and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid to an
Indemnified Party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this Section 4 shall
be deemed to include any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending
any action or claim which is the subject of this Section 4. No person
guilty of fraudulent misrepresentation within the meaning of Section
11(f) of the Securities Act shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
(e) The agreements contained in this Section 4 shall survive
the sale of the Preferred Stock pursuant to the Shelf Registration
Statement and shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement or any investigation made
by or on behalf of any indemnified party.
5. Rules 144 and 144A. The Company shall use commercially
reasonable efforts to file the reports required to be filed by it under the
Securities Act and the Exchange Act in a timely manner and, if at any time the
Company is not required to file such reports, it will, upon the request of any
Holder of Transfer Restricted Stock (as defined below), make publicly available
other information so long as necessary to permit sales of their Preferred Stock
pursuant to Rules 144 and 144A. The Company covenants that it will take such
further action as any Holder of Transfer Restricted Stock may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Transfer Restricted Stock without registration under the Securities Act
within the limitation of the exemptions provided by Rules 144 and 144A
(including the requirements of Rule 144A (d) (4)). The Company will provide a
copy of this Agreement to prospective purchasers of Transfer Restricted Stock
identified to the Company upon request. Upon the request of any Holder of
Transfer Restricted Stock, the Company shall deliver to such Holder a written
statement as to whether the Company has complied with such requirements.
6. Underwritten Registrations. If any of the Transfer
Restricted Stock covered by the Shelf Registration is to be sold in an
underwritten offering, the managing underwriters will be selected by the Holders
of a majority in aggregate principal amount of such Transfer Restricted Stock to
be included in such offering.
No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such person's Transfer
Restricted Stock on the basis reasonably provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities,
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underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
7. Definitions:
"Holder" means the Initial Holders and any person or entity to
whom Transfer Restricted Stock is validly transferred by an Initial Holder or a
Holder pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144 promulgated under the Securities Act.
"Transfer Restricted Stock" means shares of Preferred Stock
issuable to the Initial Holders under the Plan, additional shares of Preferred
Stock payable as dividends thereon, if applicable, and common stock into which
the Preferred Stock is convertible until (i) the date on which such Preferred
Stock or common stock, as applicable, has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (ii) the date on which such Preferred Stock or common stock, as
applicable, is distributed to the public pursuant to Rule 144 under the
Securities Act.
8. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, except by
the Company and with the written consent of the Holders of 75% of then
outstanding shares of the Preferred Stock affected by such amendment,
modification, supplement, waiver or consent.
(b) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand delivery,
first-class mail, facsimile transmission, or air courier which
guarantees overnight delivery:
(1) if to a Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this Section
8(b), which address initially is, with respect to each Holder, the
address of such Holder to which confirmation of the sale of such
Preferred Stock to such Holder was first sent by the Company with
copies in like manner to you as follows:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Fax No.: (212) 504-6666
Attention: Brian Hoffmann
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(2) if to the Company at the Company's address as follows:
TransTexas Gas Corporation
1300 North Sam Houston Parkway East
Houston, Texas 77032-2949
Fax No.: (281) 986-8877
Attention: Secretary
with a copy to:
Gardere & Wynne, L.L.P.
3000 Thanksgiving Tower
1601 Elm Street, Suite 3000
Dallas, TX 75201
Fax No.: (214) 999-3534
Attention: C. Robert Butterfield
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally
delivered; three business days after being deposited in the mail,
postage prepaid, if mailed; when receipt is acknowledged by recipient's
facsimile machine operator, if sent by facsimile transmission; and on
the day delivered, if sent by overnight air courier guaranteeing next
day delivery.
(c) No Inconsistent Agreements. The Company has not, as of the
date hereof, entered into, nor shall it, on or after the date hereof,
enter into, any agreement with respect to its Preferred Stock that is
inconsistent with the rights granted to the Holders herein or otherwise
conflicts with the provisions hereof.
(d) Successors and Assigns. This Agreement shall be binding
upon the Company and its respective successors and assigns; provided
however, that no successor or assign may exercise any rights under this
Agreement unless such successor or assign agrees in writing to be bound
by the provisions hereof.
(e) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(f) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
(g) Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
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If the foregoing is in accordance with your understanding of
our agreement, please sign and return to TransTexas a counterpart hereof,
whereupon this Agreement will become a binding agreement among the Company and
the Initial Holders in accordance with its terms.
Very truly yours,
TRANSTEXAS GAS CORPORATION
By:
-------------------------------------
Name:
Title:
[Junior Preferred Stock Registration Rights Agreement]
<PAGE> 12
The foregoing Registration Rights Agreement
is hereby confirmed and accepted as of the
date first above written.
Initial Holders
CREDIT SUISSE FIRST BOSTON CORPORATION
By:
----------------------------------------
Name:
Title
OAKTREE CAPITAL MANAGEMENT, LLC
as general partner and investment manager
of certain funds and accounts it manages
By:
----------------------------------------
Name:
Title
By:
----------------------------------------
Name:
Title
[Junior Preferred Stock Registration Rights Agreement]
<PAGE> 1
EXHIBIT 10.50
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
March 17, 2000, by and between TRANSTEXAS GAS CORPORATION, a business
corporation organized and operating under the laws of the State of Delaware and
having its principal office at 1300 North Sam Houston Parkway East, Houston,
Texas 77032 ("Company"), and JOHN R. STANLEY, an individual residing in Houston,
Texas ("Executive").
WITNESSETH :
WHEREAS, Executive is currently serving as Chief Executive Officer of the
Company, and the Company wishes to assure itself of the services of Executive
for the period provided in this Agreement; and
WHEREAS, Executive is willing to serve in the employ of the Company on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and conditions hereinafter set forth, the Company and Executive hereby agree as
follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, Executive agrees to serve as
Chairman of the Board and Chief Executive Officer of the Company. Executive
shall render administrative and management services to the Company such as are
customarily performed by persons situated in a similar executive capacity and
shall perform such other duties not inconsistent with his title and office as
may be assigned to him by or under the authority of the Board of Directors of
the Company (the "Board"). Executive shall have such authority as is necessary
or appropriate to carry out his assigned duties, including, without limitation,
the right to employ and remove officers, employees and agents of the Company and
fix their compensation; provided that such compensation taken as a whole is
commensurate with the compensation of similarly employed individuals within the
oil and gas industry or in accordance with any reasonable guidelines that may be
prescribed by the Board.
2. EMPLOYMENT PERIOD.
(a) The terms and conditions of this Agreement shall be and remain in
effect during the period of employment established under this Section 2
("Employment Period"). The Employment Period shall be for an initial term of
three (3) years beginning on the date of this Agreement. Prior to the third
(3rd) anniversary of the date of this Agreement and on the next immediately
succeeding anniversary date (each, an "Anniversary Date"), the Board shall
review the terms of this Agreement and Executive's performance of services
hereunder and may, in the absence of objection from Executive, approve a
one-year extension of the Employment Agreement. For purposes of this Agreement,
the term "Employment Period" shall mean the then unexpired term of this
Agreement.
<PAGE> 2
(b) During the period of his employment hereunder, except for periods of
absence occasioned by illness, disability, holidays, reasonable vacation periods
and reasonable leaves of absence, Executive shall devote substantially all of
his business time, attention, skill and efforts to the faithful performance of
his duties hereunder which shall include: (i) service as Chief Executive Officer
of the Company, and, if duly elected, as a member of, and as Chairman of, the
Board of the Company; (ii) performance of such duties not inconsistent with his
title and office as may be assigned to him by or under the authority of the
Board; and (iii) other activities and services related to the organization,
operation and management of the Company.
(c) Notwithstanding anything herein contained to the contrary: (i)
Executive's employment with the Company may be terminated by Executive during
the term of this Agreement, subject to the terms and conditions of this
Agreement; (ii) commencing two years after the date hereof, Executive's
employment with the Company may be terminated by the Company, subject to the
terms and conditions of this Agreement, and (iii) nothing in this Agreement
shall mandate or prohibit a continuation of Executive's employment following the
expiration of the term of this Agreement upon such terms and conditions as the
Board and Executive may mutually agree.
(d) During Executive's employment, Executive shall receive the maximum
indemnification protection from the Company as permitted by applicable law and
shall receive the same directors' and officers' insurance coverage provided to
any other director of the Company.
3. COMPENSATION AND OTHER CONDITIONS OF EMPLOYMENT.
(a) The compensation specified under this Agreement shall constitute the
salary and benefits paid for the duties described in Section 1. The Company
shall pay Executive as compensation, a salary at an annual rate of not less than
Three Hundred Thousand Dollars ($300,000.00) per year or such higher rate as may
be prescribed by or under the authority of the Board ("Base Salary"). The Base
Salary payable under this Section 3 shall be paid in approximately equal
installments in accordance with the Company's customary payroll practices. All
salary, bonuses and other compensation or benefits in cash or in kind paid to
Executive hereunder shall be subject to normal withholdings and deductions
imposed by any one or more of local, state, federal or foreign governments.
(b) During the Employment Period, Executive shall be treated as an employee
of the Company and shall be eligible to participate in and receive benefits
under any and all qualified or non-qualified retirement, pension, savings,
profit-sharing or stock bonus plans, any and all group life, health (including
hospitalization, medical and major medical), dental, accident and long-term
disability insurance plans, and any other employee benefit and compensation
plans (including, but not limited to, any incentive compensation plans or
programs, stock option and appreciation rights plans and restricted stock plans)
as may from time to time be maintained by, or cover employees of, the Company,
in accordance with the terms and conditions of such employee benefit plans and
programs and compensation plans and programs and consistent with the Company's
customary practices.
(c) Executive will also be given warrants at the beginning of each year
during the term of the Agreement to purchase 37,500 shares of New Common Stock
at an exercise price of
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<PAGE> 3
$120 per share. Such warrants shall be issued pursuant to the Warrant Agreement
executed and delivered by the Company pursuant to its Plan of Reorganization
under Chapter 11 of the United States Bankruptcy Code which was confirmed on
February 7, 2000, by order of the United States Bankruptcy Court for the
Southern District of Texas in Case No. 99-21550-C-11 and shall not expire prior
to June 30, 2002.
(d) Executive's principal place of employment shall be at the Company's
executive offices at the address first above written, or at such other location
in Harris County, Texas at which the Company shall maintain its principal
executive offices, or at such other location as the Board and Executive may
mutually agree upon. The Company shall provide Executive, at his principal place
of employment with support services and facilities suitable to his position with
the Company and necessary or appropriate in connection with the performance of
his assigned duties under this Agreement. The Company shall reimburse Executive
for his ordinary and necessary business expenses, including, without limitation,
fees for memberships in such clubs and organizations as Executive and the Board
shall mutually agree are necessary and appropriate for business purposes, and
travel and entertainment expenses, incurred in connection with the performance
of his duties under this Agreement, upon presentation to the Company of an
itemized account of such expenses in such form as the Company may reasonably
require.
4. TERMINATION OF EMPLOYMENT FOR REASONS OTHER THAN CAUSE.
(a) Upon the occurrence of an Event of Termination as set forth in Section
4(c), on the Date of Termination, as defined in Section 7(b), the Company shall
be obligated to pay, or to provide Executive, the benefits provided below and a
payment equal to the sum of the payments set forth below:
(i) payment of Executive's annual Base Salary through the Date of
Termination to the extent not theretofore paid;
(ii) the benefits, if any, to which Executive is entitled as a former
employee under the Company's employee benefit plans and programs and
compensation plans and programs, excluding any payments as severance in
cash, securities or otherwise;
(iii) a lump sum payment, as liquidated damages, in an amount equal to
Three Million Dollars ($3,000,000.00).
Subject to the last sentence of Section 4(b), the benefits to be provided under,
and the amounts payable pursuant to, this Section shall be provided and be
payable without regard to proof of damages and without regard to Executive's
efforts, if any, to mitigate damages. The Company and Executive hereby stipulate
that the damages which may be incurred by Executive following any such
termination of employment are not capable of accurate measurement as of the date
first above written and that such liquidated damages constitute reasonable
damages under the circumstances; provided, however, in the event Executive fails
to provide a Release (as defined below) and does not receive the amount
specified in 4(a)(iii), this stipulation shall not be applicable and shall have
no force and effect.
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<PAGE> 4
(b) Payments to Executive under Section 4 shall be made within thirty (30)
days of Executive's Date of Termination; provided, however, that the Company and
Executive agree that the Company may condition the payments and benefits due
under Section 4(a) hereof on the receipt of Executive's resignation from any and
all positions which he holds as an officer with respect to the Company and any
subsidiary or affiliate; provided further, however, that the Company and
Executive agree that the Company may condition the payment due under Section
4(a)(iii) hereof upon receipt of a release in form and substance reasonably
satisfactory to the Board releasing its officers, directors, affiliates,
stockholders and debt holders and any officers, directors or affiliates of such
stockholders and debt holders from all liabilities and obligations to Executive
hereunder or otherwise in connection with the employment of Executive (a
"Release"). If Executive elects not to accept the payment provided for in
Section 4(a)(iii) hereof, Executive shall not be obligated to deliver a Release
and shall be entitled to pursue any remedies that may be available to him at law
or in equity as a result of the termination of his employment by the Company and
the Company shall have no further obligation to pay any amounts pursuant to
Section 4(a)(iii).
(c) An "Event of Termination" shall mean the termination of Executive's
employment for any reason other than Cause, voluntary resignation, disability or
death; provided, however, the Company shall not have the right to terminate
Executive's employment for any reason other than Cause during the first two
years of the term of this Agreement.
5. TERMINATION OF EMPLOYMENT FOR CAUSE.
(a) The terms "Termination for Cause" or "Cause" shall mean the termination
of Executive's employment with the Company as a result of Executive's personal
dishonesty, willful misconduct, willful or gross neglect which has a material
adverse effect on the Company, fraud, misappropriation, embezzlement in the
performance of his duties hereunder, any breach of fiduciary duty involving
personal profit (unless the amount of such profit is de minimus), knowing
failure to perform material stated duties, conviction of a crime with respect to
the Company or any material breach of this Agreement which Executive has failed
to cure within fifteen (15) days following the receipt of written notice from
the Company specifying such breach (each, a "Non-economic Termination");
provided, however, the Company shall also be permitted to terminate Executive's
employment for "Cause" in the event that any of the following events occur: (i)
the Company defaults in the payment of interest or principal of any two payments
due on the New Senior Secured Notes(1) in accordance with the Indenture for such
Notes; (ii) the Company fails to pay dividends on any of its Capital Stock on a
dividend payment date in accordance with the Company's Certificate of
Incorporation on any two occasions; (iii) the Company fails to redeem the New
Senior Preferred Stock(2) when obligated to do so in accordance with the
Company's Certificate of Incorporation; (iv) the Company files for bankruptcy
under the Federal Bankruptcy Code; or (v) the Board of
- ------------------
(1) For purposes of this Agreement, the term "New Senior Secured Notes" shall
have the meaning ascribed to it in Section 2.79 of the First Amended Plan of
Reorganization under Chapter 11 of the Bankruptcy Code Proposed by TransTexas
Gas Corporation dated July 22, 1999 (the "Plan of Reorganization").
(2) For purposes of this Agreement, the term "New Senior Preferred Stock" shall
have the meaning ascribed to it in Section 2.77 of the Plan of Reorganization.
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<PAGE> 5
Directors shall determine that Executive is unable to carry out his duties under
this Agreement because of a disabling illness or injury including chronic
alcoholism or substance abuse. Any act, or failure to act, taken or omitted in
accordance with express instructions given pursuant to a resolution duly adopted
by the Board or based upon the written advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by Executive in good
faith and in the best interests of the Company. Notwithstanding the foregoing,
Executive shall not be deemed to have been terminated for Cause unless and until
there shall have been delivered to him a Notice of Termination which shall
include a copy of a resolution duly adopted by the affirmative vote of not less
than a majority of the members of the Board at a meeting of the Board called and
held for that purpose (after reasonable notice to Executive and an opportunity
for him, together with counsel, to be heard before the Board), finding that in
the good faith opinion of the Board, Executive was guilty of conduct justifying
Termination for Cause and specifying the particulars thereof in detail. Except
as provided in Section 5(b) below, Executive shall not have the right to receive
compensation or other benefits for any period after Termination for Cause.
(b) In the event of Executive's Termination For Cause, the Company shall be
obligated to pay, or to provide, Executive, the benefits provided below and a
payment equal to the sum of the payments set forth below:
(i) payment of Executive's annual Base Salary through the Date of
Termination to the extent not theretofore paid;
(ii) the benefits, if any, to which Executive is entitled as a former
employee under the Company's employee benefit plans and programs and
compensation plans and programs, excluding any payments as severance in
cash, securities or otherwise;
(iii) a lump sum payment, as liquidated damages, in an amount equal to
One Million, Five Hundred Thousand Dollars ($1,500,000.00);
provided, however, in no event shall the Company be obligated to pay to
Executive the payment described in Section 5(b)(iii) above if the Company's
termination of Executive's employment was due, in whole or in part, to a
Non-economic Termination. Subject to the last sentence of Section 5(c), the
benefits to be provided under, and the amounts, if any, payable pursuant to,
this Section 5 shall be provided and be payable without regard to proof of
damages and without regard to Executive's efforts, if any, to mitigate damages.
The Company and Executive hereby stipulate that the damages which may be
incurred by Executive following any such termination of employment are not
capable of accurate measurement as of the date first above written and that such
liquidated damages constitute reasonable damages under the circumstances;
provided, however, in the event Executive fails to provide a Release and does
not receive the amount specified in 5(b)(iii), this stipulation shall not be
applicable and shall have no force and effect.
(c) Payments to Executive under Section 5 shall be made within thirty (30)
days of Executive's Date of Termination; provided, however, that the Company may
condition the payments and benefits due under Section 5(b) upon the receipt of
executive's resignation from any and all positions which he holds as an officer,
and, if the Termination for Cause was, in whole or in part, a Non-economic
Termination, as a director or committee member, with respect to the Company
-5-
<PAGE> 6
and any subsidiary or affiliate provided further, however, that the Company and
Executive agree that the Company may condition the payments and benefits due
under Section 5(b)(iii) hereof upon receipt of a Release. If Executive elects
not to accept the payment provided for in Section 5(b)(iii) hereof, Executive
shall not be obligated to deliver a Release and shall be entitled to pursue any
remedies that may be available to him at law or in equity as a result of the
termination of his employment by the Company and the Company shall have no
further obligation to pay any amounts pursuant to Section 5(b)(iii).
(d) Effective immediately upon the termination of Executive for Cause,
Executive shall automatically cease to be an officer of the Company and any
subsidiary or affiliate. Effective immediately upon the Non-economic Termination
of Executive, Executive shall automatically cease to be a director or committee
member of the Company and any subsidiary or affiliate.
6. TERMINATION WITHOUT ADDITIONAL COMPANY LIABILITY.
In the event that Executive's employment with the Company shall terminate
during the Employment Period on account of:
(a) Executive's death; or
(b) Executive's voluntary resignation from employment with the Company;
then the Company shall have no further liability under this Agreement, other
than the payment to Executive (or, in the event of his death, to his estate) of
his earned but unpaid salary as of the date of the termination of his
employment, and the provision of such other benefits, if any, to which he is
entitled as a former employee under the employee benefit plans and programs and
compensation plans and programs maintained by, or covering employees of, the
Company, excluding any payments as severance in cash, securities or otherwise.
7. NOTICE.
(a) Any purported termination by the Company or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated. For purposes of this Agreement, a "Notice of Termination" shall
comply with any requirements of Sections 4, 5 and 6 hereof.
(b) "Date of Termination" shall mean the date specified in the Notice of
Termination (which, in the case of a Termination for Cause, shall be immediate).
(c) Subject to Sections 4, 5, 6 and 8, the Company may terminate
Executive's employment at any time.
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<PAGE> 7
(d) Any communication to a party required or permitted under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party, as
follows. If to Executive, John R. Stanley, 1300 North Sam Houston Parkway East,
Houston, Texas 77032; with a copy to: John C. Nabors, Gardere & Wynne, L.L.P.,
3000 Thanksgiving Tower, Dallas, Texas 75201; and if to the Company, 1300 North
Sam Houston Parkway East, Houston, Texas 77032; Attention: Ed Donahue, Vice
President; with a copy to General Counsel, TransTexas Gas Company, 1300 North
Sam Houston Parkway East, Houston, Texas 77032.
8. LIMITATIONS ON TERMINATION. Notwithstanding the provisions of Sections 4 and
5, the Company shall not terminate Executive without Cause prior to the second
anniversary of this Agreement. This Section 8 in no way limits the provisions of
Section 6 herein.
9. POST-TERMINATION OBLIGATIONS.
(a) All payments and benefits to Executive under this Agreement shall be
subject to Executive's compliance with paragraph (b) of this Section 9 during
the term of this Agreement and for one full year after the expiration or
termination hereof.
(b) Executive shall, upon reasonable notice, furnish such information and
assistance to the Company as may reasonably be required by the Company in
connection with any litigation in which it or any of its subsidiaries or
affiliates is, or may become, a party; provided that the Company shall be
required to reimburse Executive for the reasonable value of his time in
connection therewith and for any out-of-pocket costs attributable thereto.
10. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash or
check by the Company.
11. EFFECT ON PRIOR AGREEMENTS.
This Agreement contains the entire understanding between the parties hereto
and supersedes any prior employment agreement between the Company or any
predecessor of the Company and Executive.
12. NO ATTACHMENT.
Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
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<PAGE> 8
13. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.
14. SUCCESSOR AND ASSIGNS.
This Agreement will inure to the benefit of and be binding upon Executive,
his legal representatives and testate or intestate distributees, and the
Company, its successors and assigns, including any successor by purchase,
merger, consolidation or otherwise or a statutory receiver or any other person
or firm or corporation to which all or substantially all of the assets and
business of the Company may be sold or otherwise transferred. Any such successor
of the Company shall be deemed to have assumed this Agreement and to have become
obligated hereunder to the same extent as the Company and Executive's
obligations hereunder shall continue in favor of such successor.
15. SEVERABILITY.
If for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
16. HEADINGS FOR REFERENCE ONLY.
The headings of Sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement. Any reference in this Agreement to a
Section or Subsection shall refer to a Section or Subsection of this Agreement,
except as otherwise specified.
17. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE,
WITHOUT REFERENCE TO CONFLICTS OF LAW PRINCIPLES.
18. COVENANT NOT TO COMPETE.
(a) Executive acknowledges that he, at the expense of the Company, has been
and will be specially trained in the business of the Company, has established
and will continue to
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<PAGE> 9
establish favorable relations with the customers, clients and accounts of the
Company and will have access to trade secrets of the Company. Therefore, in
consideration of such training and relations and to further protect trade
secrets, directly or indirectly, of the Company, Executive agrees that during
the term of his employment by the Company and for one (1) year thereafter, he
will not, directly or indirectly, without the express written consent of the
Company:
(i) own or have any interest in or act as an officer, director,
partner, principal, employee, agent, representative, consultant or
independent contractor of, or in any way assist in, any business located in
or doing business in the United States of America or Canada in any area
within 300 miles of any facility of the Company during the term of
Executive's employment by the Company which is engaged, directly or
indirectly, in (A) oil, petroleum or gas exploration, development,
production or transportation or (B) any other business in which the Company
is engaged or proposes to engage on the Date of Termination (the businesses
described in clauses (i)(A) and (B) are collectively referred to as the
"Competitive Businesses"); provided, however, that notwithstanding the
above, Executive may own, directly or indirectly, solely as an investment,
the securities of any such Competitive Businesses which are traded on any
national securities exchange or NASDAQ if Executive: (x) is not a
controlling person of, or a member of a group which controls, such Business
and (y) does not, directly or indirectly, own 5% or more of any class of
securities of such Business;
(ii) solicit clients, customers (who are or were customers of the
Company within the twelve (12) months prior to termination) or accounts of
the Company for, on behalf of or otherwise related to any such Competitive
Businesses or any products related thereto;
(iii) solicit, employ or in any manner influence or encourage any
person who is or shall be in the employ or service of the Company to leave
such employ or service for any other employment opportunity.
(b) Notwithstanding anything contained in Section 18(a), Executive may
participate in the acquisition of oil or gas prospects or drilling of oil or gas
wells (each a "Prospect") outside the Company's Area of Interest (as defined
below). In addition, notwithstanding anything contained in Section 18(a),
Executive may participate in any Prospect inside the Company's Area of Interest;
provided that the Company shall have a Right of First Refusal (as defined below)
at any time during the period commencing on the date of this Agreement and
ending on the date that is one calendar year after the date this Agreement is
terminated for any reason. Further, notwithstanding anything contained in
Section 18(a), Executive may, with respect to oil or gas wells acquired or
drilled by him (or by an entity in which he participates) as permitted by this
Section 18(b) and with respect to production therefrom, solicit clients,
customers or accounts of the Company. For the purposes of this paragraph the
"Company's Area of Interest" shall mean the area within (i) a five-mile radius
of each existing producing well of the Company at the time Executive elects to
participate in a Prospect or (ii) any reservoir within which the Company has an
existing well or has identified a prospect at the time the Executive elects to
participate in a Prospect. At any time Executive elects to participate in a
Prospect, Executive shall so notify the Company in writing and provide the
Company a copy of all geological and economic data and information available to
Executive concerning the Prospect. If such Prospect is subject to a Right of
First Refusal, the Company shall have 45 days following receipt of such
information from Executive to make an election (a "Right of First Refusal"). The
Company may choose to take all or any part of the interest available to
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<PAGE> 10
Executive in the Prospect. However, if the Company elects not to participate or
elects to take less than all of the interest available to Executive, then
Executive may participate in the Prospect and the Area of Interest that is
specified for that Prospect to the extent that the Company has elected to not
participate therein.
(c) Notwithstanding the foregoing, the terms of this covenant not to
compete shall be enforceable against Executive only to the extent that during
Executive's employment, the Company continues to pay Executive compensation
equal to the Base Salary set forth in Section 3 of this Agreement and to provide
Executive the other benefits provided for in this Agreement and after
termination of Executive's employment, the Company continues to pay Executive
any and all payments and benefits required under Sections 4 or 5 of this
Agreement, as applicable. Furthermore, if any court determines that the covenant
not to compete, or any part thereof, is unenforceable because of the duration of
such provision or the geographic area or scope covered thereby, then such court
shall have the power to reduce the duration, area or scope of such provision
and, in its reduced form, such provision shall then be enforceable and shall be
enforced.
19. CONFIDENTIAL INFORMATION.
Executive shall hold in a fiduciary capacity for the benefit of the Company
all secret or confidential information, knowledge or data relating to the
Company or any of its affiliated companies, and their respective businesses,
which shall have been obtained by Executive during Executive's employment by the
Company or any subsidiary or affiliate and which shall not be or become public
knowledge (other than by acts by Executive or representatives of Executive in
violation of this Agreement) and shall not use or disclose the same other than
as required in the performance of his duties under this Agreement. After
termination of Executive's employment with the Company, Executive shall not,
without the prior written consent of the Company or as may otherwise be required
by law or legal process, communicate or divulge any such information, knowledge
or data to anyone other than the Company and those designated by it and shall
not use or disclose the same other than as required in the performance of his
duties under this Agreement. For purposes of this Agreement, secret and
confidential information, knowledge or data relating to the Company or any of
its subsidiaries or affiliates, and their respective business, shall not include
any information that is public, publicly available or available through trade
association sources (other than by acts by Executive or representatives of
Executive in violation of this Agreement).
20. REMEDIES
Notwithstanding any other provision of this Agreement to the contrary,
Executive acknowledges and agrees (i) that in the event of a violation or
threatened violation of any of the provisions of Sections 18 and 19, the Company
shall have no adequate remedy at law and shall therefore be entitled to enforce
each such provision by temporary or permanent injunction or mandatory relief
obtained in any court of competent jurisdiction without the necessity of proving
damages or posting any bond or other security, and without prejudice to any
other remedies that may be available at law or in equity and (ii) that in the
event of a violation or the filing of litigation seeking to declare
unenforceable the provisions of Sections 18 or 19, Executive shall repay to the
Company any liquidated damages paid to him under Sections 4(a)(iii) or
5(b)(iii), as applicable.
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<PAGE> 11
IN WITNESS WHEREOF, TransTexas Gas Corporation has caused this Employment
Agreement to be executed and its seal to be affixed hereunto by its duly
authorized officer, and Executive has signed this Employment Agreement, on the
____ day of March, 2000.
ATTEST: TRANSTEXAS GAS CORPORATION
By:
--------------------------------------
Name: Ed Donahue
------------------------------ Vice President
Title:
-----------------------------
[Seal]
WITNESS:
--------------------------- -----------------------------------------
JOHN R. STANLEY
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<PAGE> 12
STATE OF TEXAS )
)
COUNTY OF DALLAS )
On this ____ day of March, 2000, before me personally came Ed Donahue, to
me known, who, being by me duly sworn, did depose and say that he is Vice
President of TRANSTEXAS GAS CORPORATION, the Delaware corporation described in
and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such seal; that it was
so affixed by order of the Board of Directors of said corporation; and that he
signed his name thereto by like order.
-----------------------------------------
Name:
------------------------------------
Notary Public
STATE OF TEXAS )
)
COUNTY OF HARRIS )
On this ____ day of March, 2000, before me personally came JOHN R. STANLEY
to me known, and known to me to be the individual described in the foregoing
instrument, who, being by me duly sworn, did depose and say that he resides at
the address set forth in said instrument, and that he signed his name to the
foregoing instrument.
Name:
------------------------------------
Notary Public
12
<PAGE> 1
EXHIBIT 10.51
SEVERANCE AGREEMENT
This agreement is made between TransTexas Gas Corporation and Simon Ward.
1. The employment agreement between Simon Ward and TransTexas Gas Corporation
has expired, and Simon Ward is now an at-will employee of TransTexas Gas
Corporation.
2. In the event of a termination for cause, salary shall cease on the
effective date of termination. Salary and benefits earned to the date of
termination will be paid in full. "Cause" shall mean:
a. Willful neglect or mismanagement by Simon Ward of his reasonable
duties, responsibilities, and obligations which results in significant
material damage to the property or interest of TransTexas Gas
Corporation; or
b. Material breach of this agreement of the policies set forth in the
Employee Handbook by Simon Ward, or
c. Inability of Simon Ward to perform his duties, responsibilities and
obligations by reason of illness, accident or other incapacity for a
continuous period of six months.
3. Termination is without cause unless TransTexas Gas Corporation details the
cause for termination in writing, meeting the definition of paragraph 2, at
the time of termination. TransTexas Gas Corporation may terminate Simon
Ward's employment without cause by giving Simon Ward written notice of
termination. However, in the event that TransTexas Gas Corporation
terminates Simon Ward other than for cause, TransTexas Gas Corporation
shall pay Simon Ward his salary for twelve months past the termination of
employment.
4. This agreement may not be assigned without the prior written approval of
the other party.
5. Any disputes concerning or arising out of interpretation or application of
this agreement shall be determined by final and binding arbitration under
and in accordance with the rules and procedures of the American
Arbitration's Association provided that the dispute is submitted to
arbitration by written demand therefor delivered to and received by the
other party within sixty days after occurrence of the event giving rise to
the dispute.
6. If there is a conflict between TransTexas Gas Corporation personnel
policies and this agreement, this agreement shall prevail.
Date: Date:
------------------------------ ------------------------------
TransTexas Gas Corporation
-----------------------------------
Simon Ward
By:
--------------------------------
Gerald Barkley, Personnel Manager
<PAGE> 1
EXHIBIT 10.52
- --------------------------------------------------------------------------------
PURCHASE AGREEMENT
-------------------------------------------------------
PRODUCTION PAYMENT
DRILLING PROGRAM
between
TRANSTEXAS GAS CORPORATION
and
SOUTHERN PRODUCER SERVICES, L.P.,
TCW PORTFOLIO NO. 1555 DR V SUB-CUSTODY PARTNERSHIP, L.P.,
TCW DR VI INVESTMENT PARTNERSHIP, L.P.
AND
TCW ASSET MANAGEMENT COMPANY, AS FUNDS AGENT
-------------------------------------------------------
March 14, 2000
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - Definitions and References..........................................................1
Section 1.1. Defined Terms and References.............................................1
Section 1.2. Rules of Construction....................................................6
ARTICLE II - Purchase and Sale..................................................................6
Section 2.1. Agreement of Purchase and Sale...........................................6
Section 2.2. Initial Closing..........................................................7
Section 2.3. Subsequent Closings......................................................7
Section 2.4. Payment of Purchase Price Payments......................................10
Section 2.5. Release Acreage.........................................................10
Section 2.6. Expenses................................................................11
Section 2.7. Payments to Grantee.....................................................11
ARTICLE III - Closing Dates and Closings.......................................................11
Section 3.1. Times and Places of Closings............................................11
Section 3.2. Conditions to Initial Closing...........................................11
Section 3.3. Conditions to Subsequent Closings for State Tract 5/6 Offset Wells......13
Section 3.4. Conditions to Other Subsequent Closings.................................14
Section 3.5. Other Conditions to All Closings........................................16
ARTICLE IV - Representations and Covenants.....................................................16
Section 4.1. Representations and Warranties of Grantor...............................16
Section 4.2. Representations, Warranties and Disclosures by Grantee..................22
Section 4.3. Covenants of Grantor....................................................22
Section 4.4. Reporting Covenants of Grantor..........................................25
Section 4.5. Reporting Covenants of Grantee..........................................27
Section 4.6. Additional Remedies Upon Designated Event...............................28
Section 4.7. Confidentiality.........................................................28
Section 4.8. Hedging Contracts.......................................................29
Section 4.9. Marketer................................................................29
ARTICLE V - Reserve Reports....................................................................29
Section 5.1. Reserve Reports.........................................................29
ARTICLE VI - Miscellaneous.....................................................................30
Section 6.1. Waivers and Amendments..................................................30
Section 6.2. Survival of Agreements; Cumulative Nature...............................30
Section 6.3. Notices.................................................................31
Section 6.4. Parties in Interest.....................................................31
Section 6.5. Governing Law...........................................................31
Section 6.6. Limitation on Interest..................................................31
Section 6.7. Termination; Limited Survival...........................................32
</TABLE>
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<TABLE>
<S> <C>
Section 6.8. Severability............................................................32
Section 6.9. Arbitration.............................................................32
Section 6.10. Funds Agent............................................................34
Section 6.11. Counterparts...........................................................37
</TABLE>
SCHEDULE 1 -- Litigation Summary
SCHEDULE 2 -- Abstracts of Judgment
SCHEDULE 3 -- Example Calculation of Unliquidated Balance of Primary Sum
SCHEDULE 4 -- Sale, Processing and Transportation Agreements
SCHEDULE 5 -- Release Acreage
SCHEDULE 6 -- Restricted Assignees
EXHIBIT A -- Partial Conveyance
EXHIBIT B -- Winnie Guaranty
EXHIBIT C -- Purchase Agreement Supplement
EXHIBIT D -- Conveyance Supplement
EXHIBIT E -- TransTexas Marketing Agreements
EXHIBIT F -- Production Sales Agreements
EXHIBIT G -- Conveyance
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PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT dated as of March 14, 2000 (herein, as from
time to time amended or supplemented, called this "Agreement") is made by:
o TransTexas Gas Corporation, a Delaware corporation (herein
called "Grantor"),
o Southern Producer Services, L.P. (herein called "SPS"),
o TCW Portfolio No. 1555 DR V Sub-Custody Partnership, L.P.
(herein called "Fund V"), and
o TCW DR VI Investment Partnership, L.P. (herein called "Fund
VI"), and
o TCW Asset Management Company, as agent on behalf of Fund V and
Fund VI (in such capacity, "Funds Agent"),
who, in consideration of the mutual covenants and agreements contained herein,
hereby agree as follows:
ARTICLE I - Definitions and References
Section 1.1. Defined Terms and References. As used herein, the terms
"Agreement", "Fund V", "Fund VI", "Grantor", and "SPS" have the meanings given
them above (provided that references to Grantor, Fund V, Fund VI and SPS also
refer to the successors and assigns of such Persons). Reference is also made to
the "Conveyance", as defined below, for the meaning of various terms defined
therein, all of which shall when used herein (unless otherwise expressly defined
herein) have the meanings given them in the Conveyance. For purposes of this
Agreement, unless the context otherwise requires, the following additional terms
shall have the following meanings:
"Bankruptcy Case" means Case No. 99-21550 in the Southern District of
Texas (Corpus Christi Division), entitled "In re: TRANSTEXAS GAS CORPORATION, et
al."
"Bankruptcy Court Order" means the final and nonappealable order of the
Court in the Bankruptcy Case, a copy of which is attached as Exhibit C to the
Conveyance, that, among other things, authorizes Grantor to convey the
Production Payment to Grantee free and clear of any and all liens, claims, and
encumbrances (other than those in favor of Davis Petroleum Corp. that are
expressly provided for therein).
"Closing" means the Initial Closing or any Subsequent Closing, and
"Closing Date" means the Initial Closing Date or any Subsequent Closing Date.
"Confirmation Order" means the order of the Court in the Bankruptcy
Case, entered on February 7, 2000, confirming Borrower's Second Amended Plan of
Reorganization.
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"Confirmed Plan of Reorganization" means Grantor's Second Amended Plan
of Reorganization, as confirmed by the Confirmation Order.
"Conveyance" means the Production Payment Conveyance made by Grantor to
Grantee, substantially in the form of Exhibit G to this Agreement (appropriately
completed and with property descriptions attached), as from time to time
supplemented by Conveyance Supplements or otherwise amended or supplemented.
"Conveyance Supplement" means a Supplement to Production Payment
Conveyance executed by Grantor and Grantee, substantially in the form of Exhibit
D to this Agreement, under which new properties may be made Subject Interests
subject to the Production Payment, the unliquidated balance of the Primary Sum
may be increased, and the relative Percentage Shares of the Persons included in
Grantee may be modified by means of cross-conveyances from Fund V and Fund VI to
SPS.
"Designated Event" means any of the following:
(a) any representation or warranty made by Grantor or any
other TransTexas Company in the Conveyance, this Purchase Agreement or
any other Production Payment Document is false or incorrect in any
material respect as of the time when made;
(b) Grantor or any other TransTexas Company fails to pay or
perform any obligation, covenant or duty owed by it under the
Conveyance, this Purchase Agreement or any other Production Payment
Document, and such failure is not fully remedied, in the case of an
obligation to pay money or to perform (or cause to be performed)
Delivery Services, within five days after it occurs or, in the case of
any other obligation, covenant, or duty, within thirty days after it
occurs;
(c) the occurrence of a Senior Notes Event of Default; and
(d) the validity or enforceability of any Production Payment
Document is challenged by Grantor, any Affiliate of Grantor, or any
party to or beneficiary of any Senior Notes Mortgage in any court,
arbitration, or regulatory proceeding of any kind, or any Production
Payment Document is held to be unenforceable in any material respect in
any court, arbitration, or regulatory proceeding of any kind.
"Drilling Costs" means, with respect to any Offered Well, the actual
and verified costs incurred by Grantor on or after April 19, 1999, in drilling
and completing such Offered Well (or, with respect to any State Tract 5/6 Offset
Well that Grantor elects not to complete, the actual and verified costs incurred
by Grantor on or after April 19, 1999, in drilling such well).
"Eagle Bay Field" means State Tracts 308, 329, 330, 331, 332, 351, 352
and 353 in Galveston County, Texas, plus the acreage in the City of San Leon,
Texas, that is subject to the Conveyance (as originally granted), plus any other
acreage that is now or hereafter included in any production unit with any of the
foregoing acreage.
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<PAGE> 6
"Evaluation Date" means each February 1, beginning with February 1,
2000, and each August 1, beginning with August 1, 2000.
"Funds Agent" has the meaning given such term in Section 6.10(a).
"Grantee" refers collectively on the date hereof to SPS, Fund V and
Fund VI and at any time hereafter refers collectively to all Persons that own
the Production Payment at such time, provided that "a Grantee" or "any Grantee"
means any one of the Persons included in "Grantee". Unless the context otherwise
requires, all references herein to "Grantee" shall include SPS in its capacity
as an owner of the Production Payment and in its capacity as Marketer.
"Hazardous Substance" means any "hazardous waste", "hazardous
substance", "extremely hazardous substance", "toxic chemical", "hazardous
chemical", "toxic pollutants", contaminants", "chemical", "chemical substance",
or "asbestos", as such terms are defined in any Environmental Law, or related
substances, in such quantities or concentrations as are prohibited by (or
require remediation under) any Environmental Law or other applicable law, or
which may be declared to constitute a material threat to human health or to the
environment.
"Initial Closing" and "Initial Closing Date" have the meanings given
them in Section 3.1.
"Initial Purchase Price Payment" means the first Purchase Price Payment
made hereunder, which shall be $4,500,000 paid in cash by SPS to Grantor plus
the reconveyance of the Previous Production Payments by Grantee to Grantor by
means of the Reconveyance.
"Marketer" means SPS in its capacity as a party to the Production Sales
Agreements or in its capacity as a party to the TransTexas Marketing Agreements,
together with its successors and assigns in such capacities.
"Offered Well" means:
(a) each well not already subject to the Conveyance that is
drilled within the Program Period and that either (i) has a bottom hole
location that is within 1500 feet of any Production Unit that is at
such time subject to the Conveyance, or (ii) penetrates a geological
reservoir in communication with a zone either produced or able to be
produced from any well that is at such time subject to the Production
Payment, provided that with respect to the Obenhaus No. 1 Gas Unit in
Wharton County, Texas any Offered Wells under this subparagraph (a)
shall be limited to wells located on such unit,
(b) each well drilled during the Program Period with its
bottom hole location in the Eagle Bay Field,
(c) each State Tract 5/6 Offset Well, and
(d) each other well, if any, which Grantor chooses to offer to
Grantee under Section 2.3 during the Program Period.
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<PAGE> 7
"Partial Conveyance" means the Partial Conveyance of Production Payment
of even date herewith from Fund V and Fund VI to SPS in the form of Exhibit A,
pursuant to which Fund V and Fund VI have conveyed partial undivided interests
in the Previous Production Payments to SPS prior to the execution and delivery
of the Reconveyance by Fund V, Fund VI and SPS to Grantor.
"Permitted Encumbrances" has the meaning given such term in Section
4.1(h).
"PPNPV" has the meaning given such term in Section 5.1(c).
"Preferential Right" has the meaning given such term in Section 4.1(o).
"Production Payment Documents" means this Agreement, the Purchase
Agreement Supplements, the Reconveyance, the Conveyance, the Conveyance
Supplements, the Winnie Guaranty, the TransTexas Marketing Agreements, the
Production Sales Agreements, each transportation, processing and sales agreement
entered into by Marketer in connection with production attributable to the
Production Payment, and each certificate, agreement, document, or instrument now
or hereafter delivered to any Grantee in connection with any thereof by or on
behalf of Grantor or any other TransTexas Company.
"Production Sales Agreements" means the Crude Oil Purchase Agreement
and the Gas and Natural Gas Liquids Purchase Agreement of even date herewith
between Marketer and Fund V and Fund VI, as from time to time supplemented and
amended, which are being executed concurrently herewith substantially in the
forms attached as Exhibit F hereto and under which Fund V and Fund VI are
agreeing to sell, and Marketer is agreeing to buy, all of their PP Hydrocarbons.
"Production Unit" means a tract of at least 160 acres, if located in
the Eagle Bay Field, or of at least 80 acres, if located elsewhere, in each case
specified as to both area and depths and meeting the following conditions
(provided that if such production unit does not meet such conditions, Grantor
shall specify in its description of such Production Unit pursuant to Section
2.3(b) how such conditions are not met):
(a) Grantor owns good and defensible title (subject only to
Permitted Encumbrances) to an undivided fee or leasehold interest in
and to the oil, gas, and all other liquid and gaseous hydrocarbons
which may be produced from such tract, including the right to produce,
save and market production from any Offered Well located thereon.
(b) Such tract satisfies all drilling and spacing regulations
of the Railroad Commission of Texas, or any other governmental
authority having jurisdiction and is of sufficient size to afford a
well thereon the maximum applicable allowable.
"Program Period" means the period beginning on the Initial Closing Date
through and including the earlier of (a) March 31, 2001, and (b) the date on
which SPS has paid $52,000,000 in aggregate cash Purchase Price Payments to
Grantor.
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<PAGE> 8
"Purchase Agreement Supplement" means a Supplement to Purchase
Agreement executed by Grantor and Grantee, substantially in the form of Exhibit
C to this Agreement and appropriately completed.
"Purchase Price Payment" means a payment to be made by any Grantee to
Grantor under Section 2.2 or 2.3 in consideration of the Conveyance or a
Conveyance Supplement. Each Purchase Price Payment is an installment of the
total purchase price payable for the Production Payment.
"Release Acreage" has the meaning given such term in Section 2.5.
"Reserve Engineers" means Netherland, Sewell & Associates Inc. (or
other independent petroleum engineers of recognized standing selected by Grantor
and acceptable to Grantee in the reasonable exercise of its discretion).
"Reserve Report" has the meaning given such term in Section 5.1.
"Restricted Assignee" means any Person listed on Schedule 6 or any
Affiliate of such Person that is not an Affiliate of Grantee.
"Senior Notes Event of Default" means, with respect to any Senior Notes
Mortgage, any breach, default or event of default under such Senior Notes
Mortgage, or under any agreement or instrument secured thereby or evidencing any
indebtedness secured thereby, that authorizes any party to or beneficiary of
such Senior Notes Mortgage to begin foreclosure proceedings under such Senior
Notes Mortgage or to accelerate the maturity of any indebtedness secured by such
Senior Notes Mortgage.
"Senior Notes Mortgage" means any deed of trust or mortgage now or
hereafter burdening any of the Subject Interests or Retained Interests to secure
any loans, promissory notes, bonds or other indebtedness for borrowed money for
which Grantor is liable (either as borrower, issuer, guarantor, or otherwise),
excluding only any such deed of trust or mortgage that is fully discharged and
released by the Confirmation Order.
"State Tract 5/6 Offset Wells" means Grantor's currently drilling State
Tract 331 #5 well (an offset well to Grantor's existing State Tract 330 #1 well)
and Grantor's proposed State Tract 331 #6 well (an offset well to Grantor's
existing State Tract 331 #1 well), provided that such proposed well is drilled
to the stratigraphic equivalent of the Vicksburg "B" sand as seen in the State
Tract 331 #1 well at a measured depth of approximately 15,600 feet and that such
well is drilled to a bottom hole location in State Tract 331 in Galveston
County, Texas, that is approximately 16,750 feet deep and located approximately
2,700 feet South of the North boundary line of State Tract 331 and approximately
2,800 feet West of the East boundary line of State Tract 331.
"Subsequent Closing" and "Subsequent Closing Date" have the meanings
given them in Section 3.1.
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<PAGE> 9
"Tamco" means TCW Asset Management Company, a California corporation.
"TransTexas Company" means Grantor and each subsidiary of Grantor,
including GBPC and Galveston Bay Pipeline Company, provided that if Grantor ever
becomes a subsidiary of any Person after the Initial Closing Date, then such
Person or any subsidiary of such Person shall also be a TransTexas Company if it
hereafter becomes a party to any Production Payment Document.
"TransTexas Marketing Agreements" means that certain Oil Purchase
Agreement and that certain Gas and Natural Gas Liquids Purchase Agreement, each
of even date herewith between Grantor and Marketer, as each is from time to time
supplemented and amended, which are being executed concurrently herewith
substantially in the forms attached as Exhibit E hereto and under which Marketer
is agreeing to buy from Grantor (or to otherwise assist Grantor in marketing)
all of the Gas and Oil attributable to production from the Retained Interests.
"Trustco" means Trust Company of the West.
"Winnie Guaranty" means that certain Guaranty, dated of even date
herewith, executed by Grantor substantially in the form of Exhibit B hereto to
guarantee certain obligations of GBPC.
Section 1.2. Rules of Construction. All references in this Agreement to
articles, sections, subsections and other subdivisions refer to corresponding
articles, sections, subsections and other subdivisions of this Agreement unless
expressly provided otherwise. Titles appearing at the beginning of any of such
subdivisions are for convenience only and shall not constitute 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. Unless the context otherwise requires: "INCLUDING" (and its grammatical
variations) means "including without limitation"; "OR" is not exclusive; words
in the singular form shall be construed to include the plural and vice versa;
words in any gender include all other genders; references herein to any
instrument or agreement refer to such instrument or agreement as it may be from
time to time supplemented or amended; and references herein to any Person
include such Person's successors and assigns. Whether or not one Person is a
"SUBSIDIARY" of another Person shall be determined in accordance with generally
accepted accounting principles as in effect at the time in question. All
references in this Agreement to exhibits and schedules refer to the exhibits and
schedules to this Agreement unless expressly provided otherwise, and all such
exhibits and schedules are hereby incorporated herein by reference and made a
part hereof for all purposes.
ARTICLE II - Purchase and Sale
Section 2.1. Agreement of Purchase and Sale. Upon the terms and
conditions of this Agreement, Grantor agrees to sell the first component of the
Production Payment to Grantee pursuant to the Conveyance, and Grantee agrees to
purchase the same from Grantor and to pay the Initial Purchase Price Payment as
the purchase price therefor.
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<PAGE> 10
Section 2.2. Initial Closing. On the Initial Closing Date, Grantor
shall deliver the Conveyance to Grantee, making the properties described therein
subject to the Production Payment, and shall satisfy all of the conditions set
out in Sections 3.2 and 3.5. Thereupon Grantee shall pay the Initial Purchase
Price Payment to Grantor, with:
(a) the Previous Production Payments being reconveyed to
Grantor pursuant to the Reconveyance by Fund V, Fund VI and SPS in
accordance with their ownership interests therein, and
(b) $4,500,000 being paid in cash by SPS to Grantor.
Grantor will use the $4,500,000 so paid in cash as needed to satisfy the closing
conditions in Section 3.2 and will use any remainder for its general corporate
purposes.
Section 2.3. Subsequent Closings.
(a) State Tract 5/6 Offset Wells. Upon the drilling and completion of
each State Tract 5/6 Offset Well (or upon the drilling thereof and Grantor's
decision to plug and abandon such well rather than complete it) and upon the
substantially final determination of the Drilling Costs for such State Tract 5/6
Offset Well, SPS will pay an additional Purchase Price Payment to Grantor with
respect to such State Tract 5/6 Offset Well equal to the lesser of (i) such
Drilling Costs and (ii) $4,500,000 (provided that Grantee and Grantor may in
their discretion agree to a higher Purchase Price Payment). SPS shall pay this
Purchase Price Payment upon written request therefor from Grantor, provided that
Grantor first provides evidence acceptable to SPS (in the reasonable exercise of
SPS's discretion) that Grantor has paid in full in cash all costs and expenses
associated with drilling such State Tract 5/6 Offset Well or has made provision
for such payment that is satisfactory to SPS (in the reasonable exercise of
SPS's discretion). From time to time, upon request therefor from Grantee,
Grantor will promptly provide information and data of the types described in the
following subsection with respect to either State Tract 5/6 Offset Well.
(b) Other Offered Wells. Throughout the Program Period (but no more
frequently than one time per month), Grantor shall present to Grantee all logs
which it has made or received with respect to any Offered Well (other than a
State Tract 5/6 Offset Well) that has not previously been offered to Grantee,
together with:
(i) a written description of the interval or intervals which
Grantor has completed, together with (1) production information about
offsetting wells, and (2) any relevant drilling and completion records,
logs, production data, drilling reports, completion information, and
geological and geophysical maps (or access thereto), (3) a bottom hole
survey, and (4) any and all documentation, estimates and proposals for
work performed or to be performed,
(ii) a written description of the Production Unit on which
such Offered Well is located, and whether or not such Production Unit
contains acreage sufficient (i) to afford such well its maximum
allowable production (if any), as determined in accordance with the
rules and regulations of the Railroad Commission of Texas or any other
governmental
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<PAGE> 11
authority having jurisdiction, and (ii) to reasonably protect such
Offered Well from drainage,
(iii) a written description of the pipeline system or systems
by means of which production from such Offered Well will be
transported, the processing facility or facilities at which the
production from such Offered Well will be processed, the present total
capacity of such pipelines and processing facilities and any quality
requirements, and Grantor's expectations as to how much of such
transportation capacity or processing capacity will be contractually
committed to Grantee, to Marketer, or to other Persons who may have
priority rights with respect to such transportation capacity or
processing capacity,
(iv) a written description of the gathering system to which
such Offered Well will be connected, the time needed to make such
connection, and whether or not such gathering system has sufficient
capacity and pressure to permit the continuing delivery of all
Hydrocarbons reasonably expected to be able to be produced from such
Offered Well,
(v) Grantor's expectation as to whether production from such
Offered Well will be exempt from severance tax pursuant to the Texas
Tax Code,
(vi) Grantor's Drilling Costs for such Offered Well and
documents evidencing the same,
(vii) a reserve report prepared by the Reserve Engineers after
the drilling of such Offered Well, evaluating the reserves of the
Offered Well and prepared within sixty (60) days of the date such
information is submitted to Grantee, which report shall be in form and
substance, and based on assumptions, acceptable to Grantee,
(viii) a written description of all existing marketing
arrangements to which Grantor is a party, if any, that affect, or could
affect, the volumes and prices of Hydrocarbon production from the
Offered Well,
(ix) documentation relating to production, spacing rules,
title and leasehold ownership in connection with such Offered Well, and
(x) such other matters, including estimated direct operating
expenses, gathering fees, title information, environmental information,
including, but not limited to, a Phase 1 environmental report, as
Grantee shall from time to time request be disclosed in connection with
Offered Wells and Production Units.
(To the extent that Grantor has provided any of the above documents or
information in connection with one Offered Well, Grantor may, at its option,
supplement such documents or information in connection with a later Offered Well
rather than deliver duplicate copies thereof, certifying with such supplement as
to the documents and information that have not changed.) Each such presentation
by Grantor shall be deemed an offer and request by Grantor to Grantee that such
Production Unit be made (or remain) subject to the Conveyance in consideration
of
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<PAGE> 12
SPS's payment of a Purchase Price Payment specified by Grantor equal to the
Drilling Costs for such Offered Well (provided that if such Offered Well is not
described in paragraphs (a), (b), or (c) of the above definition of "Offered
Well", Grantor may propose any other price). Grantee has no obligation to accept
any such offer, and Grantee may in its discretion either accept such offer at
such Purchase Price Payment, or decline such offer, or agree with Grantor on any
other Purchase Price Payment (whether more or less) for such Offered Well and
the related Production Unit. Any decision by Grantee to make any additional
Offered Well and related Production Unit subject to the Conveyance must be made
unanimously by each Person included in Grantee. If Grantee fails to accept or
decline any such offer within 30 days after receiving all of the foregoing
information and other items to be furnished to Grantee, Grantee will be deemed
to have declined such offer.
(c) Closing Procedures. Whenever SPS becomes obligated to pay an
additional Purchase Price Payment for a State Tract 5/6 Offset Well as described
in subsection (a) above, or if as described in subsection (b) above Grantee in
its discretion agrees to make any additional Offered Well and the related
Production Unit subject to the Conveyance and SPS in its discretion agrees to
pay a Purchase Price Payment therefor:
(i) Grantor and Grantee shall in connection therewith execute
and deliver a Purchase Agreement Supplement, which shall specify the
amount of the Purchase Price Payment which they have agreed upon for
such Offered Well and the related Production Unit and which shall
contain any exceptions to representations and warranties, or additional
representations, warranties, covenants or other matters (including
exclusions from the Release Acreage as contemplated in Section 2.5) as
Grantor and Grantee may agree upon;
(ii) Grantee shall prepare a Conveyance Supplement which shall
contain a legal description for such Production Unit, a Delivery Point
for the field in which such Production Unit is located (if the same has
not already been designated for such field), and set out Grantor's net
revenue interest and working interest therein and the amount (equal to
the Purchase Price Payment which Grantor will concurrently receive) by
which the Primary Sum is to be increased;
(iii) Grantor and Marketer shall prepare a supplement to the
TransTexas Marketing Agreements, if production from new fields is to be
sold thereunder, which shall contain a Delivery Point and a sales price
for production from such field;
(iv) Fund V, Fund VI and Marketer shall prepare supplements to
the Production Sales Agreements, if production from new fields is to be
sold thereunder, which shall contain a Delivery Point and a sales price
for production from such field; and
(v) On or before such Subsequent Closing Date, Grantor,
Marketer and Grantee shall execute and deliver and file of record such
Conveyance Supplement and such supplements to the TransTexas Marketing
Agreements and the Production Sales Agreements, Grantor shall satisfy
all other conditions in Sections 3.3 or 3.4, as
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<PAGE> 13
appropriate, and in Section 3.5, and SPS shall pay such portion of such
Purchase Price Payment to Grantor.
(d) Use of Proceeds. Grantor will use the Purchase Price Payment paid
by SPS for each State Tract 5/6 Offset Well first to pay any unpaid Drilling
Costs related to such State Tract 5/6 Offset Well, then to pay any unpaid
Drilling Costs related to any other Subject Wells, and last, when all Drilling
Costs for all Subject Wells have been paid in full, for Grantor's general
corporate purposes. Grantor will use the Purchase Price Payment paid by SPS for
each Offered Well (other than a State Tract 5/6 Offset Well) as may be agreed to
in the Purchase Agreement Supplement for such Offered Well (if any such
agreement is made) and shall otherwise use such Purchase Price Payment first to
pay any unpaid Drilling Costs related to such Offered Well, then to pay any
unpaid Drilling Costs related to any other Subject Wells, and last, when all
Drilling Costs for all Subject Wells have been paid in full, for Grantor's
general corporate purposes.
Section 2.4. Payment of Purchase Price Payments. SPS will make each
cash payment of Purchase Price Payments to Grantor by wire transfer of
immediately available funds to such banks and bank accounts as Grantor shall
specify in the certificate delivered in connection therewith pursuant to Section
3.2(d), 3.3(c) or 3.4(c), as appropriate, provided that either SPS or Funds
Agent may in its discretion, to the extent Drilling Costs for the relevant
Subject Well have not been paid or provided for to its satisfaction, require
that all or any portion of such payments be either (a) deposited in any bank
account, and made subject to any disbursement procedures, agreed to by Grantor
and its co-owners of the relevant Subject Well for the payment of the Drilling
Costs therefor, or (b) wired directly to those Persons to whom Grantor owes such
Drilling Costs. Under no circumstances shall the aggregate amount of the
Purchase Price Payments to be paid in cash under Sections 2.2 and 2.3 exceed
$52,000,000. Under no circumstances shall Grantee be liable to Grantor or any
third party for the payment of any Drilling Costs. It is the agreement of the
parties hereto that Grantee shall (to the extent otherwise specified hereunder)
purchase the Production Payment by making Purchase Price Payments in amounts
which may be determined, among other things, by reference to Drilling Costs, but
that Grantor (and not Grantee) is responsible for paying all Drilling Costs.
Section 2.5. Release Acreage. In anticipation of the drilling of future
Offered Wells on the lands and depths described in Schedule 5 hereto (herein
called the "Release Acreage"), Grantor has included the Release Acreage within
the Subject Lands that are subject to the Conveyance. Grantor may at any time
demand that Grantee release and reconvey all or any specified part of the
Release Acreage from the Conveyance. Promptly after any such demand (and
regardless of whether any Designated Event then exists), Grantee will release
from the Conveyance and reconvey to Grantor the portion of the Release Acreage
so demanded by Grantor, and any Release Acreage not so demanded by Grantor shall
continue to be Release Acreage subject to the provisions of this section. If,
however, any Offered Well is hereafter drilled by Grantor on the Release Acreage
and Grantor and Grantee do agree upon the payment of an additional Purchase
Price Payment therefor pursuant to Section 2.3(b), then as part of the related
Purchase Agreement Supplement they shall amend Schedule 5 hereto to exclude from
the Release Acreage the Production Unit on which such Offered Well is located
and any other acreage which they have agreed to exclude, and any acreage so
excluded shall no longer be Release Acreage subject to Grantor's rights under
this section.
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Section 2.6. Expenses. Grantor will pay to Grantee (or directly to
Grantee's attorneys and other consultants) all Reimbursable Expenses as they are
billed. Grantor has heretofore paid a fee of $45,000 to Fund V and Fund VI and a
fee of $30,000 to SPS, and these fees will be used to reduce the Reimbursable
Expenses before Grantor is asked to make any additional payments of Reimbursable
Expenses. Thereafter Grantor will make deposits in increments of $25,000 with
the respective attorneys for Fund V and Fund VI and for SPS. To the extent that
any such deposited funds exceed the amounts reasonably anticipated to be needed
to pay Reimbursable Expenses (or other amounts which may be agreed to by
Grantor), Grantee will cause such attorneys to return the excess to Grantor upon
request. To the extent that such deposited funds are insufficient to pay all
Reimbursable Expenses, Grantor will thereafter make additional deposits of
$25,000 each with such attorneys which will be used to pay all additional
Reimbursable Expenses as billed.
Section 2.7. Payments to Grantee. Grantor will pay any amounts owing to
Fund V, Fund VI or SPS under the Production Payment Documents by wire transfer
of immediately available funds to such banks and accounts as each such Person
shall from time to time specify in writing at least five Business Days prior to
the effective date for any such change of accounts. If the Production Payment
ever becomes owned by more than three Persons in compliance with Section 6.4,
then Grantor shall not be required to make wire transfers to more than three
such Persons. If Grantor chooses not to make wire transfers to more than three
such Persons, then any additional Person owning a partial interest in the
Production Payment in compliance with Section 6.4 may by notice to Grantor
request that payments to such owner be thereafter sent directly to such owner by
check, whereupon Grantor will do so.
ARTICLE III - Closing Dates and Closings
Section 3.1. Times and Places of Closings. The closing for the
consummation of the sale and purchase of the first component of the Production
Payment (herein called the "Initial Closing") shall take place at such place (or
places) and on such date as may be agreed to by Grantor and Grantee (herein
called the "Initial Closing Date"). The closing for the consummation of the sale
and purchase of each subsequent component, if any, of the Production Payment
(each herein called a "Subsequent Closing") shall take place at such place (or
places) and on such date as may be agreed to by Grantor and Grantee (each herein
called a "Subsequent Closing Date").
Section 3.2. Conditions to Initial Closing. The obligation of Grantee
to pay the Initial Purchase Price Payment is subject to Grantee's receipt of
each of the following, in form, substance, and date satisfactory to Grantee:
(a) The Bankruptcy Court Order, authorizing the transactions
contemplated hereby, and the Confirmation Order.
(b) An "Omnibus Certificate" of the Secretary or Assistant
Secretary of Grantor, which shall contain the names and signatures of
the officers of Grantor authorized to execute the Production Payment
Documents and which shall certify to the truth,
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correctness and completeness of the following exhibits attached
thereto: (i) a copy of resolutions duly adopted by the Board of
Directors of Grantor and in full force and effect at the time this
Agreement is entered into, authorizing the execution of the Production
Payment Documents and the consummation of the transactions contemplated
therein, (ii) a copy of the charter documents of Grantor and all
amendments thereto, certified by the appropriate official of Grantor's
state of incorporation, and (iii) a copy of the bylaws of Grantor.
(c) A certificate (or certificates) of the due formation,
valid existence and good standing of Grantor in its state of
incorporation, issued by the appropriate authorities of such state, and
certificates of Grantor's good standing and due qualification to do
business in Texas.
(d) A Compliance Certificate of the Chief Financial Officer of
Grantor, dated as of the Initial Closing Date, in which such officer
(i) shall certify to the satisfaction of the conditions set out in
Section 3.5(a), (b), and (c), (ii) shall provide an aged listing (by
vendor) of any unpaid Operating Costs with respect to each separate
lease or unit included in the Subject Interests and of any unpaid
Operating Costs with respect to Grantor's other properties,
collectively, that have been incurred after April 19, 1999, and (iii)
shall give the wiring instructions referred to in Section 2.4.
(e) Any assurances of title requested by Grantee (supplied by
counsel acceptable to each Person included in Grantee in its sole
discretion) concerning the Production Payment, including the recording
and filing of the Conveyance and the updating of any specified title
opinions through such recording (it being understood that Grantee may
require these to be given after, as well as at, the Initial Closing,
and that no title deficiencies learned of by Grantee at any time shall
in any way be deemed to qualify any of Grantor's warranties of title or
indemnities with respect to title in any of the Production Payment
Documents).
(f) A report from the Reserve Engineers with respect to the
estimated quantities of proved oil and gas reserves attributable to the
Production Payment.
(g) A Phase I report (or other satisfactory report) from
acceptable environmental consultants with respect to the Subject
Interests, and a schedule from Grantor setting out the severance tax
rates, and exemptions from severance tax, applicable to the PP
Hydrocarbons produced from the various Subject Wells.
(h) Certificates from Grantor's insurance brokers or advisors
confirming that Grantor is in compliance with the requirements of
Section 3.5 of the Conveyance.
(i) A legal opinion of Gardere & Wynne, L.L.P., as counsel to
Grantor, dated the Initial Closing Date.
(j) The Conveyance, which must be filed and recorded in the
following order:
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o first the Partial Conveyance,
o then the Reconveyance,
o then the Conveyance, and
o then any Senior Notes Mortgages or other lien
documents given by Grantor pursuant to its Confirmed
Plan of Reorganization.
(k) The Production Sales Agreements, together with a letter
from Grantor approving any associated swap agreements as contemplated
in Section 4.8.
(l) The TransTexas Marketing Agreements.
(m) The Winnie Guaranty, and the Consent and Agreement of
Galveston Bay Pipeline Company and Grantor in favor of Grantee.
(n) The sales, processing and transportation contracts listed
in Schedule 4 hereto.
(o) The other agreements listed in paragraph 8 of the
Bankruptcy Order.
(p) Evidence satisfactory to Grantee that Galveston Bay
Pipeline Company and GBPC own their assets to be used in connection
with PP Hydrocarbons free and clear of liens, or subject only to liens
securing debts that are not in default and are otherwise on terms
acceptable to Grantee. In particular, and without limitation, Jefferies
Analytical Trading Group, Inc. ("Jefferies") must agree to be bound by
any contracts between GBPC and Marketer if it forecloses any lien on
assets of GBPC or Galveston Bay Pipeline Company, and the processing
agreement between GBPC and Marketer must contain GBPC's irrevocable
direction to Marketer to pay over a portion of the fees payable by
Marketer to GBPC to meet GBPC's monthly payment obligations to Koch
Speciality Plant Service, Inc. and Koch Producers Services, Inc.
(q) Copies of the "Plan Related Documents", as defined in the
Confirmation Order, with the solvency opinion required thereunder also
being addressed to Grantee.
(r) Payment (or satisfactory arrangement for payment) of all
reasonable legal fees and expenses of Grantee and Funds Agent billed on
or prior to the Initial Closing Date.
(s) The approvals that are required under Paragraph 3 of the
Bankruptcy Court Order (which shall be filed with the Court in the
Bankruptcy Case promptly after the Initial Closing Date).
Section 3.3. Conditions to Subsequent Closings for State Tract 5/6
Offset Wells. For each State Tract 5/6 Offset Well, the obligation of SPS to pay
each Purchase Price Payment (and of Grantee to execute and deliver each
Conveyance Supplement) in connection with a Subsequent Closing on the related
Subsequent Closing Date is subject to Grantee's receipt of each of the
following, in form, substance, and date satisfactory to Grantee:
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(a) Supplements to the "Omnibus Certificate" of Grantor
delivered under Section 3.2(a) and (b), confirming the matters
specified therein and containing any amendments or supplements to the
resolutions, charter documents and bylaws attached thereto.
(b) To the extent, if any, requested by Grantee, certificates
of the valid existence and good standing of Grantor in its state of
incorporation, issued by the appropriate authorities of such state, and
certificates of Grantor's good standing and due qualification to do
business in Texas.
(c) A Compliance Certificate of the Chief Financial Officer of
Grantor, dated as of such Closing Date, in which such officer (i) shall
certify to the satisfaction of the conditions set out in Sections
3.5(a), (b) and (c), (ii) shall provide an aged listing (by vendor) of
any unpaid Operating Costs with respect to each separate lease or unit
included in the Subject Interests and of any unpaid Operating Costs
with respect to Grantor's other properties, collectively, that have
been incurred after April 19, 1999, (iii) shall list any payment
obligations of Grantor (including interest) with respect to borrowed
money or obligations under the Confirmed Plan of Reorganization that
have not been paid when due (or are being contested), and (iv) shall
give the wiring instructions referred to in Section 2.4.
(d) A legal opinion of Gardere & Wynne, L.L.P., as counsel to
Grantor, dated as of such Closing Date, substantially similar in form
and content to the legal opinion delivered under Section 3.2(i) and
otherwise reasonably acceptable to Grantee and its counsel.
(e) A Purchase Agreement Supplement, and any supplements
needed or desirable to make such State Tract 5/6 Offset Well subject to
the Production Sales Agreements and the TransTexas Marketing
Agreements, together with a letter from Grantor approving any new swap
agreements as contemplated in Section 4.8.
(f) A Conveyance Supplement.
(g) Payment of all reasonable legal fees and expenses of
Grantee and Funds Agent billed on or prior to such subsequent Closing
Date.
Section 3.4. Conditions to Other Subsequent Closings. Except to the
extent governed by Section 3.3, the obligation of SPS to pay each Purchase Price
Payment (and of Grantee to execute and deliver each Conveyance Supplement) in
connection with a Subsequent Closing on the related Subsequent Closing Date is
subject to Grantee's receipt of each of the following, in form, substance, and
date satisfactory to Grantee:
(a) Supplements to the "Omnibus Certificate" of Grantor
delivered under Section 3.2(a) and (b), confirming the matters
specified therein and containing any amendments or supplements to the
resolutions, charter documents and bylaws attached thereto.
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<PAGE> 18
(b) To the extent, if any, requested by Grantee, certificates
of the valid existence and good standing of Grantor in its state of
incorporation, issued by the appropriate authorities of such state, and
certificates of Grantor's good standing and due qualification to do
business in Texas.
(c) A Compliance Certificate of the Chief Financial Officer of
Grantor, dated as of such Closing Date, in which such officer (i) shall
certify to the satisfaction of the conditions set out in Section 3.5,
(ii) shall provide an aged listing (by vendor) of any unpaid Operating
Costs with respect to each separate lease or unit included in the
Subject Interests and of any unpaid Operating Costs with respect to
Grantor's other properties, collectively, that have been incurred after
April 19, 1999, (iii) shall list any payment obligations of Grantor
(including interest) with respect to borrowed money or obligations
under the Confirmed Plan of Reorganization that have not been paid when
due (or are being contested), and (iv) shall give the wiring
instructions referred to in Section 2.4.
(d) Any assurances of title requested by Grantee (supplied by
counsel acceptable to each Person included in Grantee, in its sole
discretion) concerning the Production Payment, including the recording
and filing of the Conveyance and the Conveyance Supplements, the giving
and recording any necessary lien releases or other curative matters,
and the updating of any specified title opinions through such recording
(it being understood that Grantee may require these to be given after,
as well as at, the various Closings, and that no title deficiencies
learned of by Grantee at any time shall in any way be deemed to qualify
any of Grantor's warranties of title or indemnities with respect to
title in any of the Production Payment Documents).
(e) A report from the Reserve Engineers with respect to the
estimated quantities of proved oil and gas reserves attributable to the
Production Payment as a result of any new Subject Interests being made
subject to the Production Payment).
(f) A Phase I report (or other satisfactory report) from
acceptable environmental consultants with respect to such new Subject
Interests.
(g) Any other documents or information required under Section
2.3(b), to the extent that Grantee has not elected to waive the
delivery thereof.
(h) A legal opinion of Gardere & Wynne, L.L.P., as counsel to
Grantor, dated as of such Closing Date, substantially similar in form
and content to the legal opinion delivered under Section 3.2(i) and
otherwise reasonably acceptable to Grantee and its counsel.
(i) A Purchase Agreement Supplement, and any documents called
for thereunder (including any supplements required for the Production
Sales Agreements and the TransTexas Marketing Agreements and a letter
from Grantor approving any new swap agreements as contemplated in
Section 4.8).
(j) A Conveyance Supplement.
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(k) Satisfactory marketing arrangements by Marketer (to the
extent then existing arrangements are insufficient) for the
Hydrocarbons to be produced from the new Subject Interests.
(l) Payment of all reasonable legal fees and expenses of
Grantee and Funds Agent billed on or prior to such subsequent Closing
Date
Section 3.5. Other Conditions to All Closings. In addition to the
receipt of the foregoing documents and instruments under Section 3.2, 3.3 or
3.4, as appropriate, the obligation of Grantee to pay any Purchase Price Payment
(and to execute any Conveyance Supplement) on the related Closing Date is
subject to the satisfaction (or waiver by Grantee) of the following conditions
precedent:
(a) All representations and warranties made by Grantor or any other
TransTexas Company in any Production Payment Document then or previously
delivered shall be true and correct as of such Closing Date (unless such
representations and warranties are expressly limited to an earlier date, in
which case such representations and warranties shall be true and correct as of
such earlier date), and there must have occurred no material adverse change in
the condition of the Subject Interests or in the business or financial condition
of Grantor from that previously described to Grantee.
(b) Grantor and each other TransTexas Company shall have performed and
satisfied all agreements, covenants, and conditions which each is required to
perform or satisfy on or prior to such Closing Date under the terms of the
Bankruptcy Court Order or under the terms of any Production Payment Document.
(c) The consummation of the Closing on such Closing Date shall not (i)
be prohibited by any law or any regulation or order of any court or governmental
agency or authority applicable to Grantor or Grantee or (ii) subject any of them
to any penalty or other onerous condition under or pursuant to any such law,
regulation or order, and each of Grantor and Grantee must have any court or
governmental approvals or authorizations necessary to consummate such Closing.
(d) Grantee shall have completed its due diligence review, to the
satisfaction of each Person included in Grantee, with respect to (i) Grantor's
past operating results and current operations on the Subject Interests, (ii) all
steps necessary to transport, process and market the production subject to the
Production Sales Agreements or the TransTexas Marketing Agreements, (iii)
Grantor's internal accounting, engineering and production monitoring systems,
(iv) Grantor's basis for its current development plan and its other projections
and estimates, (v) any litigation or other legal proceedings to which Grantor
may then be a party, and (vi) such other matters as any Person included within
Grantee deems relevant. (This subsection (d) shall not apply to any Subsequent
Closing with respect to a State Tract 5/6 Offset Well.)
ARTICLE IV - Representations and Covenants
Section 4.1. Representations and Warranties of Grantor. To induce
Grantee to enter into this Agreement and to pay the Purchase Price Payments,
Grantor hereby represents and warrants to Grantee that:
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<PAGE> 20
(a) Grantor is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and duly qualified to do
business and in good standing as a foreign corporation in the State of Texas.
Grantor has all requisite power and authority, corporate or otherwise, to own
and operate its assets in Texas and to execute and deliver, and perform all of
its obligations under, the Production Payment Documents. Each other TransTexas
Company that is a party to any Production Payment Document is validly existing,
in good standing and qualified to do business in its state of organization and
any other jurisdictions in which it carries on material business. Grantor is not
a "foreign person" within the meaning of Sections 1445 and 7701 of the Internal
Revenue Code of 1986, as amended (i.e., Grantor is not a non-resident alien,
foreign corporation, foreign partnership, foreign trust or foreign estate as
those terms are defined in the Code and any regulations promulgated thereunder).
(b) The execution, delivery and performance by Grantor and each other
TransTexas Company of the Production Payment Documents to which each is a party,
and the consummation of the transactions contemplated herein and in the other
Production Payment Documents, have been duly authorized by all necessary
corporate action and, with respect to Grantor, by the Bankruptcy Court and do
not and will not (i) violate any material provision of any law, rule,
regulation, order, writ, judgment, decree, determination or award presently in
effect having applicability to Grantor or any such TransTexas Company or of the
Certificate of Incorporation, By-laws or other charter documents of Grantor or
any such TransTexas Company, or (ii) result in a breach of, or constitute a
default under, any material contract, indenture, instrument, or agreement to
which Grantor or any such TransTexas Company is a party or by which it or its
property may be presently bound or affected (including the leases under which
Grantor holds the Subject Interests), or result in or require the creation or
imposition of any lien or encumbrance on any assets of Grantor or any such
TransTexas Company. Grantor has obtained or has caused to be obtained all
consents, authorizations and waivers necessary under any such contract,
indenture, instrument or agreement or under any such material provision of law,
rule, regulation, order, writ, judgment, decree, determination or award in order
to permit the valid execution, delivery and performance by Grantor and each such
TransTexas Company of the Production Payment Documents.
(c) The Production Payment Documents have been duly executed and
delivered by Grantor and each other TransTexas Company (to the extent it is a
party thereto) and constitute the legal, valid and binding acts and obligations
of Grantor and each such TransTexas Company, enforceable against them in
accordance with the respective terms of such Production Payment Documents,
except as such enforcement may be limited by bankruptcy, insolvency, moratorium
and other similar laws applicable to creditors' rights generally or by general
principles of equity.
(d) No event or state of affairs which would, upon delivery of the
Conveyance, be a Designated Event has occurred and is continuing. No Senior
Notes Event of Default exists with respect to any Senior Notes Mortgage. All
loan agreements, trust indentures, mortgages and similar documents and
instruments to which any TransTexas Company is a party providing for loans,
credit or secured debt with an initial value of $1,000,000 or more have been
disclosed to Grantee. Except for the Bankruptcy Case, no bankruptcy or
insolvency proceeding is presently
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pending (or, to Grantor's best knowledge, threatened or contemplated) by or
against any TransTexas Company under any applicable bankruptcy, insolvency or
other similar law of any jurisdiction, and no such Person has made a general
assignment for the benefit of creditors.
(e) The data, information, exhibits, memoranda and reports furnished by
or on behalf of Grantor to Grantee in connection with the negotiation of the
Production Payment Documents (taken as a whole, and taking into account all
corrections and supplements to such information heretofore delivered) do not
contain any material misstatement of fact relevant to the transactions
contemplated hereby or omit to state a material fact relevant to the
transactions contemplated hereby or any fact necessary to make the statements
contained therein that are relevant to the transactions contemplated hereby not
misleading. There is no fact known to Grantor that has not been disclosed to
Grantee which might reasonably be expected to materially and adversely affect
the value of the Production Payment. (The data and information referred to in
the above representations and warranties include any factual information
furnished by Grantor for incorporation or use in any reserve or production
reports or estimates furnished by Grantor or the Reserve Engineers in connection
herewith, but Grantor is not representing and warranting that any reserve or
production estimates made by Grantor or such engineers will ultimately prove to
have been accurate.) Except for fluctuations in the prices of oil and gas,
production from the Subject Wells in the ordinary course of business, or other
matters disclosed to Grantee in writing, no material adverse change in the
condition or aggregate value of the Subject Wells or Subject Interests has
occurred since the date of the last reserve engineering report delivered by
Grantor to Grantee with respect to such Subject Wells and Subject Interests.
(f) Except for matters discharged or settled in the Bankruptcy
Proceeding or described on Schedule 2 hereto (or matters hereafter disclosed to
Grantee in any Purchase Agreement Supplement), there is no litigation or
administrative proceeding pending against any TransTexas Company which involves
(i) a dispute or claim concerning title to any of the Subject Interests, (ii)
any actual or purported lien, security interest, charge or burden upon any of
the Subject Interests or any lease making up any part of the Subject Interests,
or (iii) any other claim which would affect a transferee of any such lease or
any of the Subject Interests. Except for matters described on Schedule 1 hereto
(or matters hereafter disclosed to Grantee in any Purchase Agreement
Supplement), there is no other litigation or proceeding pending or, to the best
knowledge of Grantor, threatened against any TransTexas Company which, if
determined adversely to such TransTexas Company, might reasonably be expected to
have a material adverse effect on the financial condition of Grantor, the value
of the Production Payment, the ability of Grantor to convey the Production
Payment pursuant to the Production Payment Documents, the enforceability of any
Production Payment Document, or the ability of Grantor to perform its
obligations under the Production Payment Documents.
(g) Schedule 2 (as amended and supplemented from time to time by any
Purchase Agreement Supplements) contains a complete and accurate list of all
abstracts of judgment and notices of lis pendens on file against any of the
Subject Interests that have not been discharged pursuant to the Bankruptcy Case.
Grantor has posted supersedeas bonds in the amounts sufficient in all respects
to stay execution of (and pay, if necessary) any such judgment.
(h) Grantor has good and defensible title to the Subject Interests,
free and clear of all
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liens, security interests, and encumbrances except for:
(i) the contracts, agreements, burdens, encumbrances and other
matters set forth as being applicable to certain of the Subject
Interests in the descriptions of such Subject Interests on Exhibit A to
the Conveyance (as such Exhibit A is amended and supplemented from time
to time by any Conveyance Supplements), but only for so long as Grantor
is not in default thereunder or in breach thereof,
(ii) statutory liens for taxes which are not yet delinquent or
which (in the case of taxes hereafter coming due) are being contested
in good faith by appropriate proceedings and for the payment of which
Grantor has reserved adequate funds,
(iii) liens under operating agreements, pooling orders and
unitization agreements, and mechanics' and materialmen's liens, with
respect to obligations incurred in the ordinary course of business
which either (1) are not yet due or (2) in the case of obligations
hereafter coming due, are being contested in good faith by appropriate
proceedings for the payment of which Grantor has reserved adequate
funds,
(iv) easements, rights-of-way, zoning, similar restrictions
and other similar encumbrances incurred in the ordinary course of
business which do not in any case materially detract from the value or
use of the property subject thereto,
(v) judgment liens and lis pendens (which, except for the
judgment liens and lis pendens listed in Schedule 2, do not burden the
Production Payment), but only for so long as enforcement thereof is
stayed or otherwise prevented, and
(vi) liens and security interests that burden the Retained
Interests but not the Production Payment and secure only claims in the
Bankruptcy Case that have been allowed under the Confirmation Order to
continue to exist, and other deed of trust and mortgage liens burdening
the Retained Interests but not the Production Payment, and security
interests burdening the proceeds of that portion of the Subject
Hydrocarbons which is attributable to the Retained Interests but not
the PP Hydrocarbons.
The matters described in the foregoing clauses (i), (ii), (iii), (iv), (v) and
(vi) are herein called the "Permitted Encumbrances". The listing of Permitted
Encumbrances is made for the purpose of limiting the warranties of Grantor made
herein, and is not intended to restrict the description of the Subject
Interests, nor is it intended that the listing herein of any Permitted
Encumbrances shall subordinate the Production Payment to such Permitted
Encumbrance or otherwise cause the Conveyance, any Conveyance Supplement, or any
rights of Grantee thereunder to be made subject to, or encumbered by, such
Permitted Encumbrance. As provided above, no judgment lien or lis pendens
referred to in clause (v) above shall be considered to be a Permitted
Encumbrance (for the purposes of Section 4.1 of the Conveyance or for any other
purpose) after enforcement thereof ceases to be stayed or otherwise prevented
and no contract, agreement, burden, encumbrance or other matter referred to in
clause (i) above shall be considered to be a Permitted Encumbrance (for the
purposes of Section 4.1 of the Conveyance or for any other purpose) while
Grantor is in default thereunder or in breach thereof.
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(i) The oil, gas or mineral leases, contracts, servitudes and other
agreements forming a part of the Subject Interests, to the extent the same cover
or otherwise relate to the Subject Interests, are in full force and effect, and
Grantor agrees to so maintain them in full force and effect. All rents,
royalties and other payments due and payable under such leases, contracts,
servitudes and other agreements, or under the Permitted Encumbrances, or
otherwise attendant to the ownership or operation of the Subject Interests, have
been, and will continue to be, properly and timely paid (other than rent,
royalties and other payments which Grantor is discharged from paying pursuant to
the Bankruptcy Case). Grantor is not in default with respect to Grantor's
obligations (and Grantor is not aware of any default by any third party with
respect to such third party's obligations) under such leases, contracts,
servitudes and other agreements, or under the Permitted Encumbrances, or
otherwise attendant to the ownership or operation of any part of the Subject
Interests, where such default could materially and adversely affect the
ownership or operation of any of the Subject Interests or the value of the
Production Payment; Grantor will fulfill all such obligations coming due in the
future.
(j) Except for any contracts or arrangements listed on Schedule 4
hereto (as amended and supplemented from time to time by any Purchase Agreement
Supplements), no Subject Interest is dedicated or otherwise subject to any
contract or other arrangement for the sale, processing or transportation of
Hydrocarbons produced therefrom (or otherwise related to the marketing of such
Hydrocarbons) which would bind Grantee as owner of the PP Hydrocarbons or would
otherwise restrict the rights of Grantee under the Conveyance to take possession
of and market PP Hydrocarbons. Neither Grantor, nor any of its predecessors in
title, has received prepayments (including payments for gas not taken pursuant
to "take or pay" or other similar arrangements) for any Hydrocarbons to be
produced hereafter from the Subject Interests. There is no Subject Interest with
respect to which Grantor, or its predecessors in title, has, prior to the date
hereof, taken more ("overproduction"), or less ("underproduction"), Hydrocarbons
than its (or its predecessor's in title's) ownership interest in such Subject
Interest would entitle it to take, which overproduction or underproduction has
not been recouped as of the date hereof. No Subject Interest is subject to any
production balancing arrangement under which one or more third Persons may take
a portion of the production attributable to such Subject Interest without
payment (or without full payment) therefor as a result of production having been
taken from, or as a result of other actions or inactions with respect to, other
properties. No Subject Interest is subject on the date hereof to any regulatory
refund obligation and, to the best of Grantor's knowledge, no facts exist which
might cause the same to be imposed.
(k) The Subject Interests (and properties unitized therewith) are being
(and, to the extent the same could materially and adversely affect the ownership
or operation of the Subject Interests after the date hereof, have in the past
been) maintained, operated and developed in a good and workmanlike manner, in
accordance with prudent industry standards and in conformity in all material
respects with all applicable laws and all rules, regulations and orders of all
duly constituted authorities having jurisdiction with respect thereto, in
conformity with all oil, gas or other mineral leases and other contracts and
agreements forming a part of the Subject Interests (except to the extent that
Grantor has been discharged from making payments, or granted an extended period
of time to make payments, pursuant to the Confirmation Order and the Confirmed
Plan of Reorganization), in conformity with the Permitted Encumbrances and
Grantor's other agreements with Davis Petroleum Corp. relating to the Subject
Interests, and in
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conformity with the Confirmation Order, the Confirmed Plan of Reorganization,
and the payment terms provided therein. No Subject Interest is subject to having
allowable production after the date hereof reduced below the full and regular
allowable (including the maximum permissible tolerance) because of any
overproduction (whether or not the same was permissible at the time) prior to
the date hereof. None of the wells located on the Subject Interests (or
properties unitized therewith) is deviated from the vertical more than the
maximum permitted by applicable laws, regulations, rules and orders; no portion
of any well bore for any such well is located outside of the Subject Interests
(or properties unitized therewith); and no such well is bottomed under or
producing from outside the Subject Interests (or properties unitized therewith).
Grantor has all governmental licenses and permits necessary to own and operate
the Subject Interests, and Grantor has not received notice of any material
violations in respect of any such licenses or permits.
(l) Except to the extent that Grantor has been discharged from making
payments, or granted an extended period of time to make payments, pursuant to
the Confirmation Order and the Confirmed Plan of Reorganization, all expenses
and liabilities (including all bills for labor, materials and supplies used or
furnished for use in connection with the Subject Interests and all Direct Taxes
relating to the ownership or operation of the Subject Interests) have been, or
are being, paid (timely, and before the same become delinquent) by Grantor (and,
as to properties operated by third parties, by such third parties, to the best
of Grantor's knowledge) or are being contested in good faith by appropriate
proceedings for the payment of which Grantor has reserved adequate funds.
(m) The Subject Lands, and Grantor's present and proposed operations
thereon, are in compliance in all material respects with all applicable federal,
state or local laws, including all Environmental Laws. Grantor has taken all
steps necessary to determine and has determined that no Hazardous Substance has
been disposed of or otherwise released on or to the Subject Lands (except for
dispositions and releases done in material compliance with all applicable laws
and for which Grantor otherwise has no material remedial obligations), and the
use which Grantor makes and intends to make of the Subject Lands will not result
in any such disposal or release. None of such operations of Grantor, and none of
the Subject Lands, is the subject of any federal, state or local investigation
evaluating whether any remedial action is needed to respond to a release of any
Hazardous Substance into the environment or to the improper storage or disposal
(including storage or disposal at offsite locations) of any Hazardous Substance.
Neither Grantor nor, to the best knowledge of Grantor, any other Person has
filed any notice under any Environmental Law indicating that Grantor is
responsible for the release into the environment, or the improper storage or
disposal, of any Hazardous Substance that is now located on, was removed from,
or is in any way related to any Subject Lands, or that any Hazardous Substance
has been released (other than atmospheric emissions from compressor stations,
which emissions are now in compliance and permitted under applicable
Environmental Laws), or is improperly stored or disposed of, upon any Subject
Lands or upon any property of Grantor located near to any Subject Lands. No
TransTexas Company otherwise has any material contingent liability in connection
with its operations or properties in or near any Subject Lands for the release
into the environment, or the improper storage or disposal, of any such
pollutant, waste, substance or constituent.
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(n) No Subject Interest is subject to any tax or common law partnership
or to any joint venture (other than a Permitted Encumbrance).
(o) No Subject Interest is subject to a preferential right to purchase
(herein called a "Preferential Right") or subject to the requirement that a
consent to assignment be obtained from a third party, which Preferential Right
or requirement for consent might apply to or otherwise affect the transfer of
the Production Payment to Grantee or any subsequent transfer of the Production
Payment by Grantee.
(p) Grantor has incurred no obligation or liability, contingent or
otherwise, for broker's or finder's fees in respect of any of the matters
provided for in this Agreement.
(q) Grantor is able to transport production from each Subject Well
(which has been completed) to the applicable Delivery Point.
Section 4.2. Representations, Warranties and Disclosures by Grantee.
Each Person included within Grantee hereby represents and warrants to Grantor
that: (a) such Person has incurred no obligation or liability, contingent or
otherwise, for broker's or finder's fees in respect of any of the matters
provided for in this Agreement for which fees Grantor might be liable; (b) this
Agreement constitutes the legal, valid and binding act and obligation of such
Person, enforceable against such Person in accordance with its terms except as
such enforcement may be limited by bankruptcy, insolvency, moratorium and other
similar laws applicable to creditors' rights generally or by general principles
of equity; (c) no bankruptcy or insolvency proceeding is presently pending (or,
to such Person's best knowledge, threatened) by or against such Person under any
applicable bankruptcy, insolvency or other similar law of any jurisdiction; (d)
such Person has not made a general assignment for the benefit of creditors; (e)
such Person is acquiring the Production Payment for its own account and not with
any intention to transfer all or any part of the Production Payment to others in
violation of the Securities Act of 1933, as amended, or any other applicable
securities laws, and (f) such Person is a "United States person", within the
meaning of Section 7701 of the Internal Revenue Code of 1986, as amended. Fund V
and Fund VI further represent and warrant that in connection with the
transactions contemplated herein (i) they are represented by Funds Agent, an
investment manager that qualifies as a "qualified professional asset manager" as
defined in Department of Labor Prohibited Transaction Exemption 84-14 (the "QPAM
Exemption") and (ii) each of the conditions of the QPAM Exemption are satisfied
and will, throughout the term of this Agreement, be satisfied.
Section 4.3. Covenants of Grantor. To induce Grantee to enter into this
Agreement and to pay the Purchase Price Payments, Grantor covenants and agrees
that until the full and final payment of all payments due under the Production
Payment Documents and the termination of this Agreement and the Production
Payment, unless Grantee has previously agreed otherwise:
(a) Grantor will perform all of its covenants and duties under the
Production Payment Documents and under the Bankruptcy Court Order, all as fully
as if they were set out in full herein. Promptly upon receipt thereof, Grantor
will cause the consents referred to in Section 3.2(s) to be filed with the Court
in the Bankruptcy Case.
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(b) In addition to any reports and information specifically required by
the terms of this Agreement or the Conveyance, Grantor agrees to furnish to
Grantee full information, at all reasonable times, which Grantee may reasonably
request concerning any covenant, provision or condition of the Production
Payment Documents or any matter or records in connection with such documents or
with the operation of, reserve engineering for, production from, or accounting
for the Subject Interests. Subject to any restrictions on Grantor's right to do
so under applicable operating agreements or similar contracts, Grantor will
permit representatives designated by any Grantee, including independent
accountants, agents, attorneys, and other Persons, to visit and inspect the
Subject Interests (at their own risk) and Grantor's books and records pertaining
to the Subject Interests (and to make copies and photocopies from such records
and to write down and record such information as such representatives may
request, provided that no copies may be made of geological or seismic data), and
Grantor shall permit any Grantee and its designated representatives reasonably
to investigate and verify the accuracy of information furnished to Grantee
hereunder or in connection herewith and to discuss all such matters with its
officers, employees and representatives.
(c) If any Person ever challenges or attacks (i) the validity or
priority of any Production Payment Document or of any rights, titles, or
interests created or evidenced thereby or (ii) the title of Grantor to any
Subject Interest or of Grantee to any part of the Production Payment, then upon
learning thereof Grantor will give prompt written notice thereof to Grantee and
at Grantor's own cost and expense will diligently endeavor to defeat such
challenge or attack and to cure any defect that may be developed or claimed, and
Grantor will take all necessary and proper steps for the defense of any legal
proceedings with respect thereto, including the employment of counsel (at
reasonable fees) to represent Grantee, the prosecution or defense of litigation,
and the release or discharge of all adverse claims. Each of Grantee and Funds
Agent (whether or not named as a party to legal proceedings with respect
thereto) is hereby authorized and empowered to take such additional steps as in
its judgment and discretion may be necessary or proper for the defense of any
such legal proceedings or the protection of the validity or priority of the
Production Payment Documents and the rights, titles, and interests created or
evidenced thereby, including the employment of independent counsel at reasonable
fees to represent Grantee and Funds Agent, the prosecution or defense of
litigation, the compromise or discharge of any adverse claims made with respect
to the Production Payment, the purchase of any tax title and the removal of
prior liens or security interests, and all expenditures so made of every kind
and character shall be a Reimbursable Expense (which obligation Grantor hereby
expressly promises to pay on demand) owing by Grantor to Grantee or Funds Agent
and shall bear interest from the date demanded until paid at the Agreed Rate.
(d) Grantor will, on request of Grantee, (i) promptly correct any
defect, error or omission which may be discovered in the contents, execution or
acknowledgment of any Production Payment Document, (ii) execute, acknowledge,
deliver and record or file such further instruments and do such further acts as
may be necessary, desirable or proper to carry out more effectively the purposes
of the Production Payment Documents and to more fully identify and make subject
to the Conveyance any property intended to be covered thereby, including any
renewals, additions, substitutions, replacements, or appurtenances to the
Subject Interests; and (iii) execute, acknowledge, deliver, and file or record
any document or instrument reasonably requested by Grantee to protect its
rights, title and interests under the Production Payment
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Documents against the rights or interests of third Persons. Grantor shall pay
all reasonable costs connected with any of the foregoing.
(e) Without limitation of Grantee's remedies for breach of the
representations or warranties contained in Section 4.1(o), if a third party
properly exercises a Preferential Right after any Closing, Grantee will, in its
sole and absolute discretion, either (i) join in any required conveyance of the
affected Subject Interest to such third party, or (ii) make a conveyance of the
Production Payment insofar as it covers the affected Subject Interest to Grantor
in order that Grantor may make the necessary conveyance to such third party.
Upon making a conveyance in accordance with (i) or (ii), above, Grantee shall
(without limitation of its remedies for breach of the representations or
warranties contained in Section 4.1(o) hereof) be entitled to receive (and shall
thereafter apply in the same manner as PP Proceeds) -- either from the
exercising third party, assuming that Grantee exercised option (i), or from
Grantor, assuming that Grantee exercised option (ii) -- the entire amount of
consideration attributable to Grantee's interest in the particular Subject
Interest covered by such Preferential Right. In addition, Grantor shall, if
requested to do so by Grantee, repurchase the entire Production Payment from
Grantee for a price equal to the then unliquidated balance of the Primary Sum as
determined after the application of all PP Proceeds on such date or the next
occurring Application Date. Grantee and Funds Agent shall not incur any
liabilities with respect to any reconveyance of properties that may be required
in accordance with this subsection or otherwise with respect to any exercise of
a Preferential Right, and Grantor shall indemnify and hold harmless Grantee and
Funds Agent from any liabilities (including reasonable attorneys' fees) with
respect thereto.
(f) Grantor will not cause or permit the Subject Lands or Grantor to be
in material violation of any Environmental Laws with respect to the Subject
Lands or do anything or permit anything to be done which will subject Grantor or
the Subject Lands to any material remedial obligations under any Environmental
Laws pertaining to the Subject Lands, assuming in each case disclosure to the
applicable governmental authorities of all relevant facts, conditions and
circumstances, if any, pertaining to the Subject Lands, and Grantor will
promptly notify Grantee in writing of any existing, pending or, to the best
knowledge of Grantor, threatened investigation or inquiry by any private party
or governmental authority in connection with any Environmental Laws. Grantor
will take all steps necessary to determine that no Hazardous Substances are
stored, disposed of or otherwise released or being released on or to the Subject
Lands in violation of any Environmental Laws. Grantor will not cause or permit
the storage, disposal or other release of any Hazardous Substance on or to the
Subject Lands in violation of any Environmental Law and covenants and agrees to
remove or remediate any Hazardous Substance on the Subject Lands.
(g) Grantor will ensure that no Senior Notes Event of Default occurs
with respect to any Senior Notes Mortgage. Grantor will use all of the Purchase
Price Payments in compliance with all Senior Notes Mortgages and all such
agreements and instruments secured by any Senior Notes Mortgage and in
compliance with the Bankruptcy Court Order and the Confirmation Order.
(h) Grantor will provide to Grantee any assurances of title (from
counsel acceptable to each Person included in Grantee, in its sole discretion)
which Grantee may from time to time reasonably request concerning the Production
Payment, including the recording and filing of the
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Conveyance and the Conveyance Supplements and the updating of any specified
title opinions through such recording (it being understood that no title
deficiencies learned of by Grantee shall in any way be deemed to qualify any of
Grantor's warranties of title or indemnities with respect to title in any of the
Production Payment Documents).
(i) Grantor will fully bond (or pay) any judgment entered in any
lawsuit listed in Schedule 1 or Schedule 2 so that such judgment can be fully
paid by proceeding against such bond without enforcement of any judgment lien or
rights relating to any lis pendens and without otherwise affecting the
Production Payment.
(j) Grantor will at all times be a corporation validly existing and in
good standing under the laws of its state of incorporation and duly qualified to
do business and in good standing in the State of Texas.
(k) Grantor will at all times obtain and possess (or cause to be
obtained and possessed) all consents, authorizations and waivers necessary under
any material contract, indenture, instrument or agreement binding on or
affecting Grantor or any of Grantor's assets or under any material provision of
law, rule, regulation, order, writ, judgment, decree, determination or award
binding on or affecting Grantor or any of Grantor's assets, in order to permit
the performance by Grantor of the Production Payment Documents.
(l) Grantor will maintain good and defensible title to the Retained
Interests, free and clear of all liens, security interests, and encumbrances
except for Permitted Encumbrances, provided that Grantor may hereafter assign or
mortgage any Retained Interest to the extent permitted under Section 6.1 of the
Conveyance.
Section 4.4. Reporting Covenants of Grantor. To induce Grantee to enter
into this Agreement and to pay the Purchase Price Payments, Grantor covenants
and agrees that until the full and final payment of all payments due under the
Production Payment Documents and the termination of this Agreement, unless
Grantee has previously agreed otherwise, Grantor will furnish the following
statements and reports, at Grantor's expense, to SPS and to Funds Agent and to
each Person included within Grantee which has requested separate payment under
Section 2.6:
(a) Monthly, within 25 days after the end of the month to
which each report applies, Grantor shall furnish a report (in a form
reasonably acceptable to Grantee) showing:
-- in Part I thereof: (i) the name of each Subject Well, (ii)
the portion of gross production of Gas from each Subject Well (measured
in Mcfs) which is attributable to Subject Interests as metered at the
well (or, in the case of wells located in the Eagle Bay Field, as
metered at the outlet of the appropriate gas processing plant), (iii)
the quantity of Gas PP Hydrocarbons (measured in Mcfs) produced from
each Subject Well, (iv) the number of MMBTUs in each Mcf of Gas PP
Hydrocarbons produced, as measured at the meter, and (v) if known by
Grantor, the PP Severance Taxes for such Application Period with
respect to Gas PP Hydrocarbons, and
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-- in Part II thereof: (i) the name of each Subject Well, (ii)
the portion of gross production of Oil from each Subject Well (measured
in barrels) which is attributable to Subject Interests as measured at
the well (or, in the case of wells located in the Eagle Bay Field, as
metered at the outlet of the Winnie processing facility), (iii) the
quantity of Oil PP Hydrocarbons (measured in barrels) produced from
each Subject Well, and (iv) if known by Grantor, the PP Severance Taxes
for such Application Period with respect to Oil PP Hydrocarbons.
-- in Part III thereof: an aged report of all of Grantor's
accounts payable, listed by vendor.
(As used in this subsection (a), "Gas PP Hydrocarbons" means PP
Hydrocarbons consisting of Gas and "Oil PP Hydrocarbons" means PP
Hydrocarbons consisting of Oil.) Such report shall be supplemented, if
and when requested by SPS or Funds Agent, to show: (i) the gross
production of Hydrocarbons from each Subject Well, (ii) the quantities
thereof, if any, used in lease operations, (iii) the most recent status
of any Gas imbalances, if any, affecting the Subject Interests, (iv)
the number of wells operated, wells drilled and wells abandoned on the
Subject Interests, and (v) if requested, the costs to Grantor of
operating the Subject Interests. To the extent that any of such
information is not available to Grantor (despite all reasonable efforts
to obtain same) at the time any monthly report is furnished, it shall
be supplied promptly after receipt.
(b) Within 90 days after each Evaluation Date, Grantor shall
furnish a Reserve Report covering the Subject Interests and prepared in
accordance with the terms of Section 5.1 hereof.
(c) Quarterly, within 60 days after the end of the first three
fiscal quarters in each fiscal year of Grantor, and annually, within
105 days after the end of each fiscal year of Grantor, Grantor's
consolidated financial statements as of the end of and for such period,
including a balance sheet and statements of income, cash flows, and
stockholder's equity, prepared in accordance with generally accepted
accounting principles and, with respect to the annual financial
statements, accompanied by a report of the Grantor's independent
certified public accountants stating that their examination was made in
accordance with generally accepted auditing standards and that in their
opinion such financial statements fairly present the matters reported
on in accordance with generally accepted accounting principles
consistently applied. For so long as Grantor files Forms 10-Q and 10-K
with the Securities and Exchange Commission, Grantor may satisfy the
reporting requirements in this subsection (c) by sending a copy of each
such form 10-Q and 10-K within fifteen days after filing the same with
such Commission, and whenever Grantor or any other TransTexas Company
files any Form 10-Q or 10-K with such Commission or Grantor files any
Form 8-K, Grantor shall obtain and send a copy of such form to SPS and
Funds Agent (and each other Person then entitled to receive reports
under this section) within fifteen days after such form is so filed.
(d) As each Subject Well is drilled, completed, and put onto
production, copies of: (i) well logs across all pay zones, (ii) all
test information, and (iii) reports detailing
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completion and response to stimulation.
(e) Upon request of SPS or Funds Agent, but not more often
than quarterly, Grantor shall furnish reports, in detail reasonably
acceptable to SPS and Funds Agent, concerning any change in methods of
operation of all or any Subject Wells, any new drilling or development,
any method of secondary recovery by repressuring or otherwise, or any
other action with respect to the Subject Interests, the decision as to
which may increase or reduce the quantity of Hydrocarbons ultimately
recoverable from the Subject Interests, or the rate of production
therefrom, or which may shorten or prolong the period of time required
for termination of the Production Payment.
(f) Upon request of SPS or Funds Agent, Grantor shall furnish
copies of surface maps showing property lines and well locations, flow
and pressure tests, natural gas analysis and casing programs and other
similar information related to the Subject Interests, the Subject Wells
and the production therefrom.
(g) Upon request of SPS or Funds Agent, at any time and from
time to time (but not more frequently than once in any period of twelve
consecutive months, unless there has occurred a Designated Event that
is not cured within the applicable grace period) Grantor will provide
at Grantor's sole expense an inspection or audit of the Subject
Interests and the Subject Lands from an engineering or consulting firm
approved by Grantee, indicating compliance or non-compliance with
Environmental Laws. Except for reports requested during the continuance
of a Designated Event, Grantor shall be responsible to pay for the
costs of only ONE such report during the term of the Production Payment
(which report shall be specified by Funds Agent), and Grantee shall be
responsible for the costs of all others.
(h) Promptly (and in any event within five days) after
learning of the occurrence of any Designated Event or of the making of
any claim by any Person which allegedly affects the rights of Grantor
or Grantee in and to the Subject Interests, Grantor will give written
notice thereof to SPS and to Funds Agent.
Section 4.5. Reporting Covenants of Grantee. Until the full and final
payment of all payments due under the Production Payment Documents and the
termination of this Agreement, unless Grantor has previously agreed otherwise:
(a) Monthly, within 30 days after the end of the month to
which such report applies, Funds Agent will furnish to Grantor a
report, in the form of Schedule 3, showing the unliquidated balance of
the Primary Sum, as calculated by Funds Agent. To the extent that these
reports show applications of PP Proceeds to any Direct Taxes (other
than PP Severance Taxes), Reimbursable Expenses or Operating Costs paid
by SPS or Funds Agent, SPS or Funds Agent will on request by Grantor
furnish an itemized breakout of such deductions.
(b) Monthly, within 20 days after the end of each month, (if
and to the extent required to determine PP Proceeds), Grantee or Funds
Agent will furnish to Grantor
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information on the actual prices received by Grantee for any sales
which Grantee may make of PP Hydrocarbons to any Person other than a
TransTexas Company.
Section 4.6. Additional Remedies Upon Designated Event. Upon the
occurrence of a Designated Event, and provided the breach giving rise to such
Designated Event has not been cured within 30 days after Grantee gives notice of
such breach to Grantor, Grantee (i.e., all Persons included in Grantee, acting
unanimously) shall, in addition to its other rights and remedies, have the
right, but not the obligation, to:
(a) remove Grantor as the operator of any or all of the
Subject Interests in which 100% of the working interest is owned by
Grantor (in this section, a "100% Property"), or
(b) instruct Grantor to resign as the operator of any Subject
Interest (in this section, a "Third Party Property") that is subject to
a joint operating agreement between Grantor and any third party working
interest owner other than Grantor (in this section, a "Third Party
JOA").
In the event Grantor is removed by Grantee as the operator of any particular
100% Property, Grantee may appoint any reputable third party (which may be an
Affiliate of any Person included in Grantee or of Funds Agent but which may not
otherwise be any of the Persons listed in Section 6.2(b) of the Conveyance, or
any Affiliate of any such Person) who is experienced in operating Gas
properties, as the operator of any particular 100% Property, and Grantee may
negotiate with such third party a substitute operating agreement containing such
terms and conditions as are commercially reasonable in a transaction involving a
contract operator with no ownership interest in the contract area covered by an
operating agreement. All costs, expenses and fees billed or invoiced under any
such substitute operating agreement shall be borne and timely paid by Grantor.
In the event Grantee requests in accordance herewith that Grantor resign as the
operator of any Third Party Property (or in the event Grantor is otherwise
removed as operator under the terms of an applicable Third Party JOA, in which
case Grantor shall immediately so notify Grantee and Funds Agent), Grantor shall
consult with Grantee and Funds Agent prior to casting any vote it may have to
name a substitute operator and shall cast such vote as directed by Grantee.
Section 4.7. Confidentiality. Each party hereto shall hold in
confidence any confidential Information it has obtained from another party
hereto, provided that disclosure thereof shall be permitted: (a) to the
Affiliates, investors, officers and employees of any party hereto (provided that
such Persons are made aware that such Information is required to be held in
confidence), (b) to the auditors, counsel, and other professional advisors of
any party hereto (provided that such Persons are made aware that such
Information is required to be held in confidence), (c) in the course of any
arbitration, trial or other legal proceeding between any of the parties hereto
or any of their Affiliates, (d) as required by any applicable securities law or
other law (including any subpoena, interrogatory, or other similar requirement
for such Information to be disclosed), (e) in connection with any assignment or
potential assignment of such party's rights hereunder which is or would be
permitted under Section 6.4 (provided that each such assignee or potential
assignee is made aware that such information is required to be held in
confidence and agrees to hold such information in confidence in accordance
herewith) or (f) to the extent such Information
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(i) becomes publicly available other than as a result of a breach of this
section by any other Person or (ii) becomes available to any Grantee on a
nonconfidential basis from a source other than Grantor or any Person obligated
to maintain the confidentiality of such Information. For the purposes of this
section, "Information" means all information received by one party hereto from a
second party hereto relating to such second party or its business, other than
any publicly available information and any information that is available to such
first party on a nonconfidential basis prior to disclosure by such second party.
Section 4.8. Hedging Contracts. At or about the same time that Marketer
enters into the Production Sales Agreements, Marketer will be entering into one
or more commodity swap, cap, floor, or collar agreements (in this section, "swap
agreements") for the purpose of protecting Grantee against fluctuations in the
prices payable to Grantee in connection with some or all of the PP Hydrocarbons.
The notional quantities, types, time periods and estimated price terms of such
swap agreements shall be submitted to Grantor for its approval prior to closing,
it being understood and agreed that the actual price terms ultimately obtained
need not match such estimates. Grantor acknowledges, agrees and accepts that
such swap agreements will affect the amount of PP Proceeds. SPS, in its capacity
as Marketer, agrees not to enter into any other swap agreements that would
hereafter affect the amount of PP Proceeds without the prior consent of Grantor,
which consent will not be unreasonably withheld.
Section 4.9. Marketer. Marketer will sell the PP Hydrocarbons under the
"Buyer's Sales Contracts", as defined in the Production Sales Agreements, as the
same are from time to time amended, supplemented or replaced by Marketer. In
agreeing to any such amendments, supplements or replacements, Marketer will use
its reasonable best efforts to obtain the best additional or replacement
marketing arrangements reasonably available at the time and place in question,
taking into account pricing, the creditworthiness and reliability of potential
purchasers from Marketer, and other relevant factors. Marketer will not breach,
or cause Grantor to breach, such "Buyer's Sales Contracts".
ARTICLE V - Reserve Reports
Section 5.1. Reserve Reports. Within 90 days after each Evaluation
Date, Grantor shall furnish to SPS and Funds Agent (and to each other Person
included within Grantee which has requested separate payment under Section 2.6)
a reserve engineering report prepared as of such date by the Reserve Engineers
with respect to the Subject Interests. Each such report is herein called a
"Reserve Report". Each such Reserve Report shall be prepared and furnished at
the cost of Grantor. Each Reserve Report shall be prepared in accordance with
the standards of the Society of Petroleum Engineers and the Reserve Engineers'
customary professional practices, provided that each Reserve Report shall:
(a) separately address proved developed producing reserves
from other reserves.
(b) separately address the anticipated production of proved
developed producing reserves accruing to (i) the Production Payment and
(ii) the total Subject Interests.
(c) separately calculate the future net revenues allocable to
the Production
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Payment and the future net revenues allocable to the total Subject
Interests from anticipated sales of production from proved developed
producing reserves and, using a discount factor of ten percent (10%)
per annum, the present value of each on the date as of which such
report is prepared. In calculating the future net revenues attributable
to the Production Payment the Reserve Engineers shall take into account
all factors used in the calculation of PP Proceeds and shall deduct any
PP Severance Taxes. As used herein, "PPNPV" means such discounted
present value of the future net revenues accruing to the Production
Payment from anticipated sales of production from proved producing
reserves.
(d) in making such calculations, use the prices anticipated to
be received by Fund V and Fund VI under the Production Sales
Agreements.
ARTICLE VI - Miscellaneous
Section 6.1. Waivers and Amendments. No failure or delay (whether by
course of conduct or otherwise) by Grantee in exercising any right, power or
remedy which Grantee may have under any of the Production Payment Documents
shall operate as a waiver thereof or of any other right, power or remedy, nor
shall any single or partial exercise by Grantee 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 Production Payment Document
and no consent to any departure therefrom shall ever be effective unless it is
in writing and signed by Grantee (i.e., by all of the Persons included in
Grantee, acting unanimously), 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 Grantor shall in any
case of itself entitle Grantor to any other or further notice or demand in
similar or other circumstances. This Agreement and the other Production Payment
Documents set forth the entire understanding and agreement of the parties hereto
and thereto with respect to the transactions contemplated herein and therein and
supersede all prior discussions and understandings with respect to the subject
matter hereof and thereof, and no modification or amendment of or supplement to
this Agreement or the other Production Payment Documents shall be valid or
effective unless the same is in writing and signed by the party against whom it
is sought to be enforced.
THIS WRITTEN AGREEMENT AND THE OTHER PRODUCTION PAYMENT DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 6.2. Survival of Agreements; Cumulative Nature. All of the
various representations, warranties, indemnities, covenants and agreements in
the Production Payment
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Documents shall survive the execution and delivery of this Agreement and the
other Production Payment Documents and the performance hereof and thereof,
including the granting of the Production Payment and the delivery of the
Conveyance and the Conveyance Supplements. The representations, warranties,
indemnities, and covenants made by the parties in the Production Payment
Documents, and the rights, powers, and privileges granted to the parties in the
Production Payment Documents, are cumulative, and, except for expressly
specified waivers and consents, no Production Payment Document shall be
construed in the context of another to diminish, nullify, or otherwise reduce
the benefit to either party of any such representation, warranty, indemnity,
covenant, right, power or privilege.
Section 6.3. Notices. All notices, requests, consents, demands and
other communications (in this section, collectively called "notices") which are
required or permitted under any Production Payment Document shall be in writing,
unless otherwise specifically provided in such Production Payment Document, and
shall be deemed sufficiently given or furnished if delivered by personal
delivery, by telecopy, by delivery service with proof of delivery, or by
registered or certified United States mail, postage prepaid, to Grantor, each
person included in Grantee, or Funds Agent at its address specified on the
signature pages hereto. Any such notice shall be deemed to have been given (a)
in the case of personal delivery or delivery service, as of the date of first
attempted delivery during normal business hours at the address and in the manner
provided herein, (b) in the case of telecopy, upon receipt, or (c) in the case
of registered or certified United States mail, three days after deposit in the
mail. Each party hereto may change its address from time to time by sending a
notice of the new address, in the manner provided for in this section, to the
other parties hereto.
Section 6.4. Parties in Interest. All grants, covenants and agreements
contained in the Production Payment Documents shall bind and inure to the
benefit of the parties thereto and their respective successors and assigns;
provided that any assignment of any party's rights and duties hereunder must be
made in accordance with Article VI of the Conveyance. As provided in Section 6.3
of the Conveyance, if the interests of Grantee under the Conveyance are ever
owned by more than three Persons, all Persons owning interests thereunder that
were originally granted to SPS shall designate one Person and all Persons owning
interests hereunder that were originally granted to Fund V or Fund VI shall
designate a second Person, in each case to act as their agent to deliver and
receive all communications (including consents) and exercise the discretion of
Grantee hereunder and thereunder on their behalf.
Section 6.5. Governing Law. Except to the extent that the law of
another jurisdiction may be expressly elected in a Production Payment Document,
the Production Payment Documents 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, without regard to principles of conflicts of law.
Section 6.6. Limitation on Interest. Although the Production Payment
Documents provide for the sale and purchase of a real property interest and not
a loan (except under federal income tax law), there are certain provisions (such
as Section 5.1(a) of the Conveyance) of the Production Payment Documents which
provide for the charging and payment of interest.
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<PAGE> 35
Grantee and Grantor intend to contract in strict compliance with applicable
usury law from time to time in effect. In furtherance thereof they hereby
stipulate and agree that none of the terms and provisions contained in the
Production Payment 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. No party to any Production Payment Document shall ever be
liable for unearned interest or shall ever be required to pay interest 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 Production Payment Documents which may be in
conflict or apparent conflict herewith. In determining whether or not the
interest paid or payable, under any specific circumstance, exceeds the maximum
amount permitted under applicable law, the parties to the Production Payment
Documents shall to the greatest extent permitted under applicable law: (a)
characterize any non-principal payment as an expense, fee or premium rather than
as interest, (b) exclude voluntary prepayments and the effects thereof, and (c)
amortize, prorate, allocate, and spread the total amount of interest throughout
the entire contemplated term of the interest bearing obligation in accordance
with the amounts thereof outstanding from time to time 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 Chapter 303
of the Texas Finance Code, that ceiling shall be the "weekly ceiling" as defined
in the Texas Finance Code. 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 6.7. Termination; Limited Survival. As provided in the
Conveyance, the Production Payment will terminate at the Termination Time
referred to therein. Notwithstanding the foregoing or anything to the contrary
in any Production Payment Document, all waivers or admissions made by Grantor in
any Production Payment Document and all obligations which any Person may have to
indemnify or compensate any Person included within Grantee shall survive any
termination of this Agreement or any other Production Payment Document. At the
request and expense of Grantor, Grantee shall prepare, execute and deliver all
necessary instruments to reflect and effect such termination of the Production
Payment and limited survival of the Production Payment Documents.
Section 6.8. Severability. If any term or provision of any Production
Payment Document shall be determined to be illegal or unenforceable, all other
terms and provisions of the Production Payment Documents shall nevertheless
remain effective and shall be enforced to the fullest extent permitted by
applicable law.
Section 6.9. Arbitration.
(a) As used in this section:
(i) "AAA" means the American Arbitration Association (or any
successor thereto),
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<PAGE> 36
(ii) "Claims" means all claims by any party hereto against any
other party hereto with respect to the Production Payment or any of the
Production Payment Documents (including among others any claims with
respect to the interpretation or validity of any Production Payment
Document, the existence or scope of any duties owed thereunder, whether
or not any such duties have been performed or breached in any
circumstances, or the extent or enforcement of any property rights
created thereunder or subject thereto), and
(iii) "Disputed Matters" means all Claims, all defenses
against any Claims, and all controversies relating thereto.
(b) If any party hereto ever desires to assert a Claim against any
other party, the party asserting such Claim will give written notice thereof to
the other party. During the thirty day period following receipt of such notice
by the other party, both parties will discuss such Claim and the validity
thereof. If such parties cannot come to agreement about such Claim by the end of
such thirty day period (as such period may be extended by mutual agreement),
then within fifteen days after the end of such period either party may by
written notice to the other invoke the arbitration provisions of this Agreement,
whereupon such parties shall submit such Claim and all Disputed Matters in any
way related thereto to arbitration under the procedures in the next following
subsection (c).
(c) All Disputed Matters shall be resolved by arbitration conducted by
three arbitrators in accordance with this Section 6.9 and, to the extent not in
conflict herewith, the Commercial Arbitration Rules of the AAA then in effect.
Each such arbitrator must be independent and impartial and a person with at
least ten years' experience in the financing and valuation of oil and gas
properties. Within ten days after the sending and receipt of a notice invoking
arbitration as provided in subsection (b) above, each party shall specify (by
notice to the other) the name and address of an arbitrator appointed by it. (In
instances where Grantor is contesting a Disputed Matter, Grantor shall be
entitled to appoint one arbitrator and those Persons included in Grantee whose
Percentage Shares exceed fifty percent (50%) shall be entitled to appoint the
other; in instances where only the Persons included in Grantee are contesting a
Disputed Matter, SPS shall be entitled to appoint one arbitrator and Fund V and
Fund VI shall be entitled to appoint the other.) At the end of such ten days, if
one party has made a specification of its appointed arbitrator but has not
received notice of a similar specification by the other party, then the party
which has made a specification shall give notice to the other party that it has
not received a specification from the other party. If the other party does not
act to specify its arbitrator within an additional seven days after the giving
of such notice, the party who has made its specification may appoint the second
arbitrator in place of the party who has failed to do so. Within fifteen days
after the first two arbitrators have been appointed, they shall select the third
arbitrator. If a third arbitrator has not been selected within such period,
either party hereto may petition the Administrative Judge presiding over the
State District Courts of Harris County, Texas to appoint such third arbitrator,
whereupon such judge (or any person designated by such judge to make such
appointment) may make such appointment unless the first two arbitrators have
come to agreement on the third arbitrator. Consistent with the expedited nature
of arbitration, each party will, upon the written request of the other party,
provide the other with copies of documents relevant to the issues raised by the
Disputed Matter. Other discovery may be ordered by the
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<PAGE> 37
arbitrators to the extent they deem relevant and appropriate, and any dispute
regarding discovery, including disputes as to the need thereof or the relevance
or scope thereof, shall be determined by the arbitrators, whose determination
shall be conclusive. Unless all parties to the arbitration agree otherwise, all
arbitrations hereunder shall be held in Houston, Texas, at the offices of
counsel for Funds Agent. All parties to any arbitration shall proceed
expeditiously with such arbitration and shall conclude all proceedings
thereunder, including any hearing, in order to allow a decision based on
applicable law to be rendered within ninety days after the appointment of the
third arbitrator. The decision of any two such arbitrators on the issues before
them shall be final, and any award or order so decided may be enforced in any
court having personal jurisdiction over the party against whom enforcement is
sought. Grantor shall bear its own expenses, including attorneys' fees and
expenses of arbitration, in connection with any such arbitration, but all
expenses of any Grantee (excluding only expenses of litigation or arbitration
among or between Persons constituting Grantee, which litigation or arbitration
is not caused, in whole or in part, by any failure by Grantor to perform its
obligations under any Production Payment Document) shall be considered
Reimbursable Expenses to be paid or reimbursed by Grantor. Although the
foregoing arbitrations shall be conducted under the rules of the AAA, the AAA
itself shall not conduct such arbitrations, nor shall such arbitrations be
considered under the auspices of the AAA, nor shall any fee be due the AAA. The
arbitrators shall honor Grantor's and Grantee's election of the laws of the
State of Texas as set out in the various Production Payment Documents, provided
that each arbitration proceeding shall also be subject to the United States
Arbitration Act, 9 U.S.C., Chapter 1, Sections 1 et seq, to the extent
applicable. The arbitrators are not empowered to award punitive or exemplary
damages on any Claim (but are empowered to award Reimbursable Expenses to
Grantee and pre-award interest to either party), and EACH OF GRANTOR, SPS, FUND
V AND FUND VI HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO RECOVER
PUNITIVE OR EXEMPLARY DAMAGES ON ANY CLAIM.
(d) All applicable statutes of limitations and defenses based on the
passage of time shall be tolled during the period in which arbitration has been
invoked as set forth in this section. Each of Grantor and Grantee is required to
continue to perform its obligations under the Production Payment Documents
pending final resolution of any Disputed Matter.
Section 6.10. Funds Agent.
(a) Funds Agent. Each of Fund V and Fund VI, for itself and for its
successors and assigns as owners of the Production Payment, hereby appoints
Tamco as its agent (together with its successors in such capacity, herein called
"Funds Agent") to act for and on behalf of Fund V and Fund VI under and pursuant
to this Agreement and the other Production Payment Documents, and Tamco hereby
accepts such appointment. Funds Agent is authorized to act on behalf of Fund V
and Fund VI in (i) exercising rights and remedies with respect to any matter
under any of the Production Payment Documents, (ii) giving notices or
instructions to Grantor or SPS, (iii) receiving information from or notices by
Grantor or SPS, (iv) communicating to Grantor or SPS determinations required or
permitted to be made under this Agreement or any other Production Payment
Document, and (v) agreeing to, and executing and delivering, all Conveyance
Supplements and Purchase Agreement Supplements, the Production Sales
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<PAGE> 38
Agreements and any other agreements for the sale of PP Hydrocarbons, all other
Production Payment Documents, and all amendments, supplements, waivers or
consents to, of or under any Production Payment Documents. Funds Agent may, on
behalf of Fund V and Fund VI, take any other action which Fund V or Fund VI is
entitled to take hereunder or under any of the Production Payment Documents.
Grantor and SPS may rely on any action of Funds Agent as binding upon Fund V and
Fund VI. Such appointment of Tamco as Funds Agent shall not, however, impair or
modify any rights, obligations or duties which Tamco or any Affiliate of Tamco
otherwise has with respect to Fund V or Fund VI. In its administration of this
Agreement and the other Production Payment Documents, except to the extent to
which another standard applies to Tamco by reason of any Fund Governing Document
or other document or relationship between Tamco and any Person making up Fund V
or Fund VI, Funds Agent will exercise the same care that it exercises in the
administration or handling of transactions for its own account.
(b) Definitions. As used in this Section 6.10:
"Fund Governing Documents" means all documents and instruments
(other than the Production Payment Documents) under which Tamco and its
Affiliates have undertaken to act for any of the TCW Beneficiaries.
"Holders" means Fund V, Fund VI, and each of their successors
or assigns at any time owning an interest in the Production Payment.
"Requisite Holders" means, at any time, Holders owning at
least two-thirds of the total Percentage Shares in the Production
Payment that are held by all Holders at such time.
(c) Requisite Holders. All powers of Funds Agent shall be exercised for
the benefit of Holders. Any action, decision or consent taken or given by the
Requisite Holders shall be binding upon all the Holders. Except as may be
otherwise provided by the Fund Governing Documents, the Requisite Holders may,
in their reasonable discretion, remove Tamco from its appointment as Funds Agent
and then select a new party to fulfill, in accordance with the terms hereof,
such position. If any Person other than the Holders which are original parties
to this Agreement or the Fund Governing Documents ever acquires any interest in
the Production Payment, Funds Agent may insist on the execution of an agency
agreement by such Person, in form satisfactory to Funds Agent and providing for
satisfactory indemnification, before carrying out any further actions under the
Production Payment Documents on behalf of such Person. Until any such agency
agreement is executed: (i) Tamco shall have the right to withdraw as Funds
Agent, subject, however, to its rights and duties under any Fund Governing
Documents, and (ii) any action of Funds Agent under any Production Payment
Document shall be binding on such Person.
(d) Distribution of Proceeds. The Holders shall share in the proceeds
and other benefits obtained by Funds Agent under the Production Payment
Documents in the relative proportions of their interests in the Production
Payment; provided that Funds Agent shall first be reimbursed for all of its
costs and expenses incurred on behalf of all Holders to the extent permitted by
the Fund Governing Documents.
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<PAGE> 39
(e) Agents and Attorneys. Funds Agent may execute any of its respective
duties under this Agreement and the other Production Payment Documents by or
through agents or attorneys selected by it using reasonable care. Funds Agent
shall be entitled to the advice of counsel concerning all matters pertaining to
its duties hereunder.
(f) No Liability for Grantor or SPS. Funds Agent and its officers,
directors, employees, agents, attorneys-in-fact and Affiliates shall not be
responsible in any manner to any Holder or any other Person for any failure of
Grantor or SPS or any other Person to perform its obligations under this
Agreement or any other Production Payment Document.
(g) Reliance upon Documentation. Funds Agent shall be entitled to rely,
and shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or any telephone
conversation believed by it to be genuine and correct and to have been signed,
sent, made or spoken by the proper Person or Persons, and upon the advice and
statements of legal counsel, independent accountants and other experts selected
by Funds Agent.
(h) Reliance by Grantor and SPS. Fund V and Fund VI and each other
Holder agree that, prior to the delivery to Grantor or SPS of a notice of the
removal or termination of Tamco (or any subsequent Funds Agent) as Funds Agent
as set forth below, Grantor or SPS, as the case may be, shall: (i) be entitled
to rely on Tamco's (or any subsequent Funds Agent's) authority to act on behalf
of Fund V and Fund VI and each Holder in all dealings with Tamco (or any such
subsequent Funds Agent) with respect to the Production Payment Documents; (ii)
be protected in relying on actions, communications, notices and terminations
relating thereto or required or permitted thereunder by Funds Agent; and (iii)
discharge its obligations under this Agreement and the Production Payment
Documents by delivering payments, notices and other information to Funds Agent.
In the event of the removal of Funds Agent and the appointment of a successor
Funds Agent by Holders, neither Grantor nor SPS shall be required to recognize
any such removal or appointment unless and until it shall have received a
writing setting forth such removal and appointment executed by the Requisite
Holders and the acceptance of such appointment by such successor Funds Agent,
and Grantor and SPS shall be entitled to rely on such writing as being genuine
and what it purports to be without any necessity of any investigation
whatsoever.
(i) ACKNOWLEDGMENT, WAIVER AND RELEASE BY GRANTOR AND SPS. GRANTOR AND
SPS HAVE BEEN INFORMED, AND HEREBY ACKNOWLEDGE AND AGREE, THAT ALL ACTS BY TAMCO
AS FUNDS AGENT IN CONNECTION WITH THE PRODUCTION PAYMENT DOCUMENTS ARE DONE ON
BEHALF OF FUND V AND FUND VI AND THE TCW BENEFICIARIES, AND THAT TAMCO AND ITS
AFFILIATES (EXCLUDING FUND V AND FUND VI) AND ITS AND THEIR SHAREHOLDERS,
REPRESENTATIVES, TRUSTEES, AGENTS, EMPLOYEES, OFFICERS, DIRECTORS, AND ATTORNEYS
(COLLECTIVELY, THE "TCW ENTITIES"), EXCLUDING FUND V AND FUND VI, SHALL NOT BE
PERSONALLY LIABLE TO ANY PERSON (OTHER THAN THE TCW
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<PAGE> 40
BENEFICIARIES) WITH RESPECT TO ANY ACTIONS TAKEN (OR NOT TAKEN) BY TAMCO IN ITS
CAPACITY AS FUNDS AGENT UNDER THIS AGREEMENT AND THE OTHER PRODUCTION PAYMENT
DOCUMENTS. IN FURTHERANCE OF THE FOREGOING, EACH OF GRANTOR AND SPS HEREBY
WAIVES AND RELEASES (FOR ITSELF AND ON BEHALF OF ITS SHAREHOLDERS, AFFILIATES,
REPRESENTATIVES, TRUSTEES, AGENTS, EMPLOYEES, OFFICERS, DIRECTORS, AND
ATTORNEYS) THE TCW ENTITIES FROM ANY AND ALL SUCH LIABILITIES. THIS SUBSECTION
(I) IN NO WAY (A) RELEASES OR DIMINISHES ANY LIABILITY THAT FUND V AND FUND VI
MAY HAVE FOR ANY ACTION TAKEN (OR NOT TAKEN) BY TAMCO AS FUNDS AGENT OR (B)
REDUCES OR DIMINISHES THE BENEFIT TO FUND V AND FUND VI OF ANY WAIVERS, RELEASES
AND INDEMNITIES IN OTHER PROVISIONS OF THE PRODUCTION PAYMENT DOCUMENTS THAT
OTHERWISE BENEFIT FUND V AND FUND VI.
Section 6.11. 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.
IN WITNESS WHEREOF, this Agreement is executed as of the date first
written above.
GRANTOR: TRANSTEXAS GAS CORPORATION
By:
-------------------------------------
Ed Donahue, Vice President
Grantor's address: 1300 North Sam Houston Parkway East
Suite 310
Houston, Texas 77032-2949
Attention: Ed Donahue, Vice President
Telephone: 281/987-8600
Telecopy: 281/986-8865
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<PAGE> 41
SOUTHERN: SOUTHERN PRODUCER SERVICES, L.P.
By: SC Ashwood Holdings, Inc., its general partner
By:
---------------------------------------------
David W. Stewart, Vice President
Southern's address: 1200 Smith Street
Suite 2890
Houston, Texas 77002
Attention: David W. Stewart
Telephone: (713) 276-1902
Telecopy: (713) 276-1990
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<PAGE> 42
FUND V: TCW PORTFOLIO NO. 1555 DR V SUB-CUSTODY
PARTNERSHIP, L.P.
By: TCW Royalty Company V, as managing general
partner
By:
------------------------------------
Thomas F. Mehlberg, Vice President
FUND VI: TCW DR VI INVESTMENT PARTNERSHIP, L.P.
By: TCW DR VI Royalty Partnership, L.P., as
general partner
By: TCW Royalty Company VI, as managing
general partner
By:
--------------------------------
Thomas F. Mehlberg, Vice President
Fund V's and Fund VI's address: c/o Trust Company of the West
865 South Figueroa
Los Angeles, California 90017
Attention: Thomas F. Mehlberg
Telephone: 213/244-0702
Telecopy: 213/244-0604
FUNDS AGENT: TCW ASSET MANAGEMENT COMPANY, as Funds
Agent
By:
----------------------------------------
Thomas F. Mehlberg
Managing Director
Funds Agent's address: 1000 Louisiana
Suite 2175
Houston, Texas 77002
Attention: Kurt Talbot
Telephone: 713/615-7413
Telecopy: 713/615-7460
39
<PAGE> 1
EXHIBIT 10.53
PRODUCTION PAYMENT CONVEYANCE
THIS PRODUCTION PAYMENT CONVEYANCE (this "Conveyance"), dated as of the
date set out at the end hereof, is made from and by TransTexas Gas Corporation,
a Delaware corporation (herein called "Grantor") to and in favor of Southern
Producer Services, L.P., TCW Portfolio No. 1555 DR V Sub-Custody Partnership,
L.P. and TCW DR VI Investment Partnership, L.P. (herein collectively called
"Grantee").
ARTICLE I
Section 1.1. Defined Terms. When used in this Conveyance or in any
exhibit or schedule hereto (unless otherwise defined in any such exhibit or
schedule), the following terms have the respective meanings assigned to them in
this section or in the sections, subsections, exhibits and schedules referred to
below:
"Affiliate" means, with respect to any Person: (a) any other Person
directly or indirectly owning, controlling or holding with power to vote 10% or
more of the outstanding voting securities of such Person, (b) any other Person
10% or more of whose outstanding voting securities are directly or indirectly
owned, controlled or held with power to vote by such Person, and (c) any other
Person directly or indirectly controlling, controlled by or under common control
with such Person; provided that, "Affiliate" also means, with respect to Fund V
and Fund VI, (i) any of the TCW Beneficiaries, (ii) any trustee, general
partner, investment manager, custodian, custodial agent, or other fiduciary of
or for Fund V, Fund VI, or any TCW Beneficiary, (iii) Trust Company of the West,
a California trust company, and (iv) TCW Asset Management Company, a California
corporation, whether acting as Funds Agent or in any other capacity.
"Agreed Rate" means a rate of interest of fifteen percent (15.0%) per
year, calculated on the basis of actual days elapsed and a year of 360 days.
"Application Date" means the fifth Business Day of each calendar month,
starting with May 5, 2000. As used herein with respect to any Application
Period, the "related Application Date" means the Application Date that occurs
approximately five weeks after the end of such Application Period. For example,
if an Application Period ends at 9:00 a.m., Texas time, on March 1 and the fifth
Business Day of the following calendar month is April 6, the related Application
Date is such April 6.
"Application Period" means a period of time beginning at 9:00 a.m.,
Texas time, on the first day of any calendar month and ending at 9:00 a.m.,
Texas time, on the first day of the next succeeding calendar month. The first
Application Period will begin at the Initial Time and will end at 9:00 a.m.,
Texas time, on April 1, 2000. As used herein with respect to any Application
Date, the "related Application Period" means the Application Period ending
approximately five weeks prior to such Application Date. For example, if an
Application Date occurs on March 5, 6 or 7, the related Application Period is
the one which ended at 9:00 a.m., Texas time, on the preceding February 1.
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<PAGE> 2
"Bankruptcy Court Order" means the order authorizing this Conveyance
entered by the United Bankruptcy Court for the Southern District of Texas,
Corpus Christi Division, a copy of which is attached hereto as Exhibit C.
"Barrel" means 42 United States standard gallons of 231 cubic inches
per gallon at 60 degrees Fahrenheit.
"Beneficiary" means any SPS Beneficiary or TCW Beneficiary.
"British Thermal Unit" or "BTU" means the amount of energy required to
raise the temperature of one pound of pure water one degree Fahrenheit from 58.5
degrees Fahrenheit to 59.5 degrees Fahrenheit, as defined in the American Gas
Association Gas Measurement Manual and any subsequent revisions.
"Business Day" means a day that is not a Saturday, a Sunday, a legal
holiday in Houston, Texas, a legal holiday in Los Angeles, California, or a
legal holiday in Atlanta, Georgia.
"Commercial Well" has the meaning given such term in Section 3.2(c).
"Dedication Percentage" means:
(a) fifty percent (50%) from the Initial Time until 9:00 a.m.,
Texas time, on September 1, 2000;
(b) sixty-two percent (62%) from 9:00 a.m., Texas time, on
September 1, 2000 until 9:00 a.m., Texas time, on March 1, 2001; and
(c) seventy percent (70%) from and after 9:00 a.m., Texas
time, on March 1, 2001.
"Delivery Point" means (a) as of the Initial Time, for each field
listed on Schedule 2 hereto, the Delivery Point specified for such field on such
Schedule, or (b) such other delivery point or points in the vicinity of such
field hereafter from time to time designated by Grantee at which Gas from the
Subject Interests in such field is (or reasonably could be, without any
additional material expenses or expenditures) sold to a third party or delivered
into a pipeline for transportation to a market point, or (c) such other delivery
point or points as may from time to time be agreed upon in writing by Grantor
and Grantee. Unless otherwise agreed by Grantor, any designation by Grantee of a
new Delivery Point shall become effective one month after the first day of the
next succeeding Application Period.
"Delivery Services" has the meaning given such term in Section 2.5.
"Designated Event" has the meaning given such term in the Purchase
Agreement.
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<PAGE> 3
"Direct Taxes" means all ad valorem, property, gathering,
transportation, pipeline regulating, gross receipts, severance, production,
excise, heating content, carbon, value, value added, environmental, occupation,
franchise, sales, use, fuel, and other taxes and governmental charges and
assessments imposed on or as a result of all or any part of the Subject
Interests, the Hydrocarbons produced from Subject Interests or the proceeds
thereof, the Production Payment, or the PP Hydrocarbons or the proceeds thereof,
regardless of the point at which or the manner in which such taxes, charges or
assessments are charged, collected, levied or otherwise imposed. The only taxes
which are not Direct Taxes are federal income taxes, state income taxes, and
franchise taxes levied against any Grantee or any Beneficiary and any other
taxes levied against the overall net income of any Grantee or any Beneficiary
(including interest, penalties and withholding obligations owing to governmental
authorities with respect to such income or franchise taxes). Interest, penalties
and withholding obligations owing to governmental authorities with respect to
any Direct Taxes shall constitute "Direct Taxes".
"economically feasible" has the meaning given such term in Section
3.2(c).
"Environmental Laws" means all applicable local, state or federal laws,
rules, regulations, or orders regulating or otherwise pertaining to (a) the use,
generation, migration, storage, removal, treatment, remedy, discharge, release,
transportation, disposal or cleanup of pollutants, contamination, hazardous
wastes, hazardous substances, hazardous materials, toxic substances or toxic
pollutants, (b) the soil, surface waters, groundwater, land, stream sediments,
surface or subsurface strata, ambient air and any other environmental medium on
or off any Subject Interest, or (c) the environment or health and safety-related
matters; including the following as from time to time amended and all others
whether similar or dissimilar and whether now existing or hereinafter enacted:
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended by the Superfund Amendments and Reauthorization Act of 1986,
the Resource observation and Recovery Act of 1976, as amended by the Used Oil
Recycling Act of 1980, the Solid Waste Disposal Act amendments of 1980, and the
Hazardous and Solid Waste Amendments of 1984, the Hazardous Materials
Transportation Act, as amended, the Toxic Substance Control Act, as amended, the
Clean Air Act, as amended, the Clean Water Act, as amended, and all regulations
promulgated pursuant thereto.
"Expense Components" has the meaning given such term in Section 2.2.
"Field Delivery Charges" means the actual costs, if any, incurred by
any Grantee for separating, gathering, compressing, treating, stabilization, or
Processing PP Hydrocarbons prior to a Delivery Point or of transporting PP
Hydrocarbons to a Delivery Point in a condition satisfactory to meet pipeline
specifications and qualifications at such Delivery Point (net of any revenues
received by Grantee in connection with any such Processing, to the extent that
such revenues are not included in PP Proceeds) or of otherwise providing
Delivery Services.
"Force Majeure" means (a) unavoidable interruption of Delivery Services
caused by catastrophic physical events (such as freezing of wells or lines of
pipe) or (b) unavoidable or sudden mechanical difficulties relating to
performance of the Delivery Services and which by the exercise of due diligence
such party is unable to prevent or overcome; provided that Grantor shall not be
authorized as a reason for nonperformance, in part or in full, of the Delivery
Services, to
3
<PAGE> 4
claim an event of Force Majeure to the extent and beginning 24 hours after such
time as Grantee has designated a new Delivery Point or Delivery Points that
allow Grantor the ability to perform or cause to be performed the Delivery
Services despite the event of Force Majeure.
"Funds Agent" means the Person named as Funds Agent in Section 8.7,
acting in such capacity, together with its successors and assigns in such
capacity.
"Fund V" means TCW Portfolio No. 1555 DR V Sub-Custody Partnership,
L.P. and, unless the context in which used shall otherwise require, such term
shall also include any successor to it as owner at the time in question of any
or all of the Production Payment.
"Fund VI" means TCW DR VI Investment Partnership, L.P. and, unless the
context in which used shall otherwise require, such term shall also include any
successor to it as owner at the time in question of any or all of the Production
Payment.
"Gas" means natural gas and all other gaseous hydrocarbons, including
casinghead gas, whether or not such natural gas and other gaseous hydrocarbons
are Processed and including all natural gas liquids that are the products of
processing.
"GBPC" means Galveston Bay Processing Corporation, a wholly-owned
subsidiary of Grantor.
"Grantee" means the Persons named in the preamble to this Conveyance as
the Grantee, and, unless the context in which used shall otherwise require, such
term shall also include any successor to any such Person as owner at the time in
question of any or all of the Production Payment, provided that "a Grantee" or
"any Grantee" means any one of the Persons included in "Grantee".
"Grantor" means the Person named in the preamble of this Conveyance as
Grantor, and, unless the context in which used shall otherwise require, such
term means any successor-owner at the time in question of any or all of the
Subject Interests (other than the Production Payment).
"Hydrocarbons" means Oil and Gas.
"Imbalance Charges" has the meaning given such term in Section 2.6(c).
"Initial Time" means 9:00 a.m., Texas time, on March 1, 2000.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute or statutes.
"Lease Measuring Point" means, with respect to any particular Subject
Well, the point at which the BTU content of Gas included in PP Hydrocarbons
produced from such Subject Well is initially measured.
"Marketer" has the meaning given such term in the Purchase Agreement.
4
<PAGE> 5
"Mcf" means one thousand cubic feet.
"MMBTU" means one million BTUs.
"Non-Affiliate" means, with respect to any Person, any Person who is
not an Affiliate of such Person.
"NRI Percentage" means, with respect to each portion of Subject Lands
described on Exhibit A, the percentage shown on Exhibit A as the "Net Revenue
Interest" for such portion of Subject Lands.
"Oil" means crude oil, condensate, and other liquid hydrocarbons,
specifically to include condensate or other liquid hydrocarbons separated at the
surface (e.g., using conventional separators) but not to include the products of
Processing.
"Operating Costs" means, with respect to the Subject Interests or any
other properties, respectively, all costs and expenses (including all Direct
Taxes, all Field Delivery Charges, and all costs, expenses and liabilities for
labor, materials and equipment incurred in connection with the Subject Interests
or such other properties and all obligations to the holders of lessors'
interests, royalty interests and other interests affecting the Subject Interests
or such other properties) incurred in exploring, developing, operating,
reworking, remediating and maintaining the Subject Interests or such other
properties or in producing, handling, treating and transporting Hydrocarbons
produced therefrom. The "Operating Costs" with respect to the Subject Interests
also include, without duplication, any other amounts owing by Grantor to Davis
Petroleum Corp. (together with its successors and assigns, "Davis") with respect
to any of the rights of Davis, or secured by any of the liens of Davis, that are
referred to in subparagraph (a) or (to the extent applicable) subparagraph (b)
of Paragraph 2 of the Bankruptcy Court Order, but the Operating Costs with
respect to the Subject Interests do not include any costs of handling, treating,
or transporting Hydrocarbons downstream of a Delivery Point.
"Percentage Share" means, with respect to each Person included in
Grantee, the fractional undivided interest which it owns in the Production
Payment at the time in question. At the initial grant of the Production Payment,
the Percentage Share of each Person included in Grantee is as follows:
Fund V 42.859594%
Fund VI 21.429797%
SPS 35.710609%
"Permitted Assigns" has the meaning given such term in Section 6.2.
"Permitted Encumbrances" has the meaning given such term in the
Purchase Agreement.
"Person" means an individual, corporation, partnership, limited
liability company, association, joint stock company, trust or trustee thereof,
estate or executor thereof, unincorporated organization or joint venture, court
or governmental unit or any agency or subdivision thereof, or any other legally
recognizable entity.
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"PP Hydrocarbons" means the Dedication Percentage of the NRI Percentage
of all Hydrocarbons in and under and that may be produced from (or, to the
extent pooled or unitized, allocated to) any Subject Lands between the Initial
Time and the Termination Time.
"PP Proceeds" means, for any particular Application Period, the total
dollar amount actually received by Grantee during or (to the extent not
previously applied) prior to such Application Period, determined after deduction
of all PP Severance Taxes (whether paid before or after receipt by Grantee),
from sales of PP Hydrocarbons under arm's length sales agreements with third
Persons (or under agreements with Affiliates with terms at least as good),
provided that to the extent that Fund V and Fund VI sell their Percentage Shares
of any PP Hydrocarbons to SPS, as Marketer, under the Production Sales
Agreements and SPS then resells to third Persons all of such PP Hydrocarbons
(i.e., the Percentage Shares of PP Hydrocarbons so purchased from Fund V and
Fund VI together with its own Percentage Share of such PP Hydrocarbons), then
(a) the PP Proceeds received by Fund V and Fund VI shall be the amounts actually
paid by SPS, as Marketer, under the Production Sales Agreements for the
respective Percentage Shares of Fund V and Fund VI, and (b) SPS, as a Grantee
hereunder, shall be deemed to have received PP Proceeds in an amount equal to
its own Percentage Share of such PP Hydrocarbons times the price per Barrel or
per MMBTU, as appropriate, paid by SPS as Marketer to Fund V and Fund VI for
their Percentage Shares of such PP Hydrocarbons.
"PP Severance Taxes" means all severance taxes actually attributable to
the PP Hydrocarbons, taking into account any applicable credits, rebates and
other factors.
"Previous Production Payments" means the production payment previously
granted by Grantor to Fund V and Fund VI pursuant to that certain Production
Payment Conveyance dated February 23, 1998, as heretofore supplemented and
amended and recorded as described in the Reconveyance, and the production
payment previously granted by Grantor to Fund VI pursuant to that certain
Production Payment Conveyance dated September 30, 1998, as heretofore
supplemented and amended and recorded as described in the Reconveyance.
"Primary Sum" means the sum of $35,003,604 (as such sum may be
increased from time to time by amendments or supplements hereto), and at any
time the "unliquidated balance of the Primary Sum" shall be the Primary Sum plus
the aggregate amounts which have been added thereto pursuant to Section 2.3(a),
less the aggregate amount of PP Proceeds which have been applied thereto at or
before such time pursuant to Section 2.3(a)(ii), and less any reductions under
Section 2.3(b). The Purchase Agreement contains mechanisms and procedures to
increase the Primary Sum, and the parties hereto contemplate that the Primary
Sum may be increased from time to time hereafter.
"Processing" or "Processed" means to manufacture, fractionate or refine
Subject Hydrocarbons or otherwise to engage in any process designed to remove
elements (hydrocarbons or nonhydrocarbons) from Gas, but such terms do not mean
or include natural pressure reduction, the use of normal lease or well equipment
or other normal operations on or near any of the Subject Interests (such as the
use on or near the lease -- or, in the case of any offshore or near-shore wells,
at or near the landfall of the connecting pipeline -- of dehydrators, gas
treating facilities, separators, heater-treaters, lease compression facilities,
injection or recycling equipment, tank batteries, field gathering systems,
pipelines and equipment and so forth).
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<PAGE> 7
References to Hydrocarbons which are "Processed" (including the reference
thereto contained in the definition of Gas) refer both to the natural gas
liquids and other products of Processing and to the residue gas and other
hydrocarbons remaining after such operations.
"Production Payment" means the term overriding royalty which is granted
to Grantee under this Conveyance, as from time to time supplemented and amended,
and all other rights, titles, interests, estates, remedies, powers and
privileges appurtenant or incident to such term overriding royalty, whether
hereunder, under the Purchase Agreement, by operation of law, or otherwise.
"Production Payment Documents" has the meaning given such term in the
Purchase Agreement.
"Production Payment Period" means the period from and after the Initial
Time until the Termination Time.
"Production Sales Agreements" has the meaning given such term in the
Purchase Agreement.
"Purchase Agreement" means the Purchase Agreement of even date herewith
between Grantor and Grantee, as from time to time amended or supplemented.
"Reconveyance" means the Reconveyance of Production Payment of even
date herewith from Grantee to Grantor (a true and correct copy of which is
attached hereto as Exhibit B), pursuant to which Grantee has reconveyed the
Previous Production Payments to Grantor and Grantor has ratified and confirmed
certain indemnification and reimbursement obligations which (as provided in
Section 2.9 of each conveyance under which a Previous Production Payment was
granted) are to survive the termination thereof.
"Reimbursable Expenses" means all costs and expenses paid or incurred
by or on behalf of any Grantee or its Affiliates which are in any way related
to: (a) the negotiation, acquisition, ownership, enforcement, or termination of
the Production Payment, this Conveyance, the other Production Payment Documents,
or any waivers or amendments hereto or thereto, (b) the negotiation,
acquisition, ownership, enforcement, or termination of any related marketing,
transportation or processing agreements or (c) any litigation, contest, payment,
release or discharge of any adverse claim or demand made or proceeding
instituted by any Person affecting in any manner whatsoever the Production
Payment, any PP Hydrocarbons or PP Proceeds, this Conveyance or the other
Production Payment Document, or the enforcement or defense hereof or thereof, or
the defense of any Grantee's and its Affiliates' exercise of their rights
hereunder or thereunder. Included among the Reimbursable Expenses are (i) all
recording and filing fees, (ii) all reasonable fees and expenses of counsel,
engineers, accountants and other consultants, experts and advisors for any
Grantee and its Affiliates, (iii) all reasonable travel and other out of pocket
expenses of any Grantee and its Affiliates, (iv) all Imbalance Charges payable
hereunder by Grantor, and (v) all amounts which any Grantee is entitled to
receive under Section 4.1 or 5.1 hereof or with respect to any of Grantor's
"Surviving Duties", as defined in the Reconveyance. Notwithstanding the
foregoing, Reimbursable Expenses shall not include expenses associated with (1)
third party claims relating to title to the Production Payment, to the extent
such claims
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<PAGE> 8
arise solely due to the actions of Grantee or its Affiliates, (2) third party
claims that arise solely out of the failure by Grantee to perform its
obligations under any contractual arrangement entered into directly by Grantee
pursuant to Section 2.6 (a) hereof, which failure by Grantee is not caused, in
whole or in part, by any failure by Grantor to perform its obligations under any
Production Payment Document, or (3) expenses of litigation or arbitration among
or between Persons constituting Grantee hereunder, which litigation or
arbitration is not caused, in whole or in part, by any failure by Grantor to
perform its obligations under any Production Payment Document.
"Restricted Assignee" has the meaning given to such term in the
Purchase Agreement.
"Retained Interests" means the interests retained by Grantor in the
Subject Interests after conveyance of the Production Payment hereunder.
"Separation Point" means the point at which lease level separation of
Oil takes place.
"SPS" means Southern Producer Services, L.P., and, unless the context
in which used shall otherwise require, such term shall also include any
successor to it as owner at the time in question of any or all of the Production
Payment.
"SPS Beneficiary" means any Person that at any time is a general or
limited partner in SPS.
"Subject Hydrocarbons" means that portion of the Hydrocarbons in and
under and that may be produced from (or, to the extent pooled or unitized,
allocated to) Subject Lands which is attributable (after deducting all
royalties, overriding royalties, production payments and similar burdens,
excluding only the Production Payment, which both burden the Subject Interests
at the Initial Time and are reflected in the Net Revenue Interest figures set
out on Exhibit A) to the Subject Interests.
"Subject Interests" means:
(a) All of the leasehold interests and other property
interests described in Exhibit A attached hereto; and
(b) Without limitation of the foregoing, all other right,
title and interest (of whatever kind or character, whether legal or
equitable and whether vested or contingent) of Grantor in and to the
oil, gas and other minerals in and under or that may be produced from
Subject Lands (including interests in oil, gas or mineral leases to the
extent the same cover such lands, overriding royalties, production
payments and net profits interests in such lands or such leases, and
fee mineral interests, fee royalty interests and other interests in
such oil, gas and other minerals) even though Grantor's interest in
such oil, gas and other minerals may be incorrectly described in, or
omitted from, Exhibit A; and
(c) All rights, titles and interests of Grantor in and to, or
otherwise derived from, all presently existing and valid oil, gas or
mineral unitization, pooling, or communitization agreements,
declarations or orders and in and to the properties covered
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<PAGE> 9
and the units created thereby (including all units formed under orders,
rules, regulations, or other official acts of any federal, state, or
other authority having jurisdiction, voluntary unitization agreements,
designations or declarations, and so-called "working interest units"
created under operating agreements or otherwise) relating to the
properties described in subsections (a) or (b) above in this
definition.
"Subject Lands" means the lands and depths described in Exhibit A
(where no depth limit is specified, Subject Lands shall include all depths).
"Subject Wells" means all wells now located on the Subject Lands
(whether fully drilled and completed or not) or hereafter drilled on the Subject
Lands, and (unless production therefrom is expressly excluded by the terms of
the descriptions on Exhibit A) any other wells now or hereafter located on lands
or leases pooled, communitized or unitized with the Subject Interests. A well
shall be deemed located on lands and depths based on its bottom hole location or
the location of other tested or producing zones.
"TCW Beneficiary" means any Person that at any time is a general or
limited partner in Fund V or in Fund VI or any Person for whom such a general or
limited partner is acting as investment manager, custodian or custodial agent or
in a similar capacity.
"Termination Time" has the meaning assigned to it in Section 2.9.
"Total Sum" has the meaning assigned to it in Section 2.2.
Section 1.2. Rules of Construction. All references in this Conveyance
to articles, sections, subsections and other subdivisions refer to corresponding
articles, sections, subsections and other subdivisions of this Conveyance unless
expressly provided otherwise. Titles appearing at the beginning of any of such
subdivisions are for convenience only and shall not constitute part of such
subdivisions and shall be disregarded in construing the language contained in
such subdivisions. The words "this Conveyance", "this instrument", "herein",
"hereof", "hereunder"' and words of similar import refer to this Conveyance as a
whole and not to any particular subdivision unless expressly so limited. Unless
the context otherwise requires: "including" and its grammatical variations mean
"including without limitation"; "or" is not exclusive; words in the singular
form shall be construed to include the plural and vice versa; words in any
gender include all other genders; references herein to any instrument or
agreement refer to such instrument or agreement as it may be from time to time
amended or supplemented; and references herein to any Person include such
Person's successors and assigns. All references in this Conveyance to exhibits
and schedules refer to exhibits and schedules to this Conveyance unless
expressly provided otherwise, and all such exhibits and schedules are hereby
incorporated herein by reference and made a part hereof for all purposes.
ARTICLE II
Section 2.1. Conveyance. Grantor does hereby GRANT, BARGAIN, SELL,
CONVEY, ASSIGN, TRANSFER, SET OVER AND DELIVER unto Grantee, as a production
payment, to be held by the Persons included in Grantee in undivided interests in
proportion to their Percentage Shares, a term overriding royalty interest carved
out of and burdening the Subject
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<PAGE> 10
Interests equal to and measured by all PP Hydrocarbons in and under and that may
be produced from (or, to the extent pooled or unitized, allocated to) the
Subject Lands, with such production payment to terminate as of the Termination
Time.
TO HAVE AND TO HOLD the Production Payment unto Grantee, its successors
and Permitted Assigns, until the Termination Time.
Section 2.2. Amount and Term. The Production Payment shall continue and
remain in full force and effect until the receipt and realization by Grantee
from PP Proceeds of the aggregate sum of the amounts specified in the following
subsections of this Section 2.2 (herein collectively called the "Total Sum"):
(a) the full amount of the Primary Sum; plus
(b) an amount equal to the interest which would accrue at the
Agreed Rate on the unliquidated balance of the Primary Sum outstanding
during the period from the Initial Closing Date (as defined in the
Purchase Agreement) to but not including the first Application Date,
and thereafter during each period from and including one Application
Date to but not including the next occurring Application Date, if the
unliquidated balance of the Primary Sum were to bear such interest;
plus
(c) an amount equal to all Direct Taxes (other than PP
Severance Taxes), to the extent such Direct Taxes are paid by any
Grantee or Beneficiary should Grantor fail to promptly pay the same as
required by Section 2.4, together with an additional amount equal to
interest on the amount so paid computed at the Agreed Rate from and
including the date any Grantee or Beneficiary pays such Direct Taxes to
but not including the earlier of the date such Direct Taxes are either
reimbursed by Grantor or paid by the application of PP Proceeds under
Section 2.3(a) or added to the unliquidated balance of the Primary Sum
under Section 2.3(a); plus
(d) an amount equal to all Reimbursable Expenses to the extent
paid by any Grantee or any Beneficiary should Grantor fail to promptly
pay the same as required by Section 2.4, together with an additional
amount equal to interest on the amount so paid computed at the Agreed
Rate from and including the date any Grantee or Beneficiary pays such
Reimbursable Expenses to but not including the earlier of the date such
Reimbursable Expenses are either reimbursed by Grantor or paid by the
application of PP Proceeds under Section 2.3(a) or added to the
unliquidated balance of the Primary Sum pursuant to Section 2.3(a);
plus
(e) an amount equal to all Operating Costs to the extent paid
by any Grantee or Beneficiary should Grantor fail to promptly pay the
same as required by Section 2.4, together with an additional amount
equal to interest on the amount so paid, computed at the Agreed Rate
from and including the date any Grantee or Beneficiary pays such
Operating Costs to but not including the earlier of the date such
Operating Costs are either reimbursed by Grantor or paid by the
application of PP Proceeds under Section 2.3(a) or added to the
unliquidated balance of the Primary Sum pursuant to Section 2.3(a).
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The amounts (including interest) referred to in subsections (c), (d) and (e) of
this section are herein collectively called the "Expense Components".
Section 2.3. Application of PP Proceeds.
(a) On each Application Date, all PP Proceeds that have actually been
received by Grantee (whether from the purchasers of PP Hydrocarbons or from
Grantor as provided in Section 2.10) in immediately available funds prior to
noon, Los Angeles time, on such Application Date, shall, to the extent not
previously applied, be applied as follows to the Total Sum:
(i) First, to the amounts described in subsections (b), (c),
(d) and (e) of Section 2.2; and
(ii) Second, to the reduction of the unliquidated balance of
the Primary Sum.
If PP Proceeds applied on any Application Date are insufficient to cover the
full amounts specified in the foregoing subsection (i) of this subsection (a),
then such unrecovered amounts shall be added to the unliquidated balance of the
Primary Sum.
(b) Neither the actual or potential application of PP Proceeds to
Expense Components shall release Grantor from its obligations to make any
payments or reimbursements of Expense Components required under Section 2.4, but
if any PP Proceeds are actually applied to Expense Components or added to the
unliquidated balance of the Primary Sum pursuant to the preceding subsection (a)
and if such Expense Components (including interest thereon) are thereafter paid
or reimbursed by Grantor, then on the next occurring Application Date the
unliquidated balance of the Primary Sum shall be reduced by the amounts so paid
or reimbursed by Grantor.
Section 2.4. Non-Cost-Bearing Interest. The Production Payment shall be
free and clear of, and Grantee shall have no liability for, any Operating Costs
other than PP Severance Taxes. All Operating Costs (other than PP Severance
Taxes) shall be borne by the Retained Interests and paid by Grantor promptly, on
or before the dates the same become due and owing (except to the extent payment
thereof is discharged or the time for payment is extended pursuant to the
Bankruptcy Court Order). In addition, Grantor will promptly (and in any event
within 30 days after receiving any notice or statement for the same) pay all
Reimbursable Expenses which have been incurred and are unpaid and reimburse
Grantee or Beneficiaries for any Reimbursable Expenses which have been paid by
Grantee or Beneficiaries. Each amount which is to be paid by Grantor pursuant to
this Section 2.4 which is instead paid by Grantee or Beneficiaries shall bear
interest at the Agreed Rate on each day from and including the date of such
payment until but not including the date repaid by Grantor.
Section 2.5. Delivery Services.
(a) Expected Deliveries. To the extent not prevented by Force Majeure,
Grantor shall deliver, or cause to be delivered, all PP Hydrocarbons
constituting Gas to the relevant Delivery Point in a condition satisfactory to
meet or exceed pipeline specifications and qualifications at such Delivery Point
and all quality standards and other requirements of the applicable sales,
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transportation or processing contract, and Grantor will deliver all PP
Hydrocarbons constituting Oil at the points at which the Grantor delivers Oil
from the same Subject Interests into third party pipelines or to third party
transporters in a condition satisfactory to meet all quality standards and other
requirements of the applicable sales, transportation or processing contracts.
All tasks required to make such delivery (whether gathering, treating,
separating, compressing, Processing, transporting, or otherwise) are herein
called the "Delivery Services". All Delivery Services, whether performed by
Grantor or by any other Person, shall be performed without any cost or charge to
Grantee, whether incurred or assessed by Grantor or any other Person, and all
costs so incurred or assessed shall be borne and paid by Grantor as provided in
Section 2.4. The Delivery Services shall be provided to Grantee on a first
priority basis, to the extent permitted by law and applicable contracts
(meaning, for example, that (A) pipeline and compressor capacity, if owned or
controlled by Grantor or any Affiliate of Grantor, shall be afforded to Subject
Hydrocarbons prior to affording any such capacity to Grantor, any Affiliates of
Grantor or any other Person with respect to any other Hydrocarbons, and (B)
pipeline and compressor capacity owned or controlled by any Person other than
Grantor or any Affiliate of Grantor shall be afforded to Subject Hydrocarbons
prior to affording any such capacity to Grantor or any Affiliate of Grantor with
respect to any other Hydrocarbons), and Grantor hereby expressly subordinates
any capacity rights it may now or hereafter have to the PP Hydrocarbons. Grantor
shall, to the extent permitted by law and applicable contracts, take whatever
action is appropriate to cause any Affiliate of Grantor or any other Person to
afford Subject Hydrocarbons the priority capacity described in this subsection
(a), including assigning to Grantee, upon Grantee's request following failure by
Grantor to provide Delivery Services as required hereunder, any capacity rights
Grantor may have under assignable contracts or other arrangements with an
Affiliate or any other Person as may be necessary or useful to facilitate
delivery of PP Hydrocarbons to each Delivery Point in a condition satisfactory
to meet or exceed pipeline specifications or qualifications at such Delivery
Point.
(b) Excess Deliveries. If at any time Grantor delivers to Grantee PP
Hydrocarbons in excess of the amount of PP Hydrocarbons required to be delivered
to Grantee hereunder, the amount of such excess delivery shall not be returned
by Grantee but shall instead be deemed an early delivery by Grantor of future PP
Hydrocarbons and shall be considered as fully and finally delivered to Grantee
for all purposes hereunder on the date received by Grantee; provided that if any
Hydrocarbons are delivered hereunder to Grantee following the termination hereof
the proceeds of such Hydrocarbons shall be paid to Grantor.
Section 2.6. Marketing of PP Hydrocarbons by Grantee.
(a) Marketing by Grantee. Grantee shall take possession of all of the
PP Hydrocarbons at the applicable Delivery Points and shall thereafter market
and sell such PP Hydrocarbons for its own account, subject to the requirements
of Section 4.9 of the Purchase Agreement. Grantor shall take such actions
(including executing all division orders, transfer orders, instructions in lieu
thereof and other additional instruments) as are necessary or appropriate to
achieve such results, and Grantor will cooperate with Grantee in instructing all
purchasers of such PP Hydrocarbons to pay the proceeds thereof directly to
Grantee and shall execute such additional instruments (including division
orders, transfer orders and instructions in lieu thereof) as may be requested by
Grantee in connection therewith. If payment for any PP Hydrocarbons is
nonetheless made to Grantor for any reason, all amounts so paid to Grantor shall
be held in trust
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by Grantor for Grantee and Grantor shall immediately pay over such proceeds, in
the form received, to Grantee (but without recourse to Grantor on any proper
endorsement by Grantor to Grantee). Grantor shall not enter into any contracts
or other arrangements for the sale, transportation, gathering, Processing or
other marketing of Subject Hydrocarbons which would interfere with Grantee's
rights under this Section 2.6 to take possession of and market the PP
Hydrocarbons, free and clear of such contracts or other arrangements.
(b) Cooperation and Assistance. Grantee and Grantor will each be taking
quantities of Hydrocarbons from the Subject Interests, and Grantor and Grantee
recognize that coordination between Grantee and Grantor will be required with
respect thereto. Grantor agrees to cooperate with, and assist, Grantee in
connection with Grantee's receipt and sale of PP Hydrocarbons. Without
limitation of the foregoing:
(i) Not less than 10 days prior to the first day of each
Application Period, Grantor will notify Grantee or its authorized
representatives or direct purchasers, in writing, of the total amounts
and average daily amounts of Gas and Oil which Grantor expects to be
produced from the Subject Interests during such Application Period and
the portion thereof which Grantor projects will be PP Hydrocarbons.
(ii) To the extent reasonably practicable, Grantor shall
thereafter immediately notify Grantee or its authorized representatives
or direct purchasers, in writing, of any change in the rate of delivery
of PP Hydrocarbons from the Subject Interests that has come to the
attention of Grantor.
(iii) Grantor and Grantee will cooperate to ensure that
nominations to transporters, processors and purchasers are timely made
and that such nominations reflect expected deliveries from the various
Subject Interests, and Grantee and its authorized representatives shall
be entitled to rely upon Grantor's projections for the purposes of
scheduling deliveries with transporters, processors and purchasers and
entering into hedges and similar agreements. In no event shall Grantor
be responsible for the failure, through no fault of Grantor, of such
transporters, processors (except for GBPC) or purchasers to fulfill
their obligations under the relevant arrangements.
Unless Grantee otherwise notifies Grantor in writing, Grantor will furnish the
information provided for above and will make nominations and schedule deliveries
in conjunction with Grantee (and make any revisions to such nominations and
reschedule deliveries in conjunction with Grantee) for PP Hydrocarbons (in the
form and at the times required by such Persons), directly to the Persons
purchasing, processing or transporting PP Hydrocarbons for Grantee. Grantor and
Grantee acknowledge to each other that concurrently herewith SPS, Fund V and
Fund VI are entering into the Production Sales Agreements under which SPS, as
Marketer, is the purchaser of the PP Hydrocarbons belonging to Fund V and Fund
VI.
(c) Responsibility. In the event that Grantee is ever making
nominations with respect to PP Hydrocarbons and any charges, costs, penalties or
expenses are incurred or payable to any Person solely as a result of Grantee's
failure to adjust nominations or scheduled deliveries in accordance with (i) a
notification from Grantor to Grantee of any increase or decrease in quantities
to be delivered from any Subject Well, or (ii) a notification from Grantee's
direct
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purchaser of any increase or decrease in quantities to be delivered at Delivery
Points, where it was reasonably possible for Grantee to make such adjustment
without penalty, then, as between the parties hereto, Grantee shall be liable
for and shall hold Grantor harmless from any such charges, costs, penalties or
expenses. If any such charges, costs, penalties or expenses (the "Imbalance
Charges") are incurred or payable to any Person other than in the circumstances
provided for in the preceding sentence (including charges, costs, penalties or
expenses caused by failure to deliver projected quantities or failure to provide
notice of changes in deliveries, or charges, costs, penalties or expenses
incurred when Grantor is making nominations, or revisions to nominations, on
behalf of Grantee, as provided for in the next-to-last sentence of Section
2.6(b)), then, as between the parties hereto, Grantor shall be liable for and
shall indemnify and hold Grantee and SPS harmless for such Imbalance Charges.
Each of Grantor and Grantee shall promptly notify the other of any notice
received by it from any third party which indicates that an imbalance in
deliveries exists or is occurring that may give rise to any such Imbalance
Charges.
Section 2.7. Measurement: Hydrocarbons Lost or Used. As used in this
Conveyance, the term "Hydrocarbons" shall not include Oil or Gas produced from
any particular Subject Well which are unavoidably lost in the production thereof
or in the compression or transportation thereof prior to the Lease Measuring
Point for such Subject Well, or which are used by Grantor or the operator of any
Subject Well for the production of Subject Hydrocarbons or for the compression
or transportation of Subject Hydrocarbons prior to the Lease Measuring Point for
such Subject Well, in each case only to the extent the same are lost or used in
the course of operations which are being conducted prudently and in a good and
workmanlike manner. Grantor hereby represents, warrants and covenants to Grantee
as follows: (a) the Lease Measuring Point applicable to each Subject Well is and
will continue to be located at a point prior to any point where Gas from such
Subject Well is commingled with Gas or any other Hydrocarbons from any other
well or wells, (b) Grantor currently meters, and will continue to meter, Gas
from each Subject Well separately (i.e., on a well-by-well basis), (c) the
volumes (measured in Mcfs) of PP Hydrocarbons constituting Gas produced from or
out of any particular Subject Well are measured and determined, and will
continue to be measured and determined at the Lease Measuring Point applicable
to such Subject Well, and (d) the Separation Point for each Subject Well is and
will continue to be upstream of the Lease Measuring Point for such Subject Well.
Grantor covenants and agrees to determine the number of MMBTUs in each Mcf of
Gas included in PP Hydrocarbons at the Lease Measuring Points.
Section 2.8. No Proportionate Reduction. It is understood and agreed
that, though the Production Payment is conveyed by Grantor to Grantee out of the
Subject Interests, the Production Payment shall be equal to the full Dedication
Percentage in effect from time to time of the NRI Percentage of the Hydrocarbons
produced from (or, to the extent pooled or unitized, allocated to) the various
Subject Lands and shall not be reduced for any reason. Among other things, the
Production Payment and the PP Hydrocarbons shall not be reduced due to (a) the
undivided interest owned by Grantor in a lease constituting any Subject
Interests being less than the entire interest in such lease, or (b) the interest
in Oil, Gas or other minerals underlying any portion of the Subject Lands which
is covered by a particular lease (or group of leases) being less than the entire
interest in the oil, gas and other minerals underlying such portion of the
Subject Lands, or (c) the share of production from (or, to the extent pooled or
unitized, allocated to) any portion of Subject Lands which is attributable to
the Subject Interests being less than the NRI Percentage set forth on Exhibit A
for such portion of the Subject Lands, or (d) Grantor's failure to
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own, or otherwise have good title to, all or any part of the Subject Interests
as described on Exhibit A.
Section 2.9. Termination. The Production Payment shall remain in full
force and effect until the time (herein called the "Termination Time") when the
full aggregate amount of the Total Sum, together with all reimbursements,
indemnities, restitutions, and other payments required hereunder, have been
fully and indefeasibly received by Grantee as provided herein. At the
Termination Time, all rights, titles and interests herein conveyed in and to any
Hydrocarbons thereafter produced shall automatically terminate and vest in
Grantor, and, upon request by Grantor, Grantee shall execute and deliver such
instrument or instruments (in proper recordable form, if applicable) as may be
necessary to evidence such termination of the Production Payment; provided that,
notwithstanding the foregoing or anything herein to the contrary, any and all
obligations which any Person may have to indemnify or reimburse any Grantee or
its Affiliates for any reason, or to make payments to any Grantee or its
Affiliates on account of PP Hydrocarbons produced before the Termination Time,
shall survive any termination of the Production Payment. No pipeline company or
other Person purchasing, taking, or processing PP Hydrocarbons shall ever be
required to take notice of, or keep informed concerning, the termination of the
Production Payment, until actual receipt of written notice from Grantee
confirming that such termination has occurred, which Grantee agrees to deliver
with reasonable promptness upon request of Grantor. To the extent that Grantee
is ever obligated, after the termination of the Production Payment, to reimburse
or pay to any Person (including Marketer) any amount that was previously
received from the sale of PP Hydrocarbons and applied as PP Proceeds under
Section 2.3 hereof, then Grantor will promptly upon request therefor pay the
same amount to Grantee.
Section 2.10. Immediate Payments. All PP Proceeds received by Grantor
(instead of directly by Grantee) in any Application Period shall be immediately
paid by Grantor to Grantee. No PP Proceeds (whether paid by Grantor or any other
Person) shall be deemed received by Grantee or applied to the Production Payment
until such PP Proceeds have been so received by Grantee's bank or collection
agent in immediately available funds for the account of Grantee.
ARTICLE III
Section 3.1. Operations. As between Grantee and Grantor, Grantor shall
have exclusive charge, management and control of all operations to be conducted
on the Subject Interests. Grantor shall take or cause to be taken any and all
actions that a prudent operator would deem necessary in the operation,
maintenance and management thereof and in the production, handling, treating and
transportation of Hydrocarbons produced therefrom and shall otherwise act in
accordance with its customary practices; in doing the foregoing Grantor shall
not take into account the diminution in Grantor's share of production from the
Subject Interests caused by the granting of the Production Payment and Grantor
shall make its economic decisions as if Grantor owned the full interest in the
Subject Interests undiminished by the Production Payment. Except as expressly
provided in Section 3.1(e) or 3.5 below, and notwithstanding any other provision
hereof to the contrary, during the Production Payment Period Grantor shall not
conduct any redrilling or deepening of existing Commercial Wells on the Subject
Lands and nothing in this Conveyance shall impose upon Grantor any express or
implied obligation to conduct any
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exploration activities, development drilling of new wells or redrilling or
deepening of existing wells on the Subject Lands. Without limitation of the
foregoing, Grantor shall:
(a) operate and maintain the Subject Interests in material
conformity with all applicable laws and all rules, regulations and
orders of all duly constituted authorities having jurisdiction
(including all Environmental Laws) and in conformity with all leases
and other contracts and agreements forming a part of or relating to the
Subject Interests;
(b) promptly pay all Operating Costs with respect to the
Subject Interests (except to the extent that (i) Grantor is contesting
any such Operating Costs in good faith by appropriate proceedings, (ii)
Grantor has reserved adequate funds for the payment thereof, and (iii)
if any such Operating Costs are owed to any lessor of any lease under
which any of the Subject Interests are held, failure to win such
contest would not result in termination or cancellation of such lease);
(c) maintain in full force and effect, free of any right of
cancellation, forfeiture or termination, the Subject Interests, as well
as all material permits, licenses, easements, servitudes and other
rights necessary or useful in connection with the operation or
management of the Subject Interests or providing the Delivery Services;
(d) maintain in good working order and, to the extent
necessary, repair and replace, each Subject Well and the equipment
needed for production therefrom, and all separation, metering and
related facilities that are located on each Lease Measuring Point or
Separation Point; and
(e) except as may from time to time be otherwise agreed in
writing by Grantee, complete each Subject Well and properly equip it
for production (as used herein, the term "complete" includes, without
limitation, casing, testing, perforating, fracturing, shooting,
acidizing or otherwise stimulating and, if testing indicates that such
Subject Well would constitute a Commercial Well, physically connecting
such Subject Well to a pipeline or other outlet).
As to any of the Subject Interests of which Grantor is now, or hereafter
becomes, the operator, Grantor will not resign, or otherwise voluntarily
relinquish, its position as operator, except when an assignee of Grantor under a
transaction authorized under subsection 6.1(c) becomes operator. As to any
matters which Grantor does not control because Grantor is not at that time the
operator of a part of Subject Interests, Grantor shall exercise its full
contractual rights to cause the operator of such part of the Subject Interests
to take any and all actions as are required above.
Section 3.2. Shut-in or Abandonment of Subject Wells; Abandonment of
Subject Interests.
(a) Need for Consent. Until the termination of the Production Payment,
Grantor shall not, without first obtaining the consent of Grantee:
(i) abandon (or propose or consent to the abandonment of) any
Subject Well or surrender, abandon or release (or propose or consent to
the surrender, abandonment or
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release of) any Subject Interest; provided, however, that after any
Subject Well becomes a Commercial Well, Grantor may, without the
consent of Grantee, abandon such Subject Well if and when such Subject
Well ceases to be a Commercial Well and it would not be economically
feasible (without regard to the burden of the Production Payment) to
restore the productivity of such well by reworking, reconditioning,
plugging back, or otherwise conducting operations with respect to such
well (not to include redrilling or deepening of the well).
(ii) voluntarily shut-in or restrict the flow from a Subject
Well (or propose or consent to such a shut-in or restriction); provided
that (1) a shut-in of, or restriction of flow from, a well shall not be
deemed to be voluntarily made if it is caused by or results from
governmental requirements, operation and maintenance requirements
(which cannot be satisfied by actions taken with respect to other
wells, which actions do not violate other contractual duties of
Grantor), or sound reservoir management requirements, or from an act or
event of Force Majeure which act or event is not reasonably within the
control of and not caused by the fault or negligence of Grantor and
which by the exercise of due diligence Grantor is unable to prevent or
overcome, and (2) a Subject Well which has ceased to be a Commercial
Well and can be abandoned under subsection (i) above may be shut-in
pending such abandonment.
(b) Reworking. If, prior to the termination of the Production Payment,
a Subject Well that has become a Commercial Well then ceases to be a Commercial
Well and it would be economically feasible (without regard to the burden of the
Production Payment) to restore or enhance the productivity of such well by
reworking, reconditioning, plugging back, or otherwise conducting operations
relative to such well (not to include redrilling or deepening of the well),
Grantor shall take such action to restore or enhance the productivity of such
well.
(c) Definitions of "Commercial Well" and "economically feasible". For
all purposes of this Conveyance:
(i) A well shall be deemed to be a "Commercial Well" unless
and until there arises a condition, which reasonably appears to be
permanent, such that the aggregate value of the Hydrocarbons which are
being produced or which it reasonably appears will be produced from
such well -- net of Direct Taxes and of royalties, overriding royalties
and similar ownership interests reflected in the Net Revenue Interest
figures set out on Exhibit A, but without regard to the burden of the
Production Payment or any liens -- no longer exceeds the costs and
expenses directly related to the operation and maintenance of such
well.
(ii) The restoration of the productivity of a well shall be
deemed to be "economically feasible" whenever the net present value,
discounted at fifteen percent per annum, of the Hydrocarbons which it
reasonably appears will be produced from such well -- net of Direct
Taxes, of the costs of operating and maintaining such well (other than
overhead charges), and of royalties, overriding royalties and similar
ownership interests reflected in the Net Revenue Interest figures set
out on Exhibit A, but without regard to the burden of the Production
Payment or any liens -- exceeds the costs and expenses directly related
to such restoration.
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Section 3.3. Renewals and Extensions and New Leases. This Conveyance
and the Production Payment shall apply to all renewals, extensions and other
similar arrangements of the leases (or other determinable interests) which are
included in the Subject Interests, whether such renewals, extensions or
arrangements have heretofore been obtained by Grantor or are hereafter obtained
by or for Grantor or any Affiliate thereof and whether or not the same are
described in Exhibit A. For the purposes of the preceding sentence, a new lease
that covers the same interest (or any part thereof) covered by a prior lease,
and which is acquired within one year after the expiration, termination, or
release of such prior lease, shall be treated as a renewal or extension of such
prior lease.
Section 3.4. Adverse Claims. Grantor will, immediately after discovery
of such claim or demand, cause written notice to be given to Grantee of every
adverse claim or demand overtly threatened by any Person affecting the Subject
Interests or the Hydrocarbons produced therefrom in any manner whatsoever, or of
any proceedings instituted or threatened with respect thereto; and Grantor will
cause all necessary and proper steps to be diligently taken to protect and
defend the Subject Interests and such Hydrocarbons against any such adverse
claim or demand.
Section 3.5. Insurance and Replacement. Grantor shall maintain or cause
to be maintained, at its sole cost and expense and with financially sound and
reputable insurers reasonably satisfactory to Grantee, insurance covering the
Subject Interests and all wells, equipment and facilities located thereon,
against such liabilities, casualties, risks and contingencies and in such types,
as is customary in the case of companies engaged in similar operations and
having similar property. Such insurance shall in any event include the types and
coverages described in Schedule 1, with limits of coverage no less than those
set out in such Schedule. All liability insurance shall name Grantee (and, if
Grantee so requests, each Beneficiary) as an additional insured. Grantor shall
furnish annual certificates of such insurance to Grantee not less than 30 days
prior to the expiration or termination of such policy of insurance. In the event
of any damage to or loss of any well, equipment or facility on the Subject
Interests, Grantor (at no cost to Grantee, and without regard to whether
insurance proceeds are available to Grantor) shall promptly redrill, rebuild,
reconstruct, repair, restore or replace such damaged or lost property, if such
action is economically feasible, as defined in Section 3.2(c).
Section 3.6. Government Regulation. The obligations of Grantor
hereunder shall be subject to all applicable federal, state and local laws,
rules, regulations and orders (including those of any applicable agency, board,
official or commission having jurisdiction). Grantor shall timely make all
material filings with all applicable agencies, boards, officials and commissions
having jurisdiction with respect to the Subject Interests or the operation
thereof prior to or at the time any such filing becomes due. Should any statute,
or any rules or regulations of any governmental body, or any provisions in
private contracts (including those limiting the size of overriding royalties and
similar interests but excluding any contracts directly entered into by Grantee)
become applicable to the Subject Interests so as to limit the portion of the
Hydrocarbons produced from the lands covered by a particular Subject Interest
which may be attributable to the Production Payment, the Production Payment
shall, as to such Subject Interest and for the period of time during which such
statute, rule, regulation or contractual provision is applicable, be limited to
the maximum amount of production from such lands which can be attributed to the
Production Payment under such statute, rule, regulation or contractual
provision; provided, however, should such limitation come into effect as to one
or more Subject Interests, then
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(without prejudice to other rights Grantee may have) the Dedication Percentage
applicable to that portion of production from (or, to the extent pooled or
unitized, allocated to) Subject Lands covered by other Subject Interests which
would be attributable to the Production Payment in the absence of the provisions
of this subsection shall be increased, up to a maximum of 75%, as to cause, to
the maximum extent possible, Grantee to receive, by virtue of ownership of the
Production Payment, the same amount of Hydrocarbons which Grantee would have
received had the aforementioned statute, rule, regulation or contractual
provision not reduced the share of production from the aforementioned Subject
Interest with respect to which the Production Payment could be paid. Unless and
until the Dedication Percentages are otherwise increased as provided herein and
in the Purchase Agreement, the foregoing increase in the Dedication Percentages
shall remain in effect only for so long as such limitation applies, and
thereafter until Grantee has received PP Hydrocarbons sufficient to reduce the
unliquidated balance of the Primary Sum to what it would have been had such
limitation never existed.
Section 3.7. Pooling and Unitization. Certain of the Subject Interests
may have been pooled or unitized for the production of Hydrocarbons prior to the
date hereof, and may, after the date hereof, be pooled or unitized (a) pursuant
to any law, rule, regulation or order of any governmental body or official, or
(b) voluntarily by Grantor with the consent of Grantee. To the extent certain
Subject Interests are so pooled or unitized, such Subject Interests are and
shall be subject to the terms and provisions of such pooling and unitization
agreements or orders.
Section 3.8. Non-Consent Operations. Without the prior consent of
Grantee, Grantor shall not elect to be a non-participating party with respect to
any plugging back, reworking, sidetracking, completion, or other operation on
any Subject Interest (or lands pooled therewith), or (except in instances where
abandonment of such well would be permitted without Grantee's consent hereunder)
elect to be an abandoning party with respect to a well located on any Subject
Interest (or lands pooled therewith), if the consequence of such election is
that Grantor's interest in such Subject Interest or any part thereof is
temporarily (e.g., during a recoupment period) or permanently forfeited to the
parties participating in such operations or electing not to abandon such well.
Upon any such election by Grantor that is consented to by Grantee, such election
shall also be binding on the Production Payment as to the interest so
temporarily or permanently forfeited. Any additional interests acquired by
Grantor by virtue of electing to pay for or acquire the interest of a
non-consenting or abandoning party in a situation of the type described in the
preceding sentence shall not become a part of the Subject Interests or be
subject to the Production Payment.
Section 3.9. Future Gas Imbalances.
(a) No Undertakes Without Consent. Without the prior consent of
Grantee, Grantor will not deliberately take (for itself and for Grantee) a
lesser share of Gas produced from a Subject Well than the share of Gas which
Grantor and Grantee are collectively entitled to take by virtue of ownership of
the Subject Interests (without regard to any rights to take a lesser share under
any production balancing agreement or other arrangement or any rights under
common law with respect to production balancing), except as a result of Grantor
and Grantee, or any predecessor in title to such Subject Interest, having
previously taken from such Subject Well or other wells located on Subject
Interests more Gas than such parties would be entitled to receive by virtue of
their ownership ("previous overproduction"), but only to the extent that the
amount of such
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previous overproduction occurred after the Initial Time or occurred prior to the
Initial Time and is disclosed under Section 4.1(j) of the Purchase Agreement. If
any such deliberate undertakes by Grantor occur in violation of this Section
3.9, the PP Hydrocarbons shall be determined (to the maximum extent allowed
under applicable law and any applicable Permitted Encumbrances) without regard
thereto. It is recognized, however, that due to differences between the
nominations by Grantor and its (and Grantee's) share of actual production and
differences between nominations by other owners of production and their shares
of actual production, minor instances of overproduction or underproduction will
frequently occur, and any such instances will not be deemed violations of this
Section 3.9.
(b) Proportional Sharing in Overtakes. If, as permitted by applicable
contracts and laws, Grantor takes a greater share of the Gas produced from a
Subject Well than the share of Gas which Grantor is entitled to take by virtue
of ownership of the Subject Interests (such shares determined without regard to
the existence of the Production Payment), then Grantee shall be entitled to
share in such overproduction with Grantor in the same percentages that they
share in the normal production from such well (i.e., the production to which
they are entitled without regard to such overproduction).
(c) No Balancing From Other Properties. Except to the extent, if any,
that a Subject Interest is subject to such a balancing arrangement before it
becomes subject to this Conveyance and such fact is disclosed to (and accepted
by) Grantee as an express exception to Section 4.1(j) of the Purchase Agreement,
Grantor will not allow any Subject Interest to be subject to any production
balancing arrangement under which one or more third Persons may take a portion
of the production attributable to such Subject Interest without payment (or
without full payment) therefor as a result of production having been taken from,
or as a result of other actions or inactions with respect to, properties other
than such Subject Interest.
ARTICLE IV
SECTION 4.1. NO LIABILITY OF GRANTEE; INDEMNITY. EXCEPT AS
OTHERWISE SPECIFICALLY PROVIDED IN THIS CONVEYANCE WITH RESPECT TO PP SEVERANCE
TAXES, GRANTEE SHALL NEVER BE RESPONSIBLE FOR ANY PART OF THE COSTS, EXPENSES OR
LIABILITIES INCURRED IN CONNECTION WITH THE EXPLORING, DEVELOPING, OPERATING,
OWNING, MAINTAINING, REWORKING OR RECOMPLETING OF THE SUBJECT INTERESTS OR
SUBJECT LANDS, THE PHYSICAL CONDITION OF THE SUBJECT INTERESTS OR THE SUBJECT
LANDS, OR THE PRODUCING, HANDLING, TREATING OR TRANSPORTING OF HYDROCARBONS
PRODUCED FROM THE SUBJECT LANDS (INCLUDING ANY COSTS, EXPENSES, LOSSES OR
LIABILITIES RELATED TO VIOLATION OF AN ENVIRONMENTAL LAW OR OTHERWISE RELATED TO
DAMAGE TO OR REMEDIATION OF THE ENVIRONMENT, WHETHER THE SAME ARISE OUT OF
GRANTEE'S OWNERSHIP OF AN INTEREST IN PROPERTY OR OUT OF THE ACTIONS OF GRANTOR
OR GRANTEE OR OF THIRD PARTIES OR ARISE OTHERWISE), OR
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THE FAILURE BY GRANTOR TO HAVE GOOD AND DEFENSIBLE TITLE TO THE SUBJECT
INTERESTS FREE AND CLEAR OF ALL BURDENS, ENCUMBRANCES, LIENS AND TITLE DEFECTS
OTHER THAN PERMITTED ENCUMBRANCES (INCLUDING ANY COSTS, EXPENSES, LOSSES OR
LIABILITIES SUFFERED BY GRANTEE AS A RESULT OF ANY CLAIM THAT GRANTEE MUST PAY
OVER TO ANY PERSON ANY PART OF THE PP PROCEEDS AT ANY TIME PREVIOUSLY RECEIVED
OR THEREAFTER TO BE RECEIVED BY GRANTEE), AND GRANTOR AGREES TO INDEMNIFY AND
HOLD GRANTEE HARMLESS FROM AND AGAINST ALL COSTS, EXPENSES, LOSSES AND
LIABILITIES INCURRED BY GRANTEE IN CONNECTION WITH ANY OF THE FOREGOING OR IN
CONNECTION WITH THE PRODUCTION PAYMENT, THE PURCHASE AGREEMENT, THIS CONVEYANCE,
ANY OTHER PRODUCTION PAYMENT DOCUMENT, OR THE TRANSACTIONS AND EVENTS (INCLUDING
THE ENFORCEMENT OR DEFENSE THEREOF OR HEREOF) AT ANY TIME ASSOCIATED WITH OR
CONTEMPLATED IN ANY OF THE FOREGOING. SUCH INDEMNITY SHALL ALSO COVER ALL COSTS
AND EXPENSES OF ANY GRANTEE, INCLUDING REASONABLE LEGAL FEES AND EXPENSES, WHICH
ARE INCURRED INCIDENT TO THE MATTERS INDEMNIFIED AGAINST. AS USED IN THIS
ARTICLE IV, "GRANTEE" REFERS TO THE PERSONS NAMED AS GRANTEE AT THE BEGINNING OF
THIS CONVEYANCE, TO FUNDS AGENT AND THE BENEFICIARIES, TO MARKETER, AND TO THE
RESPECTIVE SUCCESSORS AND ASSIGNS AND AFFILIATES OF EACH OF THE FOREGOING,
TOGETHER WITH ALL OF THE RESPECTIVE OFFICERS, DIRECTORS, AGENTS, BENEFICIARIES,
TRUSTEES, ATTORNEYS AND EMPLOYEES OF THE FOREGOING OR OF THEIR SUCCESSORS,
ASSIGNS AND AFFILIATES.
Section 4.2. Release. No recourse shall be had for any presently
existing claim that may exist by or on behalf of Grantor against Grantee based
on this Conveyance or the other Production Payment Documents or the transactions
and events (including the enforcement or defense hereof or thereof) associated
with or contemplated in any of the foregoing, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty, or otherwise, and GRANTOR HEREBY RELEASES GRANTEE FROM ANY AND ALL SUCH
LIABILITY, WHETHER BASED UPON CONSTITUTION, STATUTE, COMMON LAW, OR EQUITY, AS A
PART OF THE CONSIDERATION FOR THE PURCHASE BY GRANTEE OF THE PRODUCTION PAYMENT;
PROVIDED THAT GRANTEE IS NOT HEREBY RELEASED FROM ANY LIABILITIES FOR ANY BREACH
BY GRANTEE OF GRANTEE'S CONTRACTUAL DUTIES UNDER THE PRODUCTION PAYMENT
DOCUMENTS.
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Section 4.3. Scope of Indemnities and Releases. THE INDEMNITIES AND
RELEASES GIVEN UNDER THE FOREGOING SECTIONS 4.1 AND 4.2 SHALL APPLY WHETHER OR
NOT ARISING OUT OF THE SOLE, JOINT OR CONCURRENT NEGLIGENCE, FAULT OR STRICT
LIABILITY OF ANY GRANTEE OR ANY OTHER PERSON INDEMNIFIED HEREUNDER AND SHALL
APPLY, WITHOUT LIMITATION, TO ANY LIABILITY IMPOSED UPON ANY PERSON INDEMNIFIED
HEREUNDER AS A RESULT OF ANY STATUTE, RULE, REGULATION, THEORY OF STRICT
LIABILITY OR OTHERWISE.
The foregoing indemnities shall not, however, apply to any costs, expenses,
losses or liabilities of any Grantee which are proximately caused solely by its
own gross negligence or willful misconduct. The foregoing indemnities and
releases shall survive the termination of the Production Payment and of this
Conveyance.
ARTICLE V
Section 5.1. Remedies. If a Designated Event occurs then Grantee may,
either on its own behalf or through any agent or representative and in addition
to all other rights and remedies available to Grantee at law and in equity
(including the right to sue for damages, which right of Grantee is specifically
acknowledged), exercise any one or more of the following remedies (it being
agreed that the exercising of any one remedy shall not preclude the exercising
of any other remedy):
(a) If Grantor has failed to perform any act or to take any action
which Grantor is required hereunder to perform or take or to pay any money which
Grantor is required hereunder to pay, then, upon written notice to Grantor,
Grantee may, but shall not be obligated to, perform or cause to be performed
such act or take such action or pay such money, all in Grantor's name or in
Grantee's own name. Any expenses so incurred by Grantee and any money so paid by
Grantee shall be a demand obligation owing by Grantor to Grantee (which
obligation Grantor hereby expressly promises to pay) and Grantee, upon making
such payment, shall be subrogated to all of the rights of the Person receiving
such payment. Each amount due and owing by Grantor to Grantee pursuant to this
subsection shall bear interest each day, from the date of such expenditure or
payment until paid, at the Agreed Rate, which interest shall be payable on the
first day of each month and shall itself bear interest at the same rate if not
timely paid.
(b) Grantee shall be entitled to apply to a court of competent
jurisdiction for the specific performance or observance of any covenant or
agreement or in aid of the execution of any power herein granted and for the
appointment of a receiver for the Subject Interests but no such appointment
shall prejudice or affect the rights of Grantee to receive all PP Hydrocarbons,
all PP Proceeds, and any amounts due hereunder.
Section 5.2. Termination of Remedies. The specific remedies to which
Grantee may become entitled under Sections 5.1(a) and (b) shall cease to be
exercisable when all Designated Events have been fully cured or otherwise ceased
to exist (provided that the effecting of performance or observation of any
unperformed covenant or agreement, or other resolution of a Designated Event, by
Grantee or Grantee's agent or representative shall not be deemed to cure
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such Designated Event unless and until Grantor reimburses Grantee for all costs
and expenses incurred by Grantee in connection therewith), without prejudice,
however, to the exercise of any such remedies upon any subsequent occurrence of
a Designated Event. Nothing in this section shall impose limitations or
otherwise inhibit the exercise of any other rights or remedies which Grantee may
have.
ARTICLE VI
Section 6.1. Assignments by Grantor. Without the prior consent of
Grantee (which consent may be granted or withheld in the sole and absolute
discretion of Grantee), Grantor shall not assign, sell, transfer, convey,
exchange, mortgage or pledge all or any part of the Subject Interests or create
any lien thereon or security interest therein, except that, without the prior
consent of Grantee, Grantor may:
(a) permit Permitted Encumbrances to exist against all or any part of
the Subject Interests;
(b) mortgage any Retained Interest to any Person (and any such
mortgagee may foreclose its lien upon such Retained Interests); and
(c) transfer and convey all, but not less than all, of Grantor's
interests in the Retained Interests to any corporate entity, the stock in which
is directly and wholly owned by Grantor,
provided that, in the case of any mortgage or transfer and conveyance described
in subsections (b) or (c) above, (i) such Person or entity must expressly
acknowledge the Production Payment as carved out of and burdening the Subject
Interests, including the Subject Interests mortgaged or transferred and conveyed
to it (and, to the extent such Person receives other assets or collateral from
Grantor or its Affiliates that are the subject of any transportation,
processing, treatment, storage or similar contract relating to PP Hydrocarbons
between any buyer from Grantee and Grantor or any of its Affiliates, must
expressly acknowledge that such contract will continue to remain in effect
following such transfer and conveyance or any foreclosure on any such
collateral), (ii) such Person or entity (in the case of subsection (b) only)
must agree not to enforce any rights with respect to the Retained Interests
(under such mortgage or otherwise) in any way which prevents any owner of the
Retained Interests (whether Grantor or its successors and assigns) from honoring
its duties with respect to this Conveyance and must agree that any Person
acquiring the Retained Interests by foreclosure or other sale pursuant to such
mortgage will take the same subject to the obligation to perform, from and after
the date of such acquisition, the duties of Grantor with respect to this
Conveyance (other than any duties to pay damages for breach of any title
warranty or to pay damages for any other breach of the this Conveyance by
Grantor prior to the date of such acquisition), (iii) such Person or entity (in
the case of subsection (c) only) must assume in writing for the benefit of
Grantee all of the liabilities and obligations of Grantor hereunder and under
the Purchase Agreement and must succeed Grantor as the operator of the Subject
Interests, and (iv) the transfer, mortgage, or conveyance shall not constitute
or precipitate a breach or event of default under any trust indenture or other
material agreement of Grantor or otherwise directly relating to the Subject
Interests. Notwithstanding the foregoing, TransTexas Gas Corporation shall, from
and after any such transfer, mortgage, or conveyance, continue to remain jointly
and severally liable for all of the liabilities and obligations of Grantor
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under this Conveyance or the Purchase Agreement or the other Production Payment
Documents. By its acceptance of the benefits of this Conveyance, Grantee hereby
confirms that the foregoing requirements of this Section 6.1 are satisfied by
the provisions of (1) Section 9.2 of the Mortgage, Deed of Trust, Assignment of
Production, Security Agreement and Financing Statement recorded
contemporaneously herewith, made by Grantor for the benefit of GMAC Commercial
Credit LLC, as Agent and (2) Section 9.2 of the Mortgage, Deed of Trust,
Assignment of Production, Security Agreement and Financing Statement recorded
contemporaneously herewith, made by Grantor for the benefit of Firstar Bank,
N.A., as indenture trustee.
Section 6.2. Assignments by Grantee. Grantee's interest in the
Production Payment may not be transferred except in compliance with this
section. Any Grantee and any Permitted Assign (as hereinafter defined) shall
have the right to sell, assign, transfer or convey its interest in the
Production Payment, in whole or in part (and either absolutely or by mortgage or
other security instrument), at any time; provided that:
(a) no change of ownership or right to receive payment of the
Production Payment or of any part thereof, however accomplished, shall
be effective or binding upon Grantor until notice thereof, including
the Percentage Share and address of the transferee, shall have been
registered with Grantor by the transferor and by the transferee (which
transferee must make to Grantor the representations and warranties in
Section 4.2 of the Purchase Agreement), and then only with respect to
production occurring after receipt of such notice, and
(b) neither Grantee nor any Permitted Assign shall assign or
convey any rights under or any interest in the Production Payment
Documents or the Production Payment to any Restricted Assignee.
Any Person to whom all or any interest in the Production Payment is assigned or
conveyed in accordance with the foregoing requirements is herein called a
"Permitted Assign". Grantor shall keep records of all Permitted Assigns, their
Percentage Shares, and their addresses, and shall give notice thereof to the
other Persons, if any, from time to time holding the interests of Grantee
hereunder.
Section 6.3. More Than Three Grantees. If the interests of Grantee
under this Conveyance are ever owned by more than three Persons, all Persons
owning interests hereunder that were originally granted to SPS shall designate
one Person and all Persons owning interests hereunder that were originally
granted to Fund V or Fund VI shall designate a second Person, in each case to
act as their agent to deliver and receive all communications (including
consents) and exercise the discretion of Grantee hereunder on their behalf.
Section 6.4. Binding Effect. All the covenants and agreements of the
respective parties herein contained shall be deemed to be covenants running with
the Subject Interests and the lands covered thereby or included therein. All of
the provisions hereof shall be binding upon and shall inure to the benefit of
the parties hereto, and their respective successors and assigns.
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ARTICLE VII
Section 7.1. Warranty. Grantor hereby binds itself to warrant and
forever defend all and singular title to the Production Payment and the PP
Hydrocarbons unto Grantee, its successors and Permitted Assigns, against every
person lawfully claiming or to claim the same or any part thereof, subject,
however, to the Permitted Encumbrances. Without limitation of the generality of
the foregoing, Grantor represents and warrants to Grantee that the ownership of
Grantor of the Subject Interests does and will, with respect to each tract of
land identified in Exhibit A hereto, subject only to the Permitted Encumbrances:
(a) entitle Grantor to receive (subject to and before giving effect to
the Production Payment), free and clear of liens and encumbrances (except the
Permitted Encumbrances), a decimal or percentage net revenue interest share of
the Hydrocarbons produced from, or allocated to, such well or unit equal to not
less than the decimal or percentage interest set forth in Exhibit A in
connection with such tract of land in the column headed "Net Revenue Interest",
and
(b) cause Grantor to be obligated to bear a decimal or percentage share
of the costs associated with wells or operation on such tract of land not
greater than the decimal or percentage share set forth in Exhibit A in
connection with such tract of land in the column headed "Working Interest",
without a corresponding increase in net revenue interest.
Grantor further represents and warrants to Grantee that such shares of
production which Grantor is entitled to receive, and shares of expenses which
Grantor is obligated to bear, are not and will not be subject to change except,
and only to the extent that, such changes are reflected on Exhibit A. This
Conveyance is made with full substitution and subrogation of Grantee in and to
all covenants, representations and warranties by others heretofore given or made
with respect to the Subject Interests.
Section 7.2. Davis Agreements. Grantee acknowledges and agrees that,
notwithstanding anything to the contrary in this Conveyance:
(a) the Production Payment, insofar as it is carved out of the
properties and interests that are subject to the liens and rights of
Davis Petroleum Corp. under the "Eagle Point Agreements," as each is
modified and supplemented by the "September Letter Agreement," (as such
terms are defined in the November 30, 1999 Order of the United States
Bankruptcy Court for the Southern District of Texas, Corpus Christi
Division, entitled "Order (1) Pursuant to Motion Filed July 28, 1999
Authorizing the Transfer and Conveyance to Davis Petroleum Corp. Of
Certain Assets Free and Clear of Liens and Encumbrances; and (2)
Pursuant to Motion Filed October 18, 1999, (A) Approving the Amendment
and Assumption of Certain Operating Agreements With Davis Petroleum
Corp.; (B) Ratifying the Termination of Certain Operating Agreements
and Exploration Agreements With Davis Petroleum Corp.; (C) Approving an
Agreement With Davis Petroleum Corp. Concerning the Drilling of the
Trout Point Prospect; (D) Authorizing the Transfer, Conveyance and
Assignment of Certain Properties to Davis Petroleum Corp. Free and
Clear of Liens, Claims, Charges and Encumbrances; and (E) Directing
Turnover of Pre-Petition Funds Owed by Davis Petroleum Corp.) entered
in the case styled In re TransTexas Gas Corporation, et al. , case no.
99-21550 (the "November 30 Order") and as
25
<PAGE> 26
each may is modified or replaced by the "Amended Agreements" referred
to below, shall be subject to, and the Permitted Encumbrances shall
include, such liens and rights of Davis Petroleum Corp.; and
(b) if the Production Payment is at any time carved out of the
properties and interests that are subject to the liens and rights of
Davis Petroleum Corp. under the "Trout Point Agreements," as each is
modified and supplemented by the "September Letter Agreement," as such
terms are defined in the November 30 Order, then the New Production
Payment, insofar as it is carved out of such properties and interests,
shall be subject to, and the Permitted Encumbrances shall include, such
liens and rights of Davis Petroleum Corp.
As used above, "Amended Agreements" means the four following letter agreements,
each dated March 1, 2000 and sent by Davis Petroleum Corp. to (1) Tejas Gas
Marketing, LLC, Grantor and SPS, (2) Pan Energy Marketing Company, Grantor and
SPS, (3) Enron Reserve Acquisition Corp., Grantor and SPS, and (4) Duke Energy
Field Services, Grantor and SPS. These four letter agreements replace the
royalty letter agreements described in Paragraph C.(1)(iv) - (ix) of the
November 30 Order.
ARTICLE VIII
Section 8.1. Choice of Law. This Conveyance shall be construed and
enforced in accordance with and governed by the laws of the State of Texas
(without regard to conflicts of law principles thereof that would cause another
state's law to apply) and the laws of the United States of America.
Section 8.2. Intentions of the Parties. Nothing herein contained shall
be construed to constitute any party hereto (under state law or for tax
purposes) in partnership with any other party. In addition, the parties hereto
intend that the Production Payment shall at all times be treated (and all
provisions of this Conveyance shall be construed and treated accordingly): (a)
as a production payment (i.e., a term overriding royalty) and a presently vested
interest in real property under the laws of each state in which Subject
Interests are located; and (b) for federal income tax purposes only, as a
mortgage loan in registered form (and not a "royalty" or other "economic
interest" in Hydrocarbons) within the meaning of the Internal Revenue Code and
the regulations and judicial authority relating thereto.
Section 8.3. Ownership of Equipment. The Production Payment does not
include any right, title or interest in and to any of the personal property,
fixtures, structures or equipment now or hereafter placed on, or used in
connection with, the Subject Interests, and the interest herein conveyed to
Grantee is exclusively a production payment (i.e., a term overriding royalty).
Section 8.4. Further Assurances. Grantor agrees to execute and deliver
to Grantee all such other and additional instruments, notices, division orders,
transfer orders and other documents and to do all such other and further acts
and things as may be necessary to more fully and effectively grant, convey and
assign to Grantee the rights, titles, interest and estates conveyed to Grantee
hereby or intended to be so conveyed.
26
<PAGE> 27
Section 8.5. Partition. Grantor and Grantee acknowledge that neither
has any right or interest that would permit it to partition any portion of the
Subject Interests as against the other, and each waives any such right.
Section 8.6. Notices and Addresses. All notices and other
communications required or permitted under this Conveyance shall be in writing
and, unless otherwise specifically provided, shall be delivered personally or by
telecopier or by registered or certified mail, postage prepaid, or by delivery
service with proof of delivery, at the respective addresses shown below, and
shall be deemed delivered on the date of receipt. Either party may specify as
its proper address any other street address within the continental limits of the
United States by giving notice to the other party, in the manner provided in
this Section, at least fifteen (15) days prior to the effective date of such
change of address.
Grantor's address:
1300 North Sam Houston Parkway East
Suite 310
Houston, Texas 77032-2949
Attention: Ed Donahue
Telephone: 281/987-8600
Telecopy: 281/986-8865
Grantee's address:
Southern Producer Services, L.P.
1200 Smith Street
Suite 2890
Houston, Texas 77002
Attention: David W. Stewart
Telephone: (713) 276-1902
Telecopy: (713) 276-1990
TCW Portfolio No. 1555 DR V Sub-Custody Partnership, L.P. and
TCW DR VI Investment Partnership, L.P.
c/o Trust Company of the West
865 South Figueroa
Los Angeles, California 90017
Attention: Thomas F. Mehlberg
Telephone: 213/244-0702
Telecopy: 213/244-0604
27
<PAGE> 28
with a copy to the Funds Agent at its address:
TCW Asset Management Company
1000 Louisiana
Suite 2175
Houston, Texas 77002
Attention: Kurt Talbot
Telephone: 713/615-7413
Telecopy: 713/615-7460
Section 8.7. Funds Agent; Consents, Waivers, Supplements and
Amendments.
(a) Fund V and Fund VI have, pursuant to the Purchase Agreement,
appointed TCW Asset Management Company as their agent (herein called the "Funds
Agent") to administer the Production Payment and to act on their behalf (as
Persons included in Grantee) in giving any consents or waivers under this
Conveyance, in making any amendments or supplements hereto, and in arranging for
the marketing of the PP Hydrocarbons. Unless and until this Conveyance is
supplemented to reflect the termination of such agency or the appointment of a
replacement or successor Funds Agent (which supplement may be executed by Fund V
and Fund VI without the joinder of Grantor or SPS), all Persons dealing with
Grantor or Grantee in connection with the Production Payment shall be entitled
to rely upon the authority of TCW Asset Management Company to act as Funds Agent
for Fund V and Fund VI in connection herewith.
(b) No consent, waiver, supplement or amendment given by Grantee in
connection with this Conveyance or the Production Payment shall be valid or
effective unless given be in writing and signed by each Person included in
Grantee (provided that Funds Agent may sign the same on behalf of Fund V and
Fund VI but not on behalf of SPS).
Section 8.8. Counterparts. This Conveyance is being executed in
multiple counterparts, all of which are identical, except that, (i) to
facilitate recordation, in certain counterparts hereof only those portions of
Exhibit A which contain descriptions of properties located in the recording
jurisdiction in which the particular counterpart is to be recorded are included,
and (ii) Schedule l may be omitted from counterparts hereof which are being
recorded. All of such counterparts shall constitute one and the same instrument.
Complete copies of this Conveyance containing the entirety of Exhibit A, and all
schedules hereto, have been retained by Grantor and Grantee.
This Conveyance is executed on the day of March, 2000 and is made
effective as to runs of Oil and deliveries of Gas as of the Initial Time.
TRANSTEXAS GAS CORPORATION
By:
--------------------------------
Name: Ed Donahue
Title: Vice President
28
<PAGE> 29
STATE OF TEXAS )
)
COUNTY OF DALLAS )
The foregoing instrument was acknowledged before me on this ____ day of
March, 2000, by Ed Donahue as Vice President of TransTexas Gas Corporation, a
Delaware corporation, on behalf of such corporation.
-------------------------------------
Notary Public, State of Texas
29
<PAGE> 30
LIST OF EXHIBITS AND SCHEDULES
Schedule 1 - Insurance
Schedule 2 - Delivery Points
Exhibit A - Property Descriptions
Exhibit B - Reconveyance
Exhibit C - Bankruptcy Court Order
30
<PAGE> 1
EXHIBIT 10.54
GAS AND NATURAL GAS LIQUIDS
PURCHASE AGREEMENT
DATED MARCH 14, 2000
BETWEEN
SOUTHERN PRODUCER SERVICES, L.P.,
AS "BUYER"
AND
TRANSTEXAS GAS CORPORATION,
AS "SELLER"
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I. DEDICATION AND QUANTITY.......................................................................2
ARTICLE II. PRICE OF GAS AND NATURAL GAS LIQUIDS..........................................................4
ARTICLE III. SELLER'S POINT(S) OF DELIVERY.................................................................5
ARTICLE IV. TERM..........................................................................................5
ARTICLE V. NOTICES.......................................................................................5
ARTICLE VI. GENERAL.......................................................................................6
EXHIBIT "A".....................................................................................................A-1
Section I. Definitions..........................................................................A-1
Section II. Transportation, Processing and Dehydration/Treating..................................A-9
Section III. Measuring Equipment and Testing......................................................A-9
Section IV. Measurement Specifications..........................................................A-11
Section V. Quality.............................................................................A-11
Section VI. Delivery Pressure...................................................................A-11
Section VII. Taxes...............................................................................A-12
Section VIII. Billings and Payments...............................................................A-12
Section IX. Title, Possession and Responsibility................................................A-13
Section X. Warranty of Title...................................................................A-14
Section XI. Force Majeure.......................................................................A-14
Section XII. Remedy for Breach...................................................................A-16
Section XIII. Assignment..........................................................................A-17
Section XIV. Laws and Regulations................................................................A-17
Section XV. [Reserved]..........................................................................A-18
Section XVI. Miscellaneous.......................................................................A-18
EXHIBIT "B"
EXHIBIT "C"
</TABLE>
i
<PAGE> 3
GAS AND NATURAL GAS LIQUIDS PURCHASE AGREEMENT
THIS GAS AND NATURAL GAS LIQUIDS PURCHASE AGREEMENT (herein called this
"Agreement") is made and entered into as of the 14th Day of March, 2000, by and
between SOUTHERN PRODUCER SERVICES, L.P., a Delaware limited partnership (herein
called the "Buyer") and TRANSTEXAS GAS CORPORATION, a Delaware corporation
herein called the "Seller"). Buyer and Seller are sometimes referred to
singularly as "Party" and collectively as "Parties". Certain capitalized terms
used herein are defined as set forth in Exhibit A hereto or as otherwise
indicated.
WITNESSETH:
WHEREAS, Seller has heretofore filed for protection under Chapter 11 of
the Bankruptcy Code in Case No. 99-21550 in the United States Bankruptcy Court
(herein called the "Court") for the Southern District of Texas (Corpus Christi
Division), entitled "In re: TransTexas Gas Corporation, et. al." (herein called
the "Bankruptcy Case");
WHEREAS, pursuant to the Bankruptcy Case, the Court has issued an order
(herein called the "Bankruptcy Order") granting Seller's motion for permission
to (1) sell the Production Payment (as hereinafter defined) and enter into and
deliver to Grantee (as hereinafter defined) the Conveyance (as hereinafter
defined) and other ancillary marketing, transportation and processing agreements
and (2) amend or amend and restate and affirm certain existing marketing,
transportation and processing agreements with third parties in order to
relinquish certain of Seller's capacity under such existing marketing,
transportation and processing agreements as is required for Buyer to market,
transport and/or process the Production Payment hydrocarbons that Buyer and Fund
V (as hereinafter defined) and Fund VI (as hereinafter defined) own or control
and such other volumes of hydrocarbons as Buyer shall purchase from Seller or
other third parties;
WHEREAS, pursuant to the Bankruptcy Order, Seller and Grantee have
entered into that certain Production Payment Conveyance (herein, as from time to
time amended, restated or otherwise modified, called the "Conveyance"), dated as
of March 14, 2000, from and by Seller, as grantor, and Buyer, TCW Portfolio No.
15555 DR V Sub-Custody Partnership, L.P. (herein called "Fund V") and TCW DR VI
Investment Partnership, L.P. (herein called "Fund VI") (in such capacity, Fund
VI together with Buyer and Fund V, collectively called the "Grantee"), whereby
Seller has granted, bargained, sold, conveyed, assigned, transferred, set over
and delivered to Grantee a term overriding royalty interest (herein called the
"Production Payment") in the Subject Interests (as defined in the Conveyance and
herein so called);
WHEREAS, pursuant to the terms of the Conveyance, production from the
Subject Interests shall be dedicated to the Grantee as (1) at fifty percent
(50%) from March 1, 2000 until 9:00 a.m., Central Time, on September 1, 2000,
(2) at sixty-two percent (62%) from 9:00 a.m., Central Time, on September 1,
2000 until 9:00 a.m., Central Time, on March 1, 2001 and (3) seventy percent
<PAGE> 4
(70%) from and after 9:00 a.m., Central Time, on March 1, 2001 until the
Termination Time (herein called the "Dedication Percentage");
WHEREAS, pursuant to the Bankruptcy Order, Seller and Grantee have
entered into that certain Purchase Agreement (herein, as from time to time
amended, restated, supplemented or otherwise modified, called the "Purchase
Agreement"), dated as of March 14, 2000, between Seller and Grantee and TCW
Asset Management Company, as agent on behalf of Fund V and Fund VI (herein
called the "Funds Agent"), whereby Seller has sold the first component of the
Production Payment to Grantee pursuant to the Conveyance, and Grantee has
purchased the same from Seller;
WHEREAS, the Grantee and Buyer have entered into that certain
Production Sales Agreement (as defined in the Purchase Agreement and herein, as
from time to time amended, restated, supplemented or otherwise modified, called
the "Production Sales Agreement"), dated as of March 14, 2000, pursuant to which
Buyer has agreed to purchase, and Grantee has agreed to sell, Grantee's interest
in the Production Payment hydrocarbons; and
WHEREAS, subject to the terms and conditions hereinafter set forth,
Buyer desires to purchase certain quantities of Gas from Seller and Seller
desires to sell such quantities of Gas to Buyer;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants hereinafter set forth, the Parties hereto covenant and agree as
follows:
ARTICLE I.
DEDICATION AND QUANTITY
1.1 Subject to the other provisions of this Agreement, Seller does
hereby commit and dedicate to the performance of this Agreement and agrees to
sell and deliver to Buyer hereunder one hundred percent (100%) of the Gas
production which Seller owns, controls or has the right to sell, pursuant to the
Conveyance (as such Exhibit may from time to time be amended, restated,
supplemented, or otherwise modified) and that is capable of being transported to
Buyer's Purchaser under contracts with Buyer's Transporters (herein called the
"Marketed Volumes"). Seller represents and warrants that it has the right to
market and sell to Buyer hereunder the Marketed Volumes. Seller hereby agrees to
sell to Buyer, and Buyer hereby agrees to purchase from Seller, upon the terms
of this Agreement all of the Marketed Volumes which are actually delivered to
and accepted by Buyer's Purchaser.
1.2 During the term hereof and as required by the applicable Buyer's
Marketing Agreements, Seller shall provide to Buyer, or to Buyer's designee, a
written nomination setting forth the quantity of Gas to be delivered to Buyer,
or to Buyer's designee, each Day during such Month (herein called the
"First-of-the-Month Nominated Quantity"). Seller shall provide to Buyer, or to
Buyer's designee, such notice as is required by the applicable Buyer's Marketing
Agreements prior to
2
<PAGE> 5
any Day for which Seller desires to nominate a quantity of Gas for sale and
delivery hereunder that is different from the First-of-the-Month Nominated
Quantity.
1.3 In no event shall the volumes of Gas that Seller is obligated to
sell and deliver to Buyer, or to Buyer's designee, or that Buyer or Buyer's
designee have agreed to purchase and receive from Seller under the terms of this
Agreement ever exceed the volumes of Gas which can be legally produced or
purchased under the applicable rules and regulations of the Railroad Commission
of Texas.
1.4 In consideration of the execution and delivery of this Agreement by
the Buyer, the Seller hereby indemnifies, exonerates and holds the Buyer and
each of its respective officers, directors, employees and agents (herein,
collectively, called the "Indemnified Parties") free and harmless from and
against any and all actions, causes of action, suits, losses, costs,
liabilities, damages and expenses (including, without limitation, reasonable
attorney's fees and disbursements) incurred in connection therewith
(irrespective of whether any such Indemnified Party is a Party to the action for
which indemnification hereunder is sought), excluding any portion of such
actions, causes of action, suits, losses, costs, liabilities, damages and
expenses (including, without limitation attorney's fees and disbursements)
resulting from the gross negligence or wilful misconduct of any Indemnified
Party (herein collectively called the "Indemnified Amounts"), incurred by the
Indemnified Parties or any of them as a result of, or arising out of, or
relating to (1) Buyer's Marketing Agreements or (2) this Agreement. IT IS
UNDERSTOOD BY THE PARTIES HERETO THAT THE INDEMNITIES BY SELLER IN FAVOR OF THE
BUYER IN THIS AGREEMENT SHALL BE APPLICABLE NOTWITHSTANDING THAT ANY INDEMNIFIED
AMOUNTS OTHERWISE COVERED BY THIS AGREEMENT ARE ATTRIBUTABLE TO THE NEGLIGENCE
(OTHER THAN GROSS NEGLIGENCE OR WILFUL MISCONDUCT) OF BUYER (WITHOUT REGARD TO
WHETHER SUCH NEGLIGENCE IS SOLE, JOINT, CONCURRENT, ACTIVE OR PASSIVE), ANY
PRE-EXISTING CONDITION OR DEFECT OR ANY FORM OF STRICT LIABILITY.
1.5 In the event that Buyer incurs, owes or is liable for any
Indemnified Amount under Section 1.4 above, Seller shall pay such Indemnified
Amount by wire transfer of immediately available funds to Buyer within five (5)
days following Buyer's written demand therefor. In addition to, and not in
limitation of the foregoing, Buyer is hereby authorized at any time and from
time to time, without notice to Seller, to setoff and apply any and all sums
held and any other sums at any time owing to or for the credit or the account of
Seller against any and all sums owing to Buyer (including, without limitation,
reasonable attorney's fees and disbursements and any Indemnified Amount),
together with interest on such amounts at the Agreed Rate until paid in full,
irrespective of whether or not Buyer will have made any demand under this
Agreement. Buyer agrees promptly to notify Seller after any such setoff and
application. The rights of the Buyer under this Section 1.5 are in addition to
other rights and remedies (including, without limitation, other rights of
setoff) which Buyer may have. The provisions of Sections 1.4 and 1.5 shall
survive the termination of this Agreement.
3
<PAGE> 6
ARTICLE II.
PRICE OF GAS AND NATURAL GAS LIQUIDS
2.1 The Price per MMBtu of Gas on which the Net Price shall be
determined shall be the Price per MMBtu paid, calculated each Month by the
relevant Buyer's Purchaser for such Gas (excluding Products of Processing)
delivered hereunder during each applicable calendar Month from each field listed
in Exhibit B hereto. As described in Section VIII of Exhibit A, Buyer will pay
the Net Price to Seller for all Marketed Volumes (including Products of
Processing) delivered to Buyer and subsequently delivered to the relevant
Buyer's Purchaser and accepted and paid for by such Buyer's Purchaser hereunder.
2.2 Notwithstanding anything contained in Paragraph 2.1 above to the
contrary, if deliveries of volumes of Gas from any of the fields listed on
Exhibit B give rise to an adjustment in Price under any Buyer's Marketing
Agreement, then the price for any such volumes of Gas delivered by Seller during
that month shall be a price per MMBtu equal to the applicable Price, with
adjustments thereto on account of such deliveries pursuant to the terms of the
applicable Buyer's Marketing Agreements for such Gas.
2.3 If, during the term of this Agreement, the index or trade
publication cited in any Buyer's Sales Contract above ceases to exist or be
published, the provisions of such Buyer's Sales Contract with respect to a
replacement index or pricing mechanism for such Buyer's Sales Contract shall
apply in determining the Price for Gas from such field hereunder. Otherwise, the
Parties will endeavor to mutually agree to a replacement index or pricing
mechanism for Gas from such field. In the event the Parties cannot agree to a
replacement index or pricing mechanism for such Gas, then this Agreement shall
terminate with respect to the purchase of Gas from such field at the end of the
last Day for which an agreed upon price is applicable.
2.4 Subject to the terms of Section VII of Exhibit A, Prices paid by
Buyer under this Article II are inclusive of severance tax reimbursement to
Buyer.
2.5 The price payable for all volumes of Products of Processing which
are redelivered for the account of Buyer after processing by Buyer's Processor,
if any, shall be the Market Price per gallon then in effect for such Products of
Processing. Seller shall have the right to elect, from time to time on prior
written notice to Buyer and the relevant Buyer's Processor, to process or not
process Seller's Gas for the recovery of Products of Processing in accordance
with the terms and provisions of the respective Buyer's Processor's contract.
4
<PAGE> 7
ARTICLE III.
SELLER'S POINT(S) OF DELIVERY
3.1 The points of delivery from Seller to Buyer for each field listed
on Exhibit B shall be the delivery point specified for such field as "Seller's
Delivery Point" on such Exhibit. In the event Seller delivers or causes to be
delivered Gas at any other delivery point, Buyer shall (to the extent it is
reasonably able to under the Buyer's Marketing Agreements) accept delivery
subject to a reduction in Net Price as provided in the definition of such term
to compensate Buyer for the reasonable charges, if any, resulting therefrom,
otherwise Buyer, or Buyer's designee, may elect not to accept delivery.
ARTICLE IV.
TERM
4.1 Subject to the other provisions hereof, this Agreement shall be
effective with respect to production from and after 9 A.M. on March 1, 2000, and
shall remain in full force and effect for a primary term equal to the greater of
(a) three (3) years or (b) a period equal to the term of the Production Payment,
and Month to Month thereafter until terminated by either Party upon at least
thirty (30) Days' prior notice given in writing or by facsimile to the other
Party, which termination shall be effective on the first Day of the Month
following the expiration of such thirty (30) Day notice period; provided,
however, Buyer may terminate this Agreement, in full or in part, at any time
upon the giving of thirty (30) days notice of such termination to Seller, which
termination shall be effective as of the first Day of the Month following the
expiration of such thirty (30) Day notice period.
ARTICLE V.
NOTICES
5.1 Any notice, request, demand, statement, payment or bill provided
for in this Agreement, or any notice which a Party may desire to give to the
other, shall be in writing and shall be considered as duly delivered as of the
date of transmittal if mailed by the U.S. Postal Service, telefaxed, wire or
courier expressed to the other Party at the following address:
BUYER:
Notices & Correspondence: Southern Producer Services, L.P.
1200 Smith Street, Suite 2890
Houston, Texas 77002
Attention: David W. Stewart
Phone: (713) 276-1902
Facsimile: (713) 276-1990
5
<PAGE> 8
Billing: Southern Producer Services, L.P.
1200 Smith Street, Suite 2890
Houston, Texas 77002
Attention: Ron Franklin
Phone: (713) 276-1916
Facsimile: (713) 276-1990
SELLER:
Notices & Correspondence: TransTexas Gas Corporation
1300 North Sam Houston Parkway East
Suite 310
Houston, Texas 77032-2949
Attention: Gas Marketing
Phone: (281) 987-8600
Facsimile: (281) 986-8840
Payments By Wire Transfer: TransTexas Gas Corporation
Bank of New York
48 Wall Street
New York, New York
ABA # 021-000-018
For the Account of GMAC Commercial
Credit LLC
Acct. # 809-0653-114
GAS - For further credit to
account #904361
CONDENSATE/LIQUIDS - For further
credit to account #904200
5.2 Either Party may change addresses by giving written notice to the
other Party.
ARTICLE VI.
GENERAL
6.1 The GENERAL TERMS AND CONDITIONS attached hereto as Exhibit "A" are
incorporated herein as if set forth in full. In the event of any conflict
between the terms and conditions contained in this Agreement and the terms and
conditions contained in Exhibit "A", then the provisions contained in the body
of this Agreement shall prevail.
6.2 ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE BUYER OR THE SELLER MAY
BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE OF TEXAS OR IN THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS; PROVIDED, HOWEVER,
THAT
6
<PAGE> 9
ANY SUIT SEEKING ENFORCEMENT AGAINST ANY PROPERTY MAY BE BROUGHT, AT THE BUYER'S
OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH PROPERTY MAY BE FOUND. THE
SELLER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE
COURTS OF THE STATE OF TEXAS AND OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF TEXAS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH
ABOVE. THE SELLER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY
REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE
STATE OF TEXAS. THE SELLER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER
MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT THE SELLER HAS OR HEREAFTER MAY ACQUIRE
ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE SELLER
HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT.
6.3 SELLER AND BUYER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT,
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF THE BUYER, OR THE SELLER. EACH OF THE BUYER AND SELLER
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION
FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR SUCH
PARTY'S ENTERING INTO THE PRODUCTION PAYMENT DOCUMENTS AND THIS AGREEMENT.
6.4 This Agreement may be executed in any number of counterparts and by
different parties hereto on separate counterparts, each of which when so
executed and delivered shall be deemed to be an original, but all of which shall
taken together constitute one and the same instrument. Any signature delivered
by a party by facsimile transmission shall be deemed to be an original hereto.
[Signature pages follow]
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<PAGE> 10
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed in duplicate originals by their duly authorized officers effective as
of the Day and Year first hereinabove written.
SELLER: BUYER:
TRANSTEXAS GAS CORPORATION SOUTHERN PRODUCER SERVICES, L.P.
By: SC Ashwood Holdings, as its
general partner
By: By:
---------------------------------- ---------------------------------
Name: Ed Donahue Name: David W. Stewart
Title: Vice President Title: Vice President
ACKNOWLEDGED AND AGREED TO:
GMAC COMMERCIAL CREDIT LLC
By:
----------------------------------
Name:
Title:
S-1
<PAGE> 1
EXHIBIT 10.55
CRUDE OIL PURCHASE AGREEMENT
DATED MARCH 14, 2000
BETWEEN
SOUTHERN PRODUCER SERVICES, L.P.,
AS "BUYER"
AND
TRANSTEXAS GAS CORPORATION,
AS "SELLER"
<PAGE> 2
CRUDE OIL PURCHASE AGREEMENT
This CRUDE OIL PURCHASE AGREEMENT (herein called "this Agreement") is entered
into as of March 14, 2000, by and between TransTexas Gas Corporation (herein
called the "Seller") and Southern Producer Services, L.P. (herein called the
"Buyer"), and shall govern the terms and conditions whereby Seller shall sell,
and Buyer shall purchase, certain crude oil and/or condensate (herein
collectively called "Crude Oil"). Buyer and Seller are sometimes referred to
singularly as "Party" and collectively as "Parties". Certain capitalized terms
used herein are defined as set forth in Exhibit A hereto or as otherwise
indicated.
W I T N E S S E T H:
WHEREAS, Seller has heretofore filed for protection under Chapter 11 of
the Bankruptcy Code in Case No. 99-21550 in the United States Bankruptcy Court
(herein called the "Court") for the Southern District of Texas (Corpus Christi
Division), entitled "In re: TransTexas Gas Corporation, et. al." (herein called
the "Bankruptcy Case");
WHEREAS, pursuant to the Bankruptcy Case, the Court has issued an order
(herein called the "Bankruptcy Order") granting Seller's motion for permission
to (1) sell the Production Payment (as hereinafter defined) and enter into and
deliver to Grantee (as hereinafter defined) the Conveyance (as hereinafter
defined) and other ancillary marketing, transportation and processing agreements
and (2) amend or amend and restate and affirm certain existing marketing,
transportation and processing agreements with third parties in order to
relinquish certain of Seller's capacity under such existing marketing,
transportation and processing agreements as is required for Buyer to market,
transport and/or process the Production Payment hydrocarbons that Buyer and Fund
V (as hereinafter defined) and Fund VI (as hereinafter defined) own or control
and such other volumes of hydrocarbons as Buyer shall purchase from Seller or
other third parties;
WHEREAS, pursuant to the Bankruptcy Order, Seller and Grantee have
entered into that certain Production Payment Conveyance (herein, as from time to
time amended, restated or otherwise modified, called the "Conveyance"), dated as
of March 14, 2000, from and by Seller, as grantor, and Buyer, TCW Portfolio No.
15555 DR V Sub-Custody Partnership, L.P. (herein called "Fund V") and TCW DR VI
Investment Partnership, L.P. (herein called "Fund VI") (in such capacity, Fund
VI together with Buyer and Fund V, collectively called the "Grantee"), whereby
Seller has granted, bargained, sold, conveyed, assigned, transferred, set over
and delivered to Grantee a term overriding royalty interest (herein called the
"Production Payment") in the Subject Interests (as defined in the Conveyance and
herein so called);
WHEREAS, pursuant to the terms of the Conveyance, production from the
Subject Interests shall be dedicated to the Grantee as (1) at fifty percent
(50%) from March 1, 2000 until 9:00 a.m., Central Time, on September 1, 2000,
(2) at sixty-two percent (62%) from 9:00 a.m., Central Time, on September 1,
2000 until 9:00 a.m., Central Time, on March 1, 2001 and (3) seventy percent
<PAGE> 3
(70%) from and after 9:00 a.m., Central Time, on March 14, 2001 until the
Termination Time (herein called the "Dedication Percentage");
WHEREAS, pursuant to the Bankruptcy Order, Seller and Grantee have
entered into that certain Purchase Agreement (herein, as from time to time
amended, restated, supplemented or otherwise modified, called the "Purchase
Agreement"), dated as of March 1, 2000, between Seller and Grantee and TCW Asset
Management Company, as agent on behalf of Fund V and Fund VI (herein called the
"Funds Agent"), whereby Seller has sold the first component of the Production
Payment to Grantee pursuant to the Conveyance, and Grantee has purchased the
same from Seller;
WHEREAS, the Grantee and Buyer have entered into that certain
Production Sales Agreement (as defined in the Purchase Agreement and herein, as
from time to time amended, restated, supplemented or otherwise modified, called
the "Production Sales Agreement"), dated as of March 14, 2000 pursuant to which
Buyer has agreed to purchase, and Grantee has agreed to sell, Grantee's interest
in the Production Payment hydrocarbons; and
WHEREAS, subject to the terms and conditions hereinafter set forth,
Buyer desires to purchase certain quantities of Crude Oil from Seller and Seller
desires to sell such quantities of Crude Oil to Buyer;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants hereinafter set forth, the Parties hereto covenant and agree as
follows:
1. QUANTITY: Seller agrees to sell and Buyer agrees to purchase, subject to the
other provisions of this Agreement, one hundred percent (100%) of the Crude Oil
that Seller owns, controls or has the authority to sell pursuant to the
Conveyance (as such Exhibit may from time to time be amended, restated,
supplemented or otherwise modified) and that is capable of being transported to
Buyer's Purchaser under contracts with Buyer's Transporters (herein called the
"Marketed Volumes"). Seller hereby agrees to sell to Buyer, and Buyer hereby
agrees to purchase from Seller, upon the terms of this Agreement, all of the
Marketed Volumes.
2. QUALITY: The Marketed Volumes delivered shall meet the Quality Specifications
then in effect for such Crude Oil as established by the Buyer's Transporter
and/or Buyer's Purchaser receiving such Marketed Volumes. Quality, quantity and
gravity of Crude Oil delivered hereunder, shall be determined in accordance with
the terms of the relevant Buyer's Sales Contract or Buyer's Transporter's
contract concerning such Marketed Volumes. In the event that such Buyer's Sales
Contract or Buyer's Transporter's contract fails to specify such terms, quality,
quantity and gravity shall be determined in accordance with generally accepted
industry practices in effect at the time and place of delivery to Buyer, or
Buyer's designee, using the latest A.S.T.M. or A.P.I. test methods, with volumes
being corrected to 60 degrees Fahrenheit temperature in accordance with the
latest A.S.T.M. test methods and the latest edition of A.P.I. volume correction
tables, and full deductions being made for all basic sediment and water and
other impurities. In the event Seller tenders or causes to be tendered Crude Oil
not meeting the Quality Specifications, without prejudice to any
2
<PAGE> 4
other remedy, Buyer may (to the extent it is able to do so under its own sales
and transportation agreements) accept delivery subject to a reduction in Net
Price as provided in the definition of such term to compensate Buyer for the
reasonable charges resulting therefrom, otherwise Buyer, or Buyer's designee,
may elect not to accept delivery.
3. DELIVERY LOCATION: Seller shall sell and deliver or cause to be delivered all
Crude Oil to Buyer, or to Buyer's designee, at Seller's Delivery Point. In the
event Seller delivers or causes to be delivered Crude Oil at any other delivery
point, Buyer may (to the extent it is able to do so under its own sales and
transportation agreements) accept delivery subject to a reduction in Net Price
as provided in the definition of such term to compensate Buyer for the
reasonable charges resulting therefrom, otherwise Buyer, or Buyer's designee,
may elect not to accept delivery.
4. TITLE AND RISK OF LOSS: Title to all Crude Oil sold hereunder shall pass to
Buyer at the Seller's Delivery Point for such Crude Oil described in Paragraph 3
of this Agreement. As between the Parties hereto, Buyer shall be deemed in
possession of and solely liable and responsible for said Crude Oil after its
delivery at the Buyer's Delivery Points and Seller shall be deemed in possession
of and solely liable and responsible for said Crude Oil at all times prior to
such delivery. Each Party shall indemnify and defend the other Party for and
save it harmless from, any and all losses, costs, expenses, damages, injuries,
or liabilities caused by the Crude Oil in its possession to the extent not due
to or contributed to by the negligent act or omission of the other Party. In the
event and to the extent Seller discharges in full, in immediately available
funds, any obligation under the indemnity to Buyer pursuant to this Paragraph 4,
Buyer, to the extent it is able to do so under its own transportation,
processing and sales agreements, agrees to assign to Seller any rights of
indemnification running in favor of Buyer under any such agreement; provided,
however, if Buyer is unable to assign such rights to Seller, Buyer shall,
pursuant to written instructions of Seller and agreement by Seller to reimburse
Buyer for any related costs and expenses therewith, diligently pursue any
remedies running in favor of Buyer at the sole cost and expense of Seller. Buyer
agrees to apply any sums so obtained on behalf of Seller pursuant to any of
Buyer's transportation, processing or sales agreements as an addition to the Net
Price, net of any costs and expenses of Buyer not previously reimbursed by
Seller. The provisions of this Paragraph 4 shall survive the termination of this
Agreement.
5. INDEMNITY:
(a) In consideration of the execution and delivery of this Agreement by the
Buyer, the Seller hereby indemnifies, exonerates and holds the Buyer
and each of its respective officers, directors, employees and agents
(herein, collectively, called the "Indemnified Parties") free and
harmless from and against any and all actions, causes of action, suits,
losses, costs, liabilities, damages and expenses (including, without
limitation, reasonable attorney's fees and disbursements) incurred in
connection therewith (irrespective of whether any such Indemnified
Party is a Party to the action for which indemnification hereunder is
sought), excluding any portion of such actions, causes of action,
suits, losses, costs, liabilities, damages and expenses (including,
without limitation, attorney's fees and disbursements)
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<PAGE> 5
resulting from the gross negligence or wilful misconduct of any
Indemnified Party (herein collectively called the "Indemnified
Amounts"), incurred by the Indemnified Parties or any of them as a
result of, or arising out of, or relating to (1) Buyer's Marketing
Agreements or (2) this Agreement. IT IS UNDERSTOOD BY THE PARTIES
HERETO THAT THE INDEMNITIES BY SELLER IN FAVOR OF THE BUYER IN THIS
AGREEMENT SHALL BE APPLICABLE NOTWITHSTANDING THAT ANY INDEMNIFIED
AMOUNT OTHERWISE COVERED BY THIS AGREEMENT ARE ATTRIBUTABLE TO THE
NEGLIGENCE (OTHER THAN GROSS NEGLIGENCE OR WILFUL MISCONDUCT) OF BUYER
(WITHOUT REGARD TO WHETHER SUCH NEGLIGENCE IS SOLE, JOINT, CONCURRENT,
ACTIVE OR PASSIVE), ANY PRE-EXISTING CONDITION OR DEFECT OR ANY FORM
OF STRICT LIABILITY.
(b) In the event that Buyer incurs, owes or is liable for any Indemnified
Amount under Clause (a) above, Seller shall pay such Indemnified Amount
by wire transfer of immediately available funds to Buyer within five
(5) days following Buyer's written demand therefor. In addition to, and
not in limitation of the foregoing, Buyer is hereby authorized at any
time and from time to time, without notice to Seller, to setoff and
apply any and all sums held and any other sums at any time owing to or
for the credit or the account of Seller against any and all sums owing
to Buyer (including, without limitation, reasonable attorney's fees and
disbursements and any Indemnified Amount), together with interest on
such amounts at the Agreed Rate until paid in full, irrespective of
whether or not Buyer will have made any demand under this Agreement.
Buyer agrees promptly to notify Seller after any such setoff and
application. The rights of the Buyer under this Section are in addition
to other rights and remedies (including, without limitation, other
rights of setoff) which Buyer may have. The provisions of Clauses (a)
and (b) of this Paragraph 5 shall survive the termination of this
Agreement.
6. PRICE AND NET PRICE:
(a) The Price per Barrel of Crude Oil on which the Net Price shall be
determined shall be the Price per Barrel of Crude Oil paid to Buyer by
the relevant Buyer's Purchaser for such Crude Oil delivered hereunder
during each applicable calendar Month from each field listed in Exhibit
B hereto.
(b) As described in Paragraph 9 below, Buyer will pay the Net Price to
Seller for all Marketed Volumes delivered to Buyer and subsequently
delivered to the relevant Buyer's Purchaser and accepted and paid for
by such Buyer's Purchaser hereunder.
7. INVOICES AND ACCOUNTING CORRESPONDENCE: Invoices and any other notices
or documentation shall be mailed or telecopied to the following addresses:
4
<PAGE> 6
SELLER: BUYER:
TransTexas Gas Corporation Southern Producer Services, L.P.
1300 North Sam Houston Parkway East 1200 Smith Street
Suite 310 Suite 2890
Houston, TX 77032-2949 Houston, Texas 77251-1188
Attention: Revenue Accounting Attention: Ron Franklin
Telephone No.: (281) 987-8600 Telephone No.: (713) 276-1916
Fax No.: (281) 986-8855 Fax No.: (713) 276-1990
8. DELIVERY PERIOD: Subject to the other terms and provisions hereof, deliveries
hereunder shall commence with respect to production from and after 9:00 A.M. on
March 1, 2000, and shall continue for a primary term equal to the greater of (a)
three (3) years or (b) a period equal to the term of the Production Payment
(herein called the "Delivery Period") and Month to Month thereafter until
terminated by Buyer and Seller upon the giving of written notice to the other
Party of its intention to terminate this Agreement at least thirty (30) Days
prior to the end of the primary term or an extension thereof; provided, however,
Buyer may terminate this Agreement, in full or in part, at any time upon the
giving of thirty (30) days notice of such termination to Seller, which
termination shall be effective as of the first Day of the Month following the
expiration of such thirty (30) Day notice period. Conclusion of the Delivery
Period shall not affect the accrued rights and obligations of the Parties.
9. STATEMENTS AND PAYMENT:
(a) Payment of the Net Price by Buyer to Seller is due no later than two
(2) Business Days following the twenty-fifth (25th) Day of the Month
following the Month of delivery via wire transfer in immediately
available funds to the banks and accounts from time to time specified
by Seller in writing. As of the date hereof, Buyer shall make payment
to Seller as follows:
Bank of New York
48 Wall Street
New York, New York
ABA #021-000-018
For the Account of GMAC Commercial Credit LLC
Acct. #809-0653-114
For further credit to Account #904200
Payment shall be made against the following documents: Seller's invoice
and a copy of Buyer's, or its designee's, carrier's receipt of such
Crude Oil; provided, however, Buyer is hereby authorized at any time
and from time to time, without notice to Seller, to setoff and apply
any and all sums held and any other sums at any time owing to or for
the credit or the account of Seller against any and all sums owing to
Buyer (including, without limitation, reasonable attorney's fees and
disbursements), together with interest on such amounts at the
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<PAGE> 7
Agreed Rate until paid in full, irrespective of whether or not Buyer
will have made any demand under this Agreement. Buyer agrees promptly
to notify Seller after any such setoff and application. The rights of
the Buyer under this Section are in addition to other rights and
remedies (including, without limitation, other rights of setoff) which
Buyer may have. If the payment due date falls on a Saturday, Sunday,
Monday or any Day which is a banking holiday in Houston, Texas, Los
Angeles, California or Atlanta, Georgia, payment will be made on the
following Business Day.
(b) Buyer and Seller shall each have the right to examine, at reasonable
times, and upon five (5) Business Days prior written notice, the books,
records, charts, and electronic data of the other to the extent
reasonably necessary to substantiate the accuracy in all material
respects of any statement, payment, charge or computation made pursuant
to this Agreement. Subsequent to any statement having been paid, if any
overpayment or underpayment in any form whatsoever shall be found,
Seller shall refund the amount of any overpayment received by Seller,
and Buyer shall pay the amount of any underpayment due Seller, within
thirty (30) Days after final determination thereof; provided however,
no retroactive adjustments will be made for any overpayment or
underpayment beyond (i) with respect to overpayments or underpayments
arising under or related to any of Buyer's Marketing Agreements, the
applicable period for retroactive adjustments provided in such Buyer's
Marketing Agreements and (ii) with respect to overpayments or
underpayments arising under or related to this Agreement, a period
twenty-four (24) Months from the date of any such overpayment or
underpayment, as the case may be. The provisions of this Clause (b)
shall survive the termination of this Agreement.
10. FORCE MAJEURE:
(a) In the event either Party is rendered unable, wholly or in part, by
force majeure to carry out its obligations under this Agreement, except
for the obligations to make payments hereunder, it is agreed that the
obligations of the Parties, so far as they are affected by such force
majeure, shall be suspended during the continuance of any inability so
caused, but for no longer period, and such force majeure shall, so far
as economically possible, be remedied with all reasonable dispatch.
Each Party shall give notice and reasonably full particulars of such
force majeure to the other Party, orally as soon as practicable and
followed in writing or by electronic transmission within a reasonable
time after the occurrence of the force majeure relied on.
(b) The term "force majeure", as employed herein, shall mean acts of God;
strikes, lockouts or other industrial disturbances; acts of the public
enemy, wars, blockades, insurrections, civil disturbances and riots,
and epidemics; landslides, lightning, earthquakes, fires, storms,
hurricanes and threats of hurricanes, floods and washouts; arrests,
orders, requests, directives, restraints and requirements of the
government and governmental agencies, either federal or state, civil
and military; any application of governmental conservation or
curtailment rules and regulations; outages (including, without
limitation, planned or
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<PAGE> 8
unplanned shutdowns) or failure of any of Buyer's Transporter, Buyer's
Separator/Stabilizer or Buyer's Purchaser if caused by an event of
force majeure with respect to such party; explosions, breakage or
accident to machinery, equipment or lines of pipe; outages (including,
without limitation, planned or unplanned shutdowns) of equipment,
machinery or lines of pipe for inspection, maintenance or repair;
freezing of wells or lines of pipe; premature, partial or entire
failure of natural gas or crude oil wells, gas or crude oil supply or
depletion of gas or crude oil reserves; any of the foregoing events or
circumstances to the extent such event or circumstance affects Seller's
treating plant, if any or Galveston Bay's Winnie Facility; and other
causes of a similar nature not reasonably within the control of the
Party claiming suspension. It is understood and agreed that the
settlement of strikes or lockouts shall be entirely within the
discretion of the Party having the difficulty, and that the above
reasonable dispatch shall not require the settlement of strikes or
lockouts by acceding to the demand of opposing Party when such course
is inadvisable or inappropriate in the discretion of the Party having
the difficulty. Force majeure shall likewise include (i) in those
instances where either Party hereto is required to obtain servitudes,
right-of-way grants, permits or licenses to enable such Party to
fulfill its obligations hereunder, the inability of such Party to
acquire, or the delays on the part of such Party in acquiring, at
reasonable cost and after the exercise of reasonable diligence, such
servitudes, right-of-way grants, permits or licenses; and (ii) in those
instances where either Party hereto is required to furnish materials
and supplies for the purpose of constructing or maintaining facilities
or is required to secure permits or permissions from any governmental
agency to enable such Party to fulfill its obligations hereunder, the
inability of such Party to acquire or the delays on the part of such
Party in acquiring, at reasonable cost and after the exercise of
reasonable diligence, such materials and supplies, permits and
permissions.
(c) The term "force majeure" specifically excludes the following
occurrences or events: the loss, interruption, or curtailment of
interruptible transportation on any transporter of Buyer necessary to
make or take delivery of crude oil hereunder, unless and to the extent
the same event also curtails firm transportation at the same point; and
loss of markets. Price changes due to market conditions or economics
associated with the purchase and sale of crude oil quantities purchased
and delivered hereunder shall not be considered events of "force
majeure".
11. WARRANTY: Seller hereby warrants good title to the Crude Oil delivered by
Seller to Buyer and the right to sell the same free and clear from all liens
(excluding liens arising under Section 9.319 of the Uniform Commercial Code as
enacted in the State of Texas, as such may be amended from time to time, and any
successor statute of similar import), encumbrances and adverse claims. Seller
further warrants that Crude Oil delivered shall not be contaminated by chemicals
foreign to virgin Crude Oil (except as required for operational purposes, to the
extent, and only to the extent, permitted under any of Buyer's Marketing
Agreements), including, but not limited to, chlorinated and/or oxygenated
hydrocarbons and lead. Seller agrees to pay, or cause to be paid, or deliver in
kind to the parties entitled thereto all royalties, overriding royalties or like
charges, if any, assessed against the Crude Oil or the value thereof. Seller
shall protect, defend, indemnify and hold
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<PAGE> 9
Buyer and Buyer's Purchaser harmless from and against all suits, actions, debts,
accounts, damages, costs, losses and expenses (including attorney's fees)
arising from or out of any adverse claims of any nature, including royalty
claims, of any and all persons to or against the Crude Oil. In the event any
adverse claim of any character whatsoever is asserted in respect to any of the
Crude Oil, Buyer may suspend its obligations to pay for Crude Oil hereunder and
suspend payments up to the amount of such claim without interest until such
claim has been finally determined, as security for the performance of Seller's
obligations with respect to such claim, or until Seller shall have furnished a
bond to Buyer, or Buyer's designee, in an amount and with securities
satisfactory to Buyer, or Buyer's designee. The provisions of this Section 11
shall survive the termination of this Agreement.
12. TAXES: The Price under this agreement includes full reimbursement for, and
the Seller is liable for and shall pay, cause to be paid or reimburse Buyer,
Buyer's Transporter, Buyer's Purchaser and Buyer's Separator/Stabilizer, if such
party has paid, any ad valorem, property, occupation, severance, production,
extraction, first use, first or subsequent purchase, conservation, gathering,
pipeline, utility, gross production, gross receipts, gross income, oil revenue,
oil import, privilege, sales, use, consumption, Btu, energy, excise, lease,
transaction and any other taxes, governmental charges, assessments, licenses,
fees or permits, or increase thereon, other than taxes based on net income or
net worth (herein collectively called "Taxes") applicable to the Crude Oil sold
hereunder imposed, assessed or collected at or prior to Buyer's Delivery Point.
Seller shall indemnify, defend and hold Buyer, Buyer's Purchaser, Buyer's
Separator/Stabilizer and Buyer's Transporter harmless from any liability against
all such Taxes. The Price does not include reimbursement for, and the Buyer is
liable for and shall pay, cause to be paid or reimburse Seller if Seller has
paid, any Taxes applicable to the Crude Oil sold hereunder imposed, assessed or
collected after Buyer's Delivery Point. Buyer shall indemnify, defend and hold
Seller harmless from any liability against all such Taxes. Notwithstanding the
foregoing, Buyer, as first purchaser of the Marketed Volumes, shall withhold
from the Net Price payable to Seller for such Marketed Volumes, such amounts
imposed, assessed or owing in respect of severance or gross production taxes or
taxes of similar import assessed against the Crude Oil or the value thereof
(herein collectively called "Severance Taxes") and Buyer shall pay or cause to
be paid on behalf of Seller such Severance Taxes withheld, to the relevant
governmental authority to whom such Severance Taxes are owing. In the event that
Buyer fails to pay when due such sums as are actually withheld by Buyer on
behalf of Seller in respect of Severance Taxes, Buyer hereby indemnifies,
exonerates and holds the Seller and each of its respective officers, directors,
employees and agents (herein called the "Seller Indemnified Parties") free and
harmless from and against any and all actions, causes of action, suits, losses,
costs, liabilities, damages and expenses incurred therewith, excluding any
portion of such actions, causes of action, suits, losses, costs, liabilities,
damages and expenses resulting from the gross negligence or wilful misconduct of
any Seller Indemnified Party and including reasonable attorney's fees and
disbursements, incurred by the Seller Indemnified Parties or any of them as a
result of Buyer's failure to pay such Severance Taxes when due.
Both Parties shall use reasonable efforts to administer this agreement and
implement the provisions thereof in accordance with their intent to minimize or
reduce Taxes. Upon request, a Party shall provide the other Party a certificate
of exemption or other reasonably satisfactory evidence of
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exemption from any Taxes, and each Party agrees to cooperate with the other
Party in obtaining any such exemption. The provisions of this Section 12 shall
survive the termination of this Agreement; provided, however, the indemnities
running in favor of the Seller Indemnified Parties shall survive the termination
of this Agreement for only three (3) Months.
13. NON-PERFORMANCE:
(a) In the event that either Party (herein called the "Non-Performing
Party") shall (i) make an assignment or any general arrangement for the
benefit of creditors; (ii) file a petition or otherwise commence,
authorize or acquiesce in the commencement of a proceeding or cause
under any bankruptcy or similar law for the protection of creditors or
have such petition filed or proceeding commenced against it; (iii)
otherwise become bankrupt or insolvent; (iv) be unable to pay its debts
as they fall due; (v) fail to make, when due, any payment required
under this Agreement if such failure is not remedied within two (2)
Business Days after written notice of such failure is given by the
Party to whom the payment is owed, provided the payment is not the
subject of a good faith dispute; (vi) fail to perform any covenant set
forth in this Agreement (other than an obligation to make payment or
obligations that are otherwise specifically defined herein as a
separate Default), and such failure is not excused by force majeure or
cured within fifteen (15) Days after written notice thereof by the
Party to whom the covenant is owed (herein, collectively, called a
"Default"), the other Party (herein called the "Performing Party") may
at its option (without waiving any other remedy for breach hereof): (i)
immediately suspend the Performing Party's performance of its
obligations hereunder, (ii) upon three (3) Days' notice in writing to
the Non-Performing Party specifying wherein the Default has occurred,
indicate the Non-Performing Party's election to establish a date on
which this Agreement will terminate (herein called "Early Termination
Date"), and (iii) withhold any payments due hereunder; provided,
however, that upon the occurrence of any Default listed in sub-clauses
(i) - (iv) of this Clause (a) of this Paragraph 13 for any Party, this
Agreement shall automatically terminate, without notice, as if an Early
Termination Date has been immediately declared. The Parties agree that
this contract constitutes a "forward contract" for purposes of Section
556 of the U.S. Bankruptcy Code.
(b) Upon the occurrence of a Designated Event (as defined in the Purchase
Agreement) and the exercise by Grantee, either on its own behalf or
through any agent or representative, of any remedy pursuant to Section
4.6 of the Purchase Agreement or Article V of the Conveyance, Buyer
may, at its option (without waiving any other remedy for breach
hereof), immediately suspend the performance of its obligations
hereunder and withhold any payments due hereunder.
(c) In the case of a Default, notwithstanding the termination of this
Agreement pursuant to Clause (a) of this Paragraph 13, each Party
reserves to itself all rights, setoffs, counterclaims, and other
remedies and/or defenses, consistent with the provision of Paragraph
14, which such Party is or may be entitled to assert arising from or
out of this Agreement, and all
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obligations to make payments hereunder that are outstanding at the time
of such default may be off-set against each other, setoff, or recouped
therefrom.
14. LIABILITIES: NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN,
NEITHER PARTY SHALL BE LIABLE OR OTHERWISE RESPONSIBLE TO THE OTHER PARTY FOR
PUNITIVE, SPECIAL, CONSEQUENTIAL, OR INCIDENTAL DAMAGES OR FOR LOST PROFITS
WHICH ARISE OUT OF OR RELATE TO THIS AGREEMENT OR THE PERFORMANCE OR BREACH
THEREOF.
15. ASSIGNMENT: This Agreement shall inure to and be binding upon the successors
and assigns of the assigning Parties. The rights of either party under this
Agreement may be transferred or assigned in whole or in part, but any such
transfer or assignment shall be expressly made subject to the provisions of this
Agreement; provided, further, that (a) no such transfer or assignment shall be
binding on the other Party until the transferring Party has provided to such
other Party a copy of the fully executed instrument of transfer, (b) any such
assignee shall agree in writing to be bound by the terms and conditions hereof,
(c) in the case of an assignment or transfer by Buyer such transfer or
assignment (i) shall relieve the Buyer of responsibility and liability for any
obligations and liabilities arising under the terms of this Agreement after the
effective date of the transfer and (ii) shall be to (X) a Person, the unsecured
long term debt (or if such Person has no outstanding long term debt, its
corporate rating or if such Person has no corporate rating, the long term debt
of such Person's parent or if such Person's parent has no outstanding long term
debt, its parent's corporate rating) of which is rated at least BBB by Standard
& Poor's or Baa2 by Moody's Investors Service, Inc., (Y) a Person who is a
Buyer's Purchaser, or (Z) such Person as Seller shall consent to, which consent
shall not be unreasonably withheld and (d) in the case of Seller, Seller may not
assign or transfer this Agreement without the prior written consent of Buyer,
which consent shall not be unreasonably withheld; provided however, Buyer hereby
consents to the assignment by Seller of Seller's right to money due or to become
due to GMAC Commercial Credit LLC under that certain Third Amended and Restated
Accounts Receivable Management and Security Agreement, dated on or about March
15, 2000, by and between Seller and GMAC Commercial Credit LLC.
16. CHOICE OF LAW: THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED, ENFORCED
AND PERFORMED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES AGREE THAT THIS AGREEMENT
SHALL BE DEEMED TO HAVE BEEN MADE IN TEXAS. THE PARTIES AGREE THAT THE UNITED
NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 1980 SHALL
NOT APPLY TO, OR GOVERN, THIS AGREEMENT.
17. WAIVER OF JURY TRIAL: SELLER AND BUYER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR
10
<PAGE> 12
WRITTEN) OR ACTIONS OF THE SELLER OR THE BUYER. EACH OF THE SELLER AND THE BUYER
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION
FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR SUCH
PARTY'S ENTERING INTO THE PRODUCTION PAYMENT DOCUMENTS AND THIS AGREEMENT.
18. SUBMISSION TO JURISDICTION:
(a) ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION
WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE BUYER OR THE
SELLER MAY BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE OF
TEXAS OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT
OF TEXAS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST
ANY PROPERTY MAY BE BROUGHT, AT THE BUYER'S OPTION, IN THE COURTS OF
ANY JURISDICTION WHERE SUCH PROPERTY MAY BE FOUND. THE SELLER HEREBY
EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF
THE STATE OF TEXAS AND OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF TEXAS FOR THE PURPOSE OF ANY SUCH LITIGATION AS
SET FORTH ABOVE. THE SELLER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE
WITHIN OR WITHOUT THE STATE OF TEXAS. THE SELLER HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF
VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO
ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT THE SELLER HAS OR HEREAFTER MAY
ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL
PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO
JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, THE SELLER HEREBY IRREVOCABLY WAIVES SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT.
(b) The Parties agree that a final judgment by any court in the
above-designated jurisdiction covered by this Agreement shall be
conclusive and may be enforced in other jurisdictions in any manner
provided by law.
(c) The Parties hereby waive any claim that a judgment obtained in the
above-designated jurisdiction is invalid or unenforceable.
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<PAGE> 13
19. No amendment to any Buyer's Marketing Agreement shall be effective for
purposes of this Agreement unless Seller (a) has consented in writing to such
amendment, which consent shall not be unreasonably withheld or (b) is deemed to
have consented to such amendment pursuant to the terms of this Agreement.
20. This Agreement may be executed in any number of counterparts and by
different parties hereto on separate counterparts, each of which when so
executed and delivered shall be deemed to be an original, but all of which shall
taken together constitute one and the same instrument. Any signature delivered
by a party by facsimile transmission shall be deemed to be an original hereto.
[Signature pages follow]
12
<PAGE> 14
IN WITNESS WHEREOF, Buyer and Seller have executed and delivered this
Agreement as of the date first written above.
BUYER:
-----
SOUTHERN PRODUCER SERVICES, L.P.
By: SC Ashwood Holdings, Inc.,
as its general partner
By:
------------------------------------
Name: David W. Stewart
Title: Vice President
SELLER:
------
TRANSTEXAS GAS CORPORATION
By:
------------------------------------
Name: Ed Donahue
Title: Vice President
ACKNOWLEDGED AND AGREED TO:
GMAC COMMERCIAL CREDIT LLC
By:
----------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.56
NATURAL GAS TREATING AND
CONDENSATE HANDLING AGREEMENT
BETWEEN
GALVESTON BAY PROCESSING CORPORATION,
AS "PROCESSOR"
AND
SOUTHERN PRODUCER SERVICES, L.P.,
AS "OWNER"
March 14, 2000
<PAGE> 2
NATURAL GAS TREATING AND CONDENSATE HANDLING AGREEMENT
THIS NATURAL GAS TREATING AND CONDENSATE HANDLING AGREEMENT (herein
called this "Agreement"), made and entered into as of this 14th day of March,
2000, by and between Galveston Bay Processing Corporation, a Delaware
corporation (herein called "Processor") and Southern Producer Services, L.P.
(herein called "Owner"), a Delaware limited partnership, sets forth the terms
and conditions of the separation, stabilization and handling of liquid
hydrocarbons (herein called "Condensate"), the treating and dehydration of
natural gas (herein called "Gas") for the removal and disposal of CO(2), H(2)S,
water and other impurities (the CO(2), H(2)S, water and other impurities from
such Gas herein, collectively called "By-Products"), to be performed by
Processor at Processor's facility (herein called the "Winnie Facility"), located
at Winnie, Jefferson County, Texas, as more fully described in Exhibit B,
attached hereto and made a part hereof.
WITNESSETH:
WHEREAS, TransTexas Gas Corporation (herein called "TransTexas"), a
Delaware corporation and 100% owner of Processor, and Processor have heretofore
entered into that certain Natural Gas Treating and Condensate handling Agreement
dated as of October 18, 1998, whereby Processor has agreed to separate,
stabilize and handle certain volumes of liquid hydrocarbons of TransTexas and
treat and dehydrate certain volumes of natural Gas of TransTexas;
WHEREAS, TransTexas has heretofore filed for protection under Chapter
11 of the Bankruptcy Code in Case No. 99-21550 in the United States Bankruptcy
Court (herein called the "Court") for the Southern District of Texas (Corpus
Christi Division), entitled "In re: TransTexas Gas Corporation, et. al." (herein
called the "Bankruptcy Case");
WHEREAS, pursuant to the Bankruptcy Case, the Court has issued an order
(herein called the "Bankruptcy Order") granting TransTexas' motion for
permission to (1) sell the Production Payment (as hereinafter defined) and enter
into and deliver to Grantee (as hereinafter defined) the Conveyance (as
hereinafter defined) and other ancillary marketing, transportation and
processing agreements and (2) amend or amend and restate and affirm certain
existing marketing, transportation and processing agreements with third parties
in order to relinquish certain of TransTexas' capacity under such existing
marketing, transportation and processing agreements as is required for Owner to
market, transport and/or process the Production Payment hydrocarbons that Owner
and Fund V (as hereinafter defined) and Fund VI (as hereinafter defined) own or
control and such other volumes of hydrocarbons as Owner shall purchase from
TransTexas or other third parties;
WHEREAS, pursuant to the Bankruptcy Order, TransTexas and Grantee have
entered into that certain Production Payment Conveyance (herein, as from time to
time amended, restated or otherwise modified, called the "Conveyance"), dated as
of March 14, 2000, from and by TransTexas, as grantor, and Owner, TCW Portfolio
No. 15555 DR V Sub-Custody Partnership, L.P. (herein called "Fund V") and TCW DR
VI Investment Partnership, L.P. (herein called "Fund VI") (in such
<PAGE> 3
capacity, Fund VI together with Owner and Fund V, called the "Grantee"), whereby
TransTexas has granted, bargained, sold, conveyed, assigned, transferred, set
over and delivered to Grantee a term overriding royalty interest (herein called
the "Production Payment") in the Subject Interests (as defined in the Conveyance
and herein so called);
WHEREAS, pursuant to the terms of the Conveyance, production from the
Subject Interests shall be dedicated to the Grantee as (1) at fifty percent
(50%) from March 1, 2000 until 9:00 a.m., Central Time, on September 1, 2000,
(2) at sixty-two percent (62%) from 9:00 a.m., Central Time, on September 1,
2000 until 9:00 a.m., Central Time, on March 1, 2001 and (3) seventy percent
(70%) from and after 9:00 a.m., Central Time, on March 14, 2001 until the
Termination Time (herein called the "Dedication Percentage");
WHEREAS, pursuant to the Bankruptcy Order, TransTexas and Grantee have
entered into that certain Purchase Agreement (as defined in the Purchase
Agreement and herein, as from time to time amended, restated, supplemented or
otherwise modified, called the "Purchase Agreement"), dated as of March 14,
2000, between TransTexas and Grantee and TCW Asset Management Company, as agent
on behalf of Fund V and Fund VI (herein called the "Funds Agent"), whereby
TransTexas has sold the first component of the Production Payment to Grantee
pursuant to the Conveyance, and Grantee has purchased the same from TransTexas;
WHEREAS, the Grantee and Owner have entered into that certain
Production Sales Agreement (as defined in the Purchase Agreement and herein, as
from time to time amended, restated, supplemented or otherwise modified, called
the "Production Sales Agreement"), dated as of March 14, 2000, pursuant to which
Owner has agreed to purchase, and Grantee has agreed to sell, Grantee's interest
in the Production Payment hydrocarbons;
WHEREAS, TransTexas and Owner have entered into those certain
TransTexas Marketing Agreements (as defined in the Purchase Agreement and
herein, as from time to time amended, restated supplemented or otherwise
modified, called the "TransTexas Marketing Agreements"), dated as of March 14,
2000, whereby TransTexas has agreed to sell and Owner has agreed to purchase,
those net volumes of hydrocarbons produced from the Subject Interests that
TransTexas owns, controls or has the right to sell and which have not been made
subject to the Production Payment and Conveyance;
WHEREAS, Owner desires Processor to separate, stabilize and handle all
volumes of Condensate, and dehydrate and treat all volumes of Gas, that Owner
owns or controls and delivers to Processor; and
WHEREAS, Processor agrees, subject to the terms of this Agreement, to
accept all volumes of Condensate and Gas which Owner owns or controls and
delivers to Processor at Processor's Winnie Facility and to cause such
Condensate to be separated, stabilized and handled and to dehydrate and treat
such Gas for benefit of Owner;
2
<PAGE> 4
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein set forth, Processor and Owner hereby agree and covenant as follows:
ARTICLE I
DEFINITIONS
1.1 The following terms (whether or not underscored) when used in this
Agreement, including its preamble, recitals, exhibits and schedules
shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
The term "Agreement" is defined in the Preamble.
The term "Agreed Rate" is defined in the Conveyance.
The term "Bankruptcy Case" is defined in the second recital.
The term "Bankruptcy Order" is defined in the third recital.
The term "By-Products" is defined in the preamble.
The term "CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
The term "Condensate" is defined in the preamble.
The term "Conveyance" is defined in the fourth recital.
The term "Court" is defined in the second recital.
The term "Dedication Percentage" is defined in the fifth recital
The term "Eagle Bay Field" is defined in the Purchase Agreement.
The term "Environmental Laws" means all applicable federal, state or
local statutes, laws, ordinances, codes, rules, regulations and
guidelines (including consent decrees and administrative orders)
relating to public health and safety and protection of the environment,
including, without limitation, CERCLA and RCRA.
The term "force majeure" is defined in Section 10.3.
The term "Fund V" is defined in the fourth recital.
The term "Fund VI" is defined in the fourth recital.
3
<PAGE> 5
The term "Funds Agent" is defined in the sixth Recital.
The term "Gas" is defined in the Preamble.
The term "Grantee" is defined in the fourth recital.
The term "Grantor" is defined in the fourth recital.
The term "Hazardous Materials" means (a) any "hazardous substance," as
defined by CERCLA; (b) any "hazardous waste," as defined by the
Resource Conservation and Recovery Act, as amended (herein called
"RCRA"); or (c) any pollutant or contaminant or hazardous, dangerous or
toxic chemical, material or substance within the meaning of any other
applicable federal, state or local law, regulation, ordinance or
requirement (including consent decrees and administrative orders)
relating to or imposing liability or standards of conduct concerning
any hazardous, toxic or dangerous waste, substance or material, all as
amended or hereafter amended.
The term "Indemnified Amounts" is defined in Section 7.2.
The term "Indemnified Party" is defined in Section 7.2.
The term "Owner" is defined in the preamble.
The term "Person" means an individual, corporation, partnership,
limited liability company, association, joint stock company, trust or
trustee thereof, estate or executor thereof, unincorporated
organization or joint venture, court or governmental unit or any agency
or subdivision thereof, or any other legally recognizable entity.
The term "Production Payment" is defined in the fourth recital.
The term "Processor" is defined in the preamble.
The term "Production Sales Agreement" is defined in the seventh
recital.
The term "Purchase Agreement" is defined in sixth recital
The term "RCRA" is defined in the definition of the term "Hazardous
Material".
The term "Subject Interests" is defined in the fourth recital.
The term "Termination Time" is defined in the Conveyance.
The term "TransTexas" is defined in the first recital.
4
<PAGE> 6
The term "TransTexas Marketing Agreements" is defined in the eighth
recital.
The term "TransTexas Party" means TransTexas, each subsidiary of
TransTexas (including, without limitation, Processor) any Person of
which TransTexas is at the time in question a Subsidiary and any other
Subsidiary of any such Person.
The term "Winnie Facility" is defined in the preamble.
1.2 All references herein to any document or instrument refer to the same
as from time to time amended, supplemented, restated or otherwise
modified.
1.3 Unless the context of this Agreement clearly requires otherwise, (a)
pronouns, wherever used herein, and of whatever gender, shall include
natural persons and corporations and associations of every kind and
character, (b) the singular shall include the plural and the plural
shall include the singular wherever and as often as may be appropriate,
(c) the word "includes" or "including" shall mean "including without
limitation", and (d) the words "hereof", "herein", "hereunder", and
similar terms in this Agreement shall refer to this Agreement as a
whole and not any particular section or article in which such words
appear. The section, article and other headings in this Agreement are
for reference purposes and shall not control or affect the construction
of this Agreement or the interpretation hereof in any respect. Article,
section, subsection, schedule and exhibit references are to this
Agreement unless otherwise specified.
ARTICLE II
TREATING AND DEHYDRATION OF GAS,
SEPARATION AND HANDLING OF CONDENSATE
2.1 Owner has entered or will enter into various agreements relating to the
purchase of Gas and Condensate and the transportation, processing
and/or sales of Gas and Condensate that Owner owns, controls or has the
right to sell. Owner has or will have the right under said agreements
to bring such Gas and Condensate into Processor's facility at Winnie,
Texas (herein called the "Winnie Facility") for separation and
stabilization of such Condensate, the dehydration and treatment of such
Gas and for the removal of By-Products therefrom and to accept
redelivery of such dehydrated and treated Gas into the Centana
Intrastate Pipeline Company's ("CIPCO") pipeline connected to the
Winnie Facility (or such other pipeline as Owner may designate from
time to time), and to accept redelivery of such separated and
stabilized Condensate into the Sun Pipeline Company's (herein called
"Sun") pipeline connected to the Winnie Facility (or such other
pipeline as Owner may designate from time to time).
2.2 Processor agrees to receive daily, subject to all the provisions of
this Agreement, all of the Gas and Condensate that Owner may deliver or
cause to be delivered to the Winnie Facility,
5
<PAGE> 7
which Gas and Condensate is produced from the Subject Interests.
Processor shall cause such Condensate to be separated from the
associated Gas and water, stabilized, and stored, if required, on
behalf of Owner, and Processor shall deliver the stabilized Condensate
to Owner, or its designee, at the tailgate of the Winnie Facility at
the interconnection to Sun's pipeline at Meter Stations Number 900, 901
and 902 (or such other pipeline as Owner may designate from time to
time), all subject to Article III hereof. Processor shall also
dehydrate and treat Owner's Gas stream for the removal of water,
hydrogen sulfide and carbon dioxide and deliver such treated Gas to
Owner, or its designee downstream of the tailgate of the Winnie
Facility at the interconnection to CIPCO's pipeline at Meter Stations
Number 77565- 01, 77565-02 and 77567-01 (or such other pipeline as
Owner may designate from time to time), or at other delivery points as
may be mutually agreed to by Processor and Owner from time to time. The
separation, stabilization, dehydration and treatment of said Condensate
and Gas shall be performed by Processor and shall meet the delivery
specifications (including, without limitation, as to chemical
composition, water content, and delivery pressures) set by each of the
pipeline transporters or purchasers currently receiving Owner's volumes
of Gas and Condensate at the tailgate of the Winnie Facility. Processor
shall remove the associated water and By-Products from Owner's
Condensate and Gas and shall dispose of said associated water and
By-Products in accordance with all rules, regulations, and laws as may
be required by any governmental authorities.
2.3 To induce Owner to enter into this Agreement, the Purchase Agreement,
the Conveyance, the TransTexas Marketing Agreements and the Production
Sales Agreement, Processor covenants and agrees that until the
termination of this Agreement, the Purchase Agreement, the Conveyance,
the TransTexas Marketing Agreements and the Production Sales Agreement:
(a) Processor will not cause or permit the Winnie Facility to be
in violation of any Environmental Laws pertaining thereto or
do anything or permit anything to be done which will subject
the Winnie Facility to any remedial obligations under any
Environmental Laws pertaining thereto, and Processor will
promptly notify Owner in writing of any existing, pending or,
threatened investigation or inquiry by any private party or
governmental authority in connection with any Environmental
Laws. Processor will take all steps necessary to determine
that no Hazardous Materials are disposed of or otherwise
released or being released on or to the Winnie Facility in
violation of any Environmental Laws. Processor will not cause
or permit the disposal or other release of any Hazardous
Materials on or to the Winnie Facility in violation of any
Environmental Law and covenants and agrees to remove or
remediate any Hazardous Materials on the Winnie Facility;
(b) Processor will at all times be a corporation validly existing
and in good standing under the laws of its state of
incorporation and duly qualified to do business and in good
standing in the State of Texas;
6
<PAGE> 8
(c) Processor will at all times obtain and possess (or cause to be
obtained and possessed) all material consents, permits,
approvals, authorizations and waivers necessary under any
contract, indenture, instrument or agreement binding on or
affecting Processor or the Winnie Facility or under any
provision of law, rule, regulation, order, writ, judgment,
decree, determination or award binding on or affecting the
Processor, in order to permit the performance by Processor of
this Agreement;
(d) Processor will not, without the prior written consent of the
Owner (which consent shall not be unreasonably withheld),
enter into any agreement selling, transferring or encumbering
the Winnie Facility; provided, however, that any such
agreement shall expressly provide that the parties thereto
agree to be bound by all of the terms of this Agreement;
provided further that nothing herein shall be deemed to
prohibit mortgages, security interests or similar encumbrances
on the real or personal property owned by Processor, nor any
exercise of remedies by the mortgagee or secured party
thereunder so long as any mortgage, security agreement or
similar agreement encumbering the Winnie Facility expressly
provides that the parties thereto (and any purchaser at
foreclosure) agree to be bound by all of the terms of this
Agreement;
(e) Processor will file all tax returns which are required to be
filed by it and will pay or provide for the payment before the
same becomes delinquent all taxes due pursuant to such returns
or pursuant to any assessment received by Processor;
(f) Processor will furnish to Owner, promptly upon receipt and in
any event not later than ten (10) days following such receipt,
any information concerning any actions, suits or proceedings
by or before any court, arbitrator or any governmental
commission, board, bureau or other administrative agency
pending or threatened, against Processor, any subsidiary of
Processor or the Winnie Facility that could reasonably be
expected to have a material adverse effect on Processor,
including, without limitation, any foreclosure proceedings;
(g) Processor will cause the Winnie Facility to be maintained and
continuously operated for the dehydration and treatment of
Gas, the stabilization and separation of Condensate, the
removal of By-Products and the disposal of water in a good and
workmanlike manner and in a manner so as to meet the delivery
specifications (including, without limitation, as to chemical
composition, water content, and delivery pressure) set by each
of the current pipeline transporters or purchasers receiving
Owner's volumes of Gas and Condensate at the tailgate of the
Winnie Facility as would a prudent operator, all in accordance
with generally accepted standards and practices, applicable
agreements and in material compliance with all applicable
federal, state and local laws, rules and regulations
(including, without limitation, all Environmental Laws);
7
<PAGE> 9
(h) Processor will give prompt notice to the Owner of any default,
including, without limitation, any notice of any default
received by the Processor on or subsequent to the date of this
Agreement, under any instrument or agreement relating to the
Winnie Facility to which the Processor is a party or by which
the Processor is bound, which default could reasonably be
expected to have a material adverse effect on Processor; and
(i) Processor will not sell, transfer or encumber or create any
mortgage, pledge, title retention lien, or other lien,
encumbrance or security interest with respect to any of the
Condensate or Gas of Owner.
ARTICLE III
ALLOCATION OF GAS AND CONDENSATE
3.1 Condensate and Gas shall be allocated to Owner, or Owner's designee, on
the same basis as Owner's ownership portion of the total stream flowing
through the Winnie Facility. Condensate measurement by Sun (or Sun's
successor or permitted assign) will be used by Processor for all
Condensate fees provided for under this Agreement. Owner agrees to
accept Sun's Condensate measurement for the appropriate allocation of
its tailgate Condensate volumes. Gas measured by Tejas Ship Channel,
LLC at the applicable meters will be used by Processor for all Gas fees
provided for under this Agreement; however, Owner agrees to accept
CIPCO's (or CIPCO's successor or permitted assign) Gas measurement for
the appropriate allocation of its tailgate Gas volumes. The pro-rata
volume of water produced as a By-Product of the dehydration and
treatment of Owner's portion of the Gas relative to total volume of
water produced as a By-Product of the dehydration and treatment of the
total stream of Gas flowing through the Winnie Facility as measured by
Processor or Processor's agent at the Winnie Facility, will be used for
the application of disposal fees for such water under this Agreement.
3.2 Should conditions exist at any time that in Processor's reasonable and
prudent judgment, exercised in good faith, create a capacity bottleneck
or unsafe operating situation as to pipeline pressure or any other
operating condition at the Winnie Facility, Processor shall have the
option to request that TransTexas (with a copy of such notice
simultaneously delivered to Owner) restrict the production from
TransTexas' wells. TransTexas agrees that it shall immediately comply,
to the fullest extent reasonably possible, with Processor's request and
restrict production until such time that, in Processor's reasonable and
prudent judgment, exercised in good faith, the capacity bottleneck or
unsafe conditions no longer exist. In the event Owner's Gas and
Condensate is restricted due to capacity bottleneck or unsafe pipeline
pressure, Owner will have the right to take and sell its Gas and
Condensate by whatever means Owner deems prudent. If Owner continues to
deliver all or a portion of its Gas and Condensate to Processor's
Winnie Facility while the facility is experiencing a capacity
bottleneck, subject to and as further clarified in the subsequent
sentences in this
8
<PAGE> 10
Section 3.2, Owner will be allocated a pro-rata portion of the capacity
of the facility in the same relationship that Owner's deliverability
bears to the total deliverability of all shippers having the right to
move that production through the Winnie Facility. As of the date
hereof, Schedule 3.2 hereto is a true and correct list of persons
having a right to move production through Processor's Winnie Facility,
which right is based on such persons percentage of ownership or control
of the Eagle Bay Field (as defined in the Purchase Agreement), and the
volumetric allocation of each such person with respect to Gas,
Condensate and produced water. Processor agrees to give priority in
allocating capacity, to the extent permitted by law and applicable
contracts existing prior to March 1, 2000, first to volumes of Gas,
Condensate and water produced from the Subject Interests (as defined in
the Conveyance) and then to volumes of Gas, Condensate and water
produced from wells other than the Subject Interests. Processor further
agrees that any agreement to stabilize, separate, dehydrate or treat
additional volumes of Gas or Condensate at Processor's Winnie Facility
(other than those described on Schedule 3.2 to this Agreement), shall
be of no force and effect unless such agreement is expressly made
subject to the terms of this Section 3.2 concerning the first priority
rights of Owner.
ARTICLE IV
BILLING AND PAYMENT
4.1 On or before the tenth (10th) day of each month, Processor shall tender
to Owner a statement for the actual service rendered (including the
costs of disposal of water produced as a By- Product of dehydration and
treatment of Owner's Gas as referenced in Sec. 5.3 below) during the
preceding month if actual data is available. If actual data is not
available, billing will be on an estimated basis and such estimate will
be adjusted to actual totals on the billing immediately following
receipt of such actual data.
4.2 Owner shall pay Processor by wire transfer, to any banks and accounts
from time to time specified by Seller in writing, no later than the
thirtieth (30th) day of the month following the month in which such
actual services were provided; provided, however, Owner shall not be
required to pay any such invoice earlier than twenty (20) days
following receipt of such invoice, according to instructions on the
invoice.
4.3 Should Owner fail to pay the amount of any bill tendered by Processor
when such amount is due, interest shall accrue thereon until paid, at
the lesser of (i) the then-effective prime rate of interest established
from time to time by Wells Fargo Bank, Houston, Texas, plus five
percent (5%) or (ii) the Agreed Rate, computed on an annualized basis
and compounded monthly, not to exceed the maximum rate of interest
permitted by applicable law.
4.4 In the event of an overbilling error, the amount of such error shall be
adjusted within thirty (30) days after discovery of such error,
provided that the claim of such error was made within two (2) years
from the date such bill was received by Owner.
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<PAGE> 11
4.5 Owner shall have the right to examine during normal business hours, the
books and records of Processor to the extent necessary to verify the
accuracy of any bill tendered for services performed under this
Agreement.
ARTICLE V
RATES FOR SERVICES
5.1 For the Condensate separation, stabilization, storage and distribution
services provided by Processor at its Winnie Facility, Owner shall pay
to Processor a fee of $1.20 per stabilized barrel for Owner's portion
of the Condensate allocation referenced in Articles II and III above
that is actually stabilized, treated and delivered to and accepted by
Owner or Owner's designee.
5.2 For the Gas dehydration and treating performed by Processor at its
Winnie Facility, Owner shall pay Processor a fee of $.175 per Mcf for
Owner's portion of the Gas measured at the applicable meter referenced
in Article III above and actually delivered to and accepted by Owner or
Owner's designee.
5.3 Owner shall pay to Processor a disposal fee of $1.00 per barrel for
Owner's portion of any water produced as a By-Product of the
dehydration and treatment of Owner's Gas and measured and disposed of
by Processor at the Winnie Facility.
ARTICLE VI
TERM
This Agreement shall be effective as of March 1, 2000, and shall remain
in full force and effect for a term equal to the greater of (i) the term of the
Production Payment or (ii) the TransTexas Marketing Agreements.
ARTICLE VII
LIABILITIES AND INDEMNITIES
7.1 Each party shall protect, indemnify and save the other party hereto
harmless from and against all claims, demands and causes of action of
every kind and character for injury to or death of the indemnifying
party's own employees or invitees, and for all damage or loss of
property of indemnifying party's own employees, arising directly or
indirectly out of the performance by the indemnifying party of this
Agreement from any cause, other than injury, death or damage caused by
gross negligence or willful misconduct of the other party. Employees of
contractors or subcontractors of Owner shall be considered invitees of
Owner. Employees of contractors or subcontractors of Processor shall be
considered invitees of Processor.
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<PAGE> 12
Notwithstanding anything herein to the contrary, Owner assumes all risk
and agrees to protect, indemnify and save Processor harmless from and
against all costs, expenses, claims, demands and causes of action for
personal injury, death or property damage, excluding costs, expenses,
claims, demands and causes of action arising directly or indirectly out
of the gross negligence or wilful misconduct of Processor, in
connection with exercise of Owner's rights under Section 10.5.
7.2 In addition to, and without limiting any other rights or remedies which
Owner and each Grantee may have hereunder or under applicable law, the
Processor hereby agrees to indemnify Owner, each Grantee and each of
their respective officers, directors, employees, members, agents and
representative s (herein collectively the "Indemnified Parties" or
individually an "Indemnified Party") and to exonerate, and hold each
Indemnified Party harmless from and against, any and all actions,
causes of action, suits, costs, expenses, damages, losses, claims,
liabilities (including, but not limited to, fines, penalties and
interest) and related costs and expenses (irrespective of whether any
Indemnified Party is a party to the action for which indemnification is
sought), including attorneys' fees and expenses incurred by any
Indemnified Party in enforcing Processor's obligations hereunder (all
of the foregoing being collectively referred to as the "Indemnified
Amounts") awarded against or incurred by any Indemnified Party arising
out of, relating to or as a result of, any one or more of the following
occurring after scheduled deliveries to Processor's Winnie Facility and
prior to redelivery of treated volumes at the tailgate of Processor's
Winnie Facility to Owner or Owner's designee: (i) any Environmental Law
applicable to Processor or any of its properties or the Winnie
Facility, including without limitation, the treatment or disposal of
Hazardous Materials on or at any of the properties owned or operated by
Processor, (ii) the presence, use, release, storage, treatment or
disposal of Hazardous Materials on or at any of the properties owned or
operated by Processor, (iii) any other environmental, health or safety
condition in connection with this Agreement or the Winnie Facility,
(iv) failure to deliver Gas or Condensate which meets the delivery
specifications set by any of Owner's current pipeline transporters or
purchasers receiving volumes at the tailgate of Processor's Winnie
Facility or (v) failure to pay any taxes, governmental charges,
assessments or other costs or expenses applicable to the dehydration
and treatment of Gas and the stabilization and separation of Condensate
delivered by Owner to Processor; provided, however, that (except as
specifically otherwise provided herein) the Processor shall not be
obligated to indemnify any Indemnified Party for any Indemnified Amount
to the extent that a court of competent jurisdiction determines that
such Indemnified Amount resulted from the gross negligence or willful
misconduct of such Indemnified Party; but in no event will this
restrict or limit the obligations undertaken hereunder to the other
Indemnified Parties if such other Indemnified Parties are not jointly,
concurrently or derivatively liable for such gross negligence or
willful misconduct. THE INDEMNITIES BY THE PROCESSOR IN FAVOR OF THE
INDEMNIFIED PARTIES IN THIS SECTION 7.2 SHALL BE APPLICABLE
NOTWITHSTANDING THAT AN INDEMNIFIED AMOUNT OTHERWISE COVERED BY THIS
SECTION 7.2 IS ATTRIBUTABLE TO THE NEGLIGENCE (OTHER THAN GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT) OF AN
11
<PAGE> 13
INDEMNIFIED PARTY (WHETHER SUCH NEGLIGENCE IS SOLE, JOINT, CONCURRENT,
ACTIVE OR PASSIVE), ANY PRE-EXISTING CONDITION OR DEFECT OR ANY FORM OF
STRICT LIABILITY.
If any action or proceeding is brought against any Indemnified Party
with respect to which indemnity may be sought from the Processor
pursuant to this Section 7.2, or any Indemnified Party receives notice
from any potential claimant that such Indemnified Party reasonably
believes will result in the commencement against such Indemnified Party
of any such action or proceeding, such Indemnified Party shall, as
promptly as practicable after receiving notice thereof, give notice to
the Processor of the commencement of such action or proceeding or of
the existence of any such claim (and furnish the Processor with copies
of any summons or other legal process received by such Indemnified
Party and other documents and information in the possession of such
Indemnified Party as to the nature and basis of the claim); provided
that no failure to give or delay in giving such notice or such
documents and information shall relieve the Processor from any of its
indemnification obligations hereunder.
Any amount payable under the indemnification provisions of this Section
7.2 shall be paid by the Processor to Owner for the account of the
appropriate Indemnified Party within thirty (30) days following such
Indemnified Party's demand therefor given in writing to the Processor
with a copy to Owner. The obligations of the Processor to indemnify the
Indemnified Parties pursuant to this Section 7.2 shall survive the
termination of this Agreement.
7.3 Processor agrees with Owner that Gas and Condensate delivered hereunder
by Owner is delivered as is and without any representations or
warranties of any kind. Processor further agrees with Owner that Owner
and each of its respective officers, directors, employees, members,
agents and representatives shall not be liable to any TransTexas Party
for any costs, expenses, damages, losses, claims, liabilities
(including, but not limited to, attorney's fees, fines, penalties and
interest) of any kind arising from or in any way related to (including,
without limitation, failure to deliver Gas or Condensate and delivery
of Gas or Condensate which fails to meet any specification of
Processor) the delivery of or stabilization, dehydration, treatment or
separation of, Owner's Gas or Condensate at Processor's Winnie
Facility.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
8.1 The Processor is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, is duly
qualified to do business and is in good standing under the laws of the
State of Texas and in each other state where its failure to be so
qualified or in good standing would have a material adverse effect on
its ability to perform its obligations hereunder or to make any payment
required hereunder and the Processor has the
12
<PAGE> 14
corporate power to enter into and perform this Agreement and to perform
its obligations hereunder.
8.2 The making and performance by the Processor of this Agreement have been
duly authorized by all necessary corporate action and will not (a)
violate any provision of its certificate of incorporation or by-laws,
or any provision of law applicable to the Processor or by which it or
its property may be bound, (b) result in the breach of or constitute a
default or require any consent (other than any consent previously
obtained) under, or result in the creation of any security interest,
lien, charge or encumbrance upon any property or assets of the
Processor pursuant to any indenture, agreement or instrument to which
the Processor is a party or by which the Processor's property or
business is bound, which breach, default or lack of consent could have
a material adverse effect on the Processor's ability to perform its
obligations hereunder or (c) require any license, consent or approval
of any governmental agency or regulatory authority, other than
licenses, consents and approvals that have previously been obtained.
This Agreement has been duly executed and delivered by the Processor
and constitutes its legal, valid and binding obligation, enforceable in
accordance with its terms, except as such enforceability may be limited
by (a) bankruptcy, insolvency, reorganization, moratorium or similar
laws of general applicability affecting the enforcement of creditor's
rights and (b) the application of general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
8.3 The Owner is a limited partnership duly organized, validly existing and
in good standing under the laws of the State of Delaware, is duly
qualified to do business and is in good standing under the laws of the
State of Texas as a foreign limited partnership and in each other state
where its failure to be so qualified or in good standing would have a
material adverse effect on its ability to perform its obligations
hereunder or to make any payment required hereunder and the Owner has
the partnership power to enter into and perform this Agreement and to
perform its obligations hereunder.
8.4 The making and performance by the Owner of this Agreement have been
duly authorized by all necessary partnership action and will not (a)
violate any provision of its certificate of limited partnership,
partnership agreement, or any other document chartering Owner or
governing its business activities, or any provision of law applicable
to the Owner or by which it or its property may be bound, (b) result in
the breach of or constitute a default or require any consent (other
than any consent previously obtained) under, or result in the creation
of any security interest, lien, charge or encumbrance upon any property
or assets of the Owner pursuant to any indenture, agreement or
instrument to which the Owner is a party or by which the Owner's
property or business is bound, which breach, default or lack of consent
would have a material adverse effect on the Owner's ability to perform
its obligations hereunder or (c) require any license, consent or
approval of any governmental agency or regulatory authority, other than
licenses, consents and approvals that have previously been obtained.
This Agreement has been duly executed and delivered by the Owner and
constitutes its legal, valid and binding obligation, enforceable in
accordance with its terms,
13
<PAGE> 15
except as such enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or similar laws of general
applicability affecting the enforcement of creditor's rights and (b)
the application of general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
8.5 Attached hereto as Exhibit B are true and correct meets and bounds
descriptions for the Winnie Facility.
ARTICLE IX
NOTICES
All notices, requests, statements, or other communications provided for
(other than billing invoices) shall be in writing and shall be deemed to have
been properly served when sent by mail or telecopy to the address of the parties
hereto, which are as follows:
PROCESSOR
All Notices: Galveston Bay Processing Corporation
1300 North Sam Houston Parkway East, Suite 340
Houston, Texas 77032-2949
Attention: Contract Administration
Telephone: (281) 987-8600
Facsimile: (281) 986-8840
OWNER
All Notices: Southern Producer Services, L.P.
1200 Smith Street, Suite 2890
Houston, Texas 77002
Attention: David W. Stewart
Telephone: (713) 276-1902
Facsimile: (713) 276-1990
Either party may change the above address upon written notification to
the other party.
ARTICLE X
MISCELLANEOUS
10.1 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICT OF LAWS.
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<PAGE> 16
10.2 This Agreement shall inure to and be binding upon the successors and
assigns of the assigning Parties. The rights of Owner under this
Agreement may be transferred or assigned in whole or in part, but any
such transfer or assignment shall be expressly made subject to the
provisions of this Agreement; provided, however, that (a) no such
transfer or assignment shall be binding on Processor until the Owner
has provided to Processor a copy of the fully executed instrument of
transfer; (b) any such assignee shall agree in writing to be bound by
the terms and conditions hereof; and (c) such transfer or assignment
shall relieve the Owner of responsibility and liability for any
obligations and liabilities arising under the terms of this Agreement
after the effective date of the transfer.
10.3 The term "force majeure", as employed herein, shall mean acts of God;
strikes, lockouts or other industrial disturbances; acts of the public
enemy, wars, blockades, insurrections, civil disturbances and riots,
and epidemics; landslides, lightning, earthquakes, fires, storms,
hurricanes and threats of hurricanes, floods and washouts; arrests,
orders, requests, directives, restraints and requirements of the
government and governmental agencies, either federal or state, civil
and military; any application of governmental conservation or
curtailment rules and regulations; outages (including, without
limitation, planned or unplanned shutdowns) or failure with respect to
any third party transporting or processing Gas and/or Condensate for
Owner or purchasing Gas and/or Condensate from Owner if caused by an
event of force majeure with respect to such third party; explosions,
breakage or failure of machinery, equipment or lines of pipe; outages
(including, without limitation, planned or unplanned shutdowns) of
equipment, machinery or lines of pipe for inspection, maintenance or
repair; freezing of wells or lines of pipe; premature, partial or
entire failure of natural Gas wells, Gas supply or depletion of Gas
reserves; any of the foregoing events or circumstances to the extent
such event or circumstance affects Processor's treating plant, if any;
and other causes of a similar nature not reasonably within the control
of the party claiming suspension. Force majeure shall likewise include
(a) in those instances where either party hereto is required to obtain
servitudes, right-of-way grants, permits or licenses to enable such
party to fulfill its obligations hereunder, the inability of such party
to acquire, or the delays on the part of such party in acquiring, at
reasonable cost and after the exercise of reasonable diligence, such
servitudes, right-of-way grants, permits or licenses; and (b) in those
instances where either party hereto is required to furnish materials
and supplies for the purpose of constructing or maintaining facilities
or is required to secure permits or permissions from any governmental
agency to enable such party to fulfill its obligations hereunder, the
inability of such party to acquire or the delays on the part of such
party in acquiring, at reasonable cost and after the exercise of
reasonable diligence, such materials and supplies, permits and
permissions.
10.4 It is understood and agreed that the settlement of strikes or lockouts
shall be entirely within the discretion of the party having the
difficulty, and the above-requirement of the use of diligence in
restoring normal operating conditions shall not require the settlement
of strikes or lockouts by acceding to the terms of the opposing party
when such course is inadvisable in the discretion of the party having
the difficulty.
15
<PAGE> 17
10.5 Owner or its designee shall have access to Processor's facilities, upon
at least 24 hours prior notice to Processor when such notice is
practicable, to examine all pertinent equipment utilized in connection
with Processor's operations at its Winnie Facility.
10.6 This Agreement contains the entire agreement between the parties with
respect to the subject matter hereof, and there are no agreements,
modifications, conditions or understandings, oral or written, expressed
or implied, pertaining to the subject matter hereof which are not
contained therein.
10.7 The Parties stipulate and agree that this Agreement shall be deemed and
considered for all purposes as prepared through the joint effort of the
Parties and shall not be construed against one Party or the other as a
result of the preparation, submittal or other event of negotiation,
drafting or execution hereof.
10.8 Modifications of this Agreement shall be or become effective only upon
the due and mutual execution of appropriate supplemental agreements or
amendments hereto by duly authorized representatives of the respective
Parties.
10.9 The headings and subheadings contained in this Agreement are used
solely for convenience and do not constitute a part of the Agreement
between the Parties nor should they be used to aid in any manner in
construing this Agreement.
10.10 ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION
WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF OWNER OR THE
PROCESSOR MAY BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE OF
TEXAS OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT
OF TEXAS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST
ANY PROPERTY MAY BE BROUGHT, AT OWNER'S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE SUCH PROPERTY MAY BE FOUND. THE PROCESSOR HEREBY
EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF
THE STATE OF TEXAS AND OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF TEXAS FOR THE PURPOSE OF ANY SUCH LITIGATION AS
SET FORTH ABOVE. THE PROCESSOR FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL
SERVICE WITHIN OR WITHOUT THE STATE OF TEXAS. THE PROCESSOR HEREBY
EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE
LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN
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<PAGE> 18
INCONVENIENT FORUM. TO THE EXTENT THAT THE PROCESSOR HAS OR HEREAFTER
MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO
JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, THE PROCESSOR HEREBY IRREVOCABLY WAIVES SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT.
10.11 PROCESSOR, OWNER AND EACH INDEMNIFIED PARTY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
OWNER, THE INDEMNIFIED PARTY OR THE PROCESSOR. EACH OF THE PROCESSOR,
THE INDEMNIFIED PARTY AND OWNER ACKNOWLEDGES AND AGREES THAT IT HAS
RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR SUCH PARTY'S ENTERING INTO
THIS AGREEMENT AND THE TRANSTEXAS MARKETING AGREEMENTS.
10.12 This Agreement may be executed in any number of counterparts and by
different parties hereto on separate counterparts, each of which when
so executed and delivered shall be deemed to be an original, but all of
which shall together constitute one and the same instrument. Any
signature delivered by a party by facsimile transmission shall be
deemed to be an original hereto.
10.13 The terms and provisions of this Agreement shall be deemed to be
covenants running with the land and shall be binding upon and inure to
the benefit of the parties and their respective successors and assigns,
including, without limitation, all subsequent owners of all or any
portion of the Winnie Facility.
[Signature pages follow]
17
<PAGE> 19
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the date first written above.
GALVESTON BAY PROCESSING SOUTHERN PRODUCER SERVICES, L.P.
CORPORATION
By: SC Ashwood Holdings, Inc., as
general partner
By: By:
------------------------------- -------------------------------
Name: Name: Dave W. Stewart
Title: Title: Vice President
ACKNOWLEDGED AND AGREED TO:
TRANSTEXAS GAS CORPORATION
By:
-------------------------------
Name: Ed Donahue
Title: Vice President
S-1
<PAGE> 20
STATE OF TEXAS )
)
COUNTY OF _______ )
The foregoing instrument was acknowledged before me on this ____ day of
_____________, 2000, by __________________, the ____________________ of
GALVESTON BAY PROCESSING CORPORATION, a Delaware corporation, on behalf of such
corporation.
Witness my hand and official seal.
-----------------------------------
Notary Public
Residing at _________ County, Texas
My commission expires:
- -----------------------------------
S-2
<PAGE> 21
STATE OF TEXAS )
)
COUNTY OF ________ )
The foregoing instrument was acknowledged before me on this ____ day of
_____________, 2000, by David W. Stewart, the Vice President of SC Ashwood
Holdings, Inc., a Delaware corporation, the general partner of Southern
Producers Services, L.P., on behalf of such corporation.
Witness my hand and official seal.
-----------------------------------
Notary Public
Residing at _________ County, Texas
My commission expires:
- -----------------------------------
S-3
<PAGE> 22
STATE OF TEXAS )
)
COUNTY OF ________ )
The foregoing instrument was acknowledged before me on this ____ day of
_____________, 2000, by Ed Donahue, the Vice President of TransTexas Gas
Corporation, a Delaware corporation, on behalf of such corporation.
Witness my hand and official seal.
-----------------------------------
Notary Public
Residing at _________ County, Texas
My commission expires:
- -----------------------------------
S-4
<PAGE> 1
EXHIBIT 10.57
THIRD AMENDED AND RESTATED
ACCOUNTS RECEIVABLE MANAGEMENT
AND SECURITY AGREEMENT
DATED AS OF MARCH 15, 2000
BY
TRANSTEXAS GAS CORPORATION, AS BORROWER
AND
GMAC COMMERCIAL CREDIT LLC, AS LENDER
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. (A) General Definitions..................................................................................1
(B) Accounting Terms...............................................................................22
(C) UCC Terms......................................................................................22
(D) Other Terms....................................................................................22
2. Conditions; Accounts Receivables Management; Loans......................................................22
3. Repayment...............................................................................................27
4. Procedure for Revolving Credit Advances.................................................................27
5. Interest; Fees; Commissions.............................................................................28
6. Security Interest.......................................................................................31
7. Representations Concerning the Collateral...............................................................32
8. Covenants Concerning the Collateral.....................................................................32
9. Collection and Maintenance of Collateral and Records....................................................34
10. Inspections.............................................................................................34
11. Information.............................................................................................35
12. Additional Representations and Warranties...............................................................36
13. Covenants...............................................................................................38
14. Power of Attorney.......................................................................................45
15. Expenses................................................................................................45
16. Assignment By Lender....................................................................................46
17. Waivers.................................................................................................47
18. Term of Agreement.......................................................................................47
19. Events of Default.......................................................................................48
20. Remedies................................................................................................50
21. Waiver Cumulative Remedies..............................................................................50
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
22. Application of Payments.................................................................................51
23. Depository Accounts.....................................................................................51
24. Lock Box Accounts.......................................................................................51
25. Revival.................................................................................................51
26. Notices.................................................................................................51
27. Governing Law; Consent to Exclusive Jurisdiction and Waiver of Jury Trial...............................52
28. Limitation of Liability.................................................................................53
29. Entire Understanding....................................................................................53
30. Modification............................................................................................54
31. Severability............................................................................................54
32. Captions................................................................................................54
33. Confidentiality.........................................................................................54
34. Guarantee...............................................................................................54
35. Counterparts; Telecopied Signatures.....................................................................58
36. Construction............................................................................................58
</TABLE>
ii
<PAGE> 4
SCHEDULES
Schedule 12(e) - Laws, including environmental laws
Schedule 12(h) - Litigation
Schedule 13(c) - Inventory Locations
Schedule 16 - Consent Required for Assignment
iii
<PAGE> 5
THIRD AMENDED AND RESTATED ACCOUNTS RECEIVABLE
MANAGEMENT AND SECURITY AGREEMENT
This Third Amended and Restated Accounts Receivable Management and
Security Agreement (the "Third Amended Credit Agreement") is made as of March
15, 2000, by and between GMAC COMMERCIAL CREDIT LLC ("Lender"), having offices
at 1290 Avenue of the Americas, New York, New York 10104 and TRANSTEXAS GAS
CORPORATION ("TRANSTEXAS" or "Borrower"), having its principal place of business
at 1300 North Sam Houston Parkway East, Suite 310, Houston, Texas 77032-2949.
WITNESSETH
WHEREAS, Borrower and Lender have heretofore entered into an Accounts
Receivable Management and Security Agreement dated as of October 6, 1994 (the
"Original Credit Agreement"), providing, among other things, for revolving
credit advances to be made and letters of credit to be issued by Lender to, or
for the account of, Borrower on the terms and subject to the conditions therein
set forth;
WHEREAS, the Original Credit Agreement was amended by an Amended and
Restated Accounts Receivable Management and Security Agreement dated as of
October 31, 1995, and by a First Amendment to Amended and Restated Accounts
Receivable Management and Security Agreement dated as of December 13, 1996, by a
Second Amended and Restated Accounts Receivable Management and Security
Agreement dated as of October 14, 1997 and a Post-Petition Amendment No. 1 to
Financing Agreement dated as of April 19, 1999 (collectively the "Amended Credit
Agreement").
WHEREAS, Borrower has requested that Lender amend the Amended Credit
Agreement to reflect the implementation of the Plan of Reorganization of
Borrower;
WHEREAS, Lender is willing to (a) amend the Amended Credit Agreement to
reflect the effectiveness of the Plan of Reorganization of Borrower and (b) to
restate the Amended Credit Agreement as so amended, all on the terms and subject
to the conditions herein set forth.
NOW, THEREFORE, Borrower and Lender agree that the Amended Credit
Agreement is hereby amended and restated, effective as of the Closing Date, to
read in its entirety as follows:
1. (A) General Definitions. When used in this Agreement. the following
terms shall have the following meanings:
"Adjusted Net Assets" of a Guarantor means the lesser of (a) the amount
by which the Guarantor's property, at a fair valuation, exceeds the sum of its
debts (including unliquidated or contingent debts), (b) the amount by which the
present fair salable value of the Guarantor's assets exceeds the amount that
will be required to pay its probable liability on its existing debts as they
become absolute and matured, (c) the amount by which the Guarantor's assets
exceed the maximum amount that would constitute unreasonably small capital for
its business, or (d) the
<PAGE> 6
amount by which the Guarantor's assets exceed the amount that such Guarantor
should reasonably retain to pay its debts (including unliquidated or contingent
debts) as they mature.
"Affiliate" of any Person means (a) any other Person (other than a
Subsidiary or an Unrestricted Subsidiary) which, directly or indirectly, is in
control of, is controlled by, or is under common control with such Person, or
(b) any Person who is a director or officer (i) of such Person, (ii) of any
Subsidiary of such Person or (iii) of any Person described in clause (a) above.
For purposes of this definition, control of a Person shall mean the power,
direct or indirect, (i) to vote 10% or more of the securities having ordinary
voting power for the election of directors of such Person, or (ii) to direct or
cause the direction of the management and policies of such Person whether by
contract or otherwise.
"Alternate Base Rate" means, for any day, a rate per annum equal to the
higher of (i) the Prime Rate in effect on such day and (ii) the Federal Funds
Rate in effect on such day plus 1/2 of 1%.
"Ancillary Agreements" means the Letter of Credit Agreement, any
Guaranty and all other agreements, instruments, and documents including, without
limitation, mortgages, pledges, powers of attorney, consents, assignments,
contracts, security agreements, trust agreements, whether heretofore,
concurrently, or hereafter executed by or on behalf of Borrower or any
Subsidiary or Guarantor and delivered to Lender, relating to this Agreement or
any of such Ancillary Agreements or to the transactions contemplated by this
Agreement.
"Asset Sale" means any direct or indirect conveyance, sale, transfer or
other disposition (including through damage or destruction for which insurance
proceeds are paid or by condemnation), in one or a series of related
transactions, of any of the properties, businesses or assets of Borrower or any
Guarantor; provided, however, that "Asset Sale" shall not include (i) any
disposition of property that is not Collateral, (ii) any disposition of
Collateral in accordance with Section 8(a) hereof, or (iii) any pledge or
disposition of assets to the extent and only to the extent that it results in
the creation of a Permitted Lien.
"Attributable Indebtedness" in respect of a Sale and Leaseback
Transaction means, at the time of determination, the present value (discounted
at the rate of interest implicit in such transaction, determined in accordance
with GAAP or, in the event that such rate of interest is not reasonably
determinable, discounted at the rate of interest of 9%) of the Capitalized Lease
Obligation during the remaining term of the Capital Lease included in such Sale
and Leaseback Transaction (including any period for which such lease has been
extended or may, at the option of the lessor, be extended).
"Availability" means the lesser of (x) the Maximum Loan Amount, or (y)
the Formula Amount, less the total amount, without duplication, of outstanding
(i) Revolving Credit Advances and other amounts charged or chargeable to
Borrower's account hereunder, plus (ii) Letter of Credit Liabilities.
"Bank" means The Bank of New York.
2
<PAGE> 7
"Borrower Entity(ies)" means, individually or collectively, Borrower
and each of its Subsidiaries.
"Business Day" means any day other than a day on which commercial banks
in New York or Texas are authorized or required by law to close.
"Capital Expenditures" of a Person means expenditures (whether paid in
cash or accrued as a liability) by such Person or any of its Subsidiaries that,
in conformity with GAAP, are or would be included in "capital expenditures,"
"additions to property, plant or equipment" or comparable items in the
consolidated financial statements of such Person consistent with prior
accounting practices.
"Capital Lease" as applied to any Person means the lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"Capital Stock" means, with respect to any Person, any capital stock of
such Person and shares, interests, participations or other ownership interests
(however designated), of such Person and any rights (other than debt securities
convertible into corporate stock), warrants or options to purchase any of the
foregoing, including without limitation each class of common stock and preferred
stock of such Person if such Person is a corporation and each general and
limited partnership interest or other equity interest of such Person if such
Person is a partnership.
"Capitalized Lease Obligation" means obligations under a lease that are
required to be capitalized for financial reporting purposes in accordance with
GAAP (including Statement of Financial Accounting Standards No. 13 of the
Financial Accounting Standards Board as in effect on the Closing Date), and the
amount of Indebtedness represented by such obligations shall be the capitalized
amount of such obligations, as determined in accordance with GAAP.
"Cash Equivalents" means (a) Dollars, (b) securities issued or directly
and fully guaranteed or insured by the United States government or any agency or
instrumentality thereof having maturities of not more than one year from the
date of acquisition, (c) certificates of deposit with maturities of one year or
less from the date of acquisition, bankers' acceptances with maturities not
exceeding one year, and overnight bank deposits, in each case, with any Eligible
Institution, (d) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (b) and (c) entered
into with any Eligible Institution, (e) commercial paper rated "P-1," "A-1" or
the equivalent thereof by Moody's Investors Service, Inc. or Standard & Poor's
Ratings Group, respectively, and in each case maturing within one year after the
date of acquisition, (f) shares of money market funds that invest solely in
Dollars and securities of the types described in clauses (a) through (e) above,
(g) demand and time deposits and certificates of deposit with any commercial
bank organized in the United States not meeting the qualifications specified in
clause (c) above or an Eligible Institution, provided, however, that such
deposits and certificates support bonds, letters of credit and other similar
types of obligations incurred in the ordinary course of business, (h) deposits,
including deposits denominated in foreign currency, with any Eligible
Institution; provided, however, that all such deposits do not exceed $10 million
in the aggregate at any one time, and
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<PAGE> 8
(i) demand or fully insured time deposits used in the ordinary course of
business with commercial banks insured by the Federal Deposit Insurance
Corporation.
"Change of Control" means the occurrence of the following event: during
any period of three consecutive years or less beginning at or after 11:59 p.m.,
New York, New York time on the Closing Date, individuals who at the beginning of
such period constituted the Board of Directors of Borrower (together with any
new directors (a) whose election by such Board of Directors during such period
or whose nomination by such Board of Directors, for election by the stockholders
of Borrower during such period, was made or approved by a vote of not less than
60% of the directors of Borrower then still in office who were either directors
at the beginning of such period or whose election or nomination for election
during such period was previously so approved, or (b) in the case of the Class B
Director, elected during such period by the holders of the Class B Common Stock
voting separately as a class in such election) cease for any reason to
constitute a majority of the Board of Directors of Borrower then in office.
"Chapter 11 Proceeding" means that proceeding under Chapter 11, title
11 of the United States Code commenced by the filing of a voluntary petition
thereunder by Borrower in the United States Bankruptcy Court for the District of
Delaware on April 19, 1999, and transferred to the United States Bankruptcy
Court for the Southern District of Texas, Corpus Christi Division.
"Class B Common Stock" means the Class B Common Stock, par value $0.01
per share, of Borrower.
"Class B Director" means the Person elected to the Board of Directors
of Borrower by the holders of the Class B Common Stock voting separately as a
class in such election.
"Closing Date" means March 15, 2000 or such other date as may be agreed
upon by the parties hereto.
"Collateral" means and includes:
(i) all Inventory;
(ii) all Receivables; and
(iii) all products and proceeds of the foregoing (i) and (ii).
"Consolidated Coverage Ratio" means for any period, the ratio of (i)
the sum of Consolidated EBITDA of Borrower for such period, plus the net
proceeds received by Borrower and its consolidated Subsidiaries in respect of
Indebtedness for borrowed money (other than Indebtedness under this Agreement or
the Oil & Gas Credit Facility) incurred during such period, plus, without
duplication, the net proceeds received by Borrower and its consolidated
Subsidiaries from asset sales (other than sales of Inventory and Hydrocarbons in
the ordinary course of business) consummated during such period, to (ii) the sum
of Consolidated Interest Expense of Borrower for such period,
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<PAGE> 9
plus Capital Expenditures of Borrower during such period, plus required
principal payments by Borrower and its consolidated Subsidiaries on Indebtedness
for borrowed money (other than Indebtedness under this Agreement or the Oil &
Gas Credit Facility) during such period, plus cash dividends.
"Consolidated EBITDA" of any Person for any period, unless otherwise
defined herein, means (a) the Consolidated Net Income of such Person for such
period, plus (b) the sum, without duplication (and only to the extent such
amounts are deducted from net revenues in determining such Consolidated Net
Income), of (i) the provision for income taxes for such period, for such Person
and its consolidated Subsidiaries, (ii) depreciation, depletion, and
amortization of such Person and its consolidated Subsidiaries for such period,
and (iii) Consolidated Fixed Charges of such Person for such period, determined
in each case, on a consolidated basis for such Person and its consolidated
Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" on any date (the
"Transaction Date") means, with respect to any Person, the ratio, on a pro forma
basis, of (i) the aggregate amount of Consolidated EBITDA of such Person
(attributable to continuing operations and businesses and exclusive of the
amounts attributable to operations and businesses discontinued or disposed of,
on a pro forma basis as if such operations and businesses were discontinued or
disposed of on the first day of the Reference Period) for the Reference Period
to (ii) the aggregate Consolidated Fixed Charges of such Person (exclusive of
amounts attributable to discontinued operations and businesses on a pro forma
basis as if such operations and businesses were discontinued or disposed of on
the first day of the Reference Period, but only to the extent that the
obligations giving rise to such Consolidated Fixed Charges would no longer be
obligations contributing to such Person's Consolidated Fixed Charges subsequent
to the Transaction Date) during the Reference Period; provided, however, that
for purposes of such computation, in calculating Consolidated EBITDA and
Consolidated Fixed Charges, (a) the transaction giving rise to the need to
calculate the Consolidated Fixed Charge Coverage Ratio shall be assumed to have
occurred on the first day of the Reference Period (b) the incurrence of any
Indebtedness or issuance of Disqualified Capital Stock during the Reference
Period or subsequent thereto and on or prior to the Transaction Date shall be
assumed to have occurred on the first day of such Reference Period, (c)
Consolidated Interest Expense attributable to any Indebtedness (whether existing
or being incurred) bearing a floating interest rate shall be computed as if the
rate in effect on the Transaction Date had been the applicable rate for the
entire period, unless such Person or any of its Subsidiaries is a party to a
Swap Obligation (that remains in effect for the 12-month period after the
Transaction Date) that has the effect of fixing the interest rate on the date of
computation, in which case such rate (whether higher or lower) shall be used,
and (d) if Borrower or any Subsidiary of Borrower has repaid, repurchased,
defeased or otherwise discharged any Indebtedness or Disqualified Capital Stock
since the beginning of the period measured by the four full fiscal quarters
ended immediately before the Transaction Date or if any Indebtedness is to be
repaid, repurchased, defeased or otherwise discharged (in each case other than
Indebtedness incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been replaced) on the
Transaction Date, EBITDA and Consolidated Fixed Charges for such period shall be
calculated on a pro forma basis as if such discharge had occurred on the first
day of such period and as if Borrower or such Subsidiary has not earned the
interest income which has actually accrued during such period in respect of cash
or Cash Equivalents used to repay, repurchase, defease or otherwise discharge
such Indebtedness.
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<PAGE> 10
"Consolidated Fixed Charges" of any Person for any period means
(without duplication) the sum of (i) Consolidated Interest Expense of such
Person for such period, (ii) dividend requirements of such Person and its
Consolidated Subsidiaries (whether in cash or otherwise (except dividends
payable solely in shares of Qualified Capital Stock)) with respect to Preferred
Stock paid, accrued, or scheduled to be paid or accrued during such period, in
each case to the extent attributable to such period and excluding items
eliminated in consolidation, (iii) one-third of the Consolidated Operating Lease
Obligations for such period, and (iv) fees paid, accrued, or scheduled to be
paid or accrued during such period by such Person and its Subsidiaries in
respect of performance bonds or other guarantees of payment. For purposes of
clause (ii) above, dividend requirements shall be increased to an amount
representing the pre-tax earnings that would be required to cover such dividend
requirements; accordingly, the increased amount shall be equal to a fraction,
the numerator of which is such dividend requirements and the denominator of
which is 1 minus the applicable actual combined effective federal, state, local
and foreign income tax rate of such Person and its Subsidiaries (expressed as a
decimal), on a consolidated basis, for the fiscal year immediately preceding the
date of the transaction giving rise to the need to calculate Consolidated Fixed
Charges.
"Consolidated Interest Expense" of any Person means, for any period,
the aggregate interest (without duplication), whether expensed or capitalized,
paid, accrued, or scheduled to be paid or accrued during such period in respect
of all Indebtedness of such Person and its Consolidated Subsidiaries (including
(i) amortization of deferred financing costs and original issue discount and
non-cash interest payments or accruals, (ii) the interest portion of all
deferred payment obligations, calculated in accordance with the effective
interest method, and (iii) all commissions, discounts, other fees, and charges
owed with respect to letters of credit and banker's acceptance financing and
costs associated with Swap Obligations, in each case to the extent attributable
to such period determined on a consolidated basis in accordance with GAAP). For
purposes of this definition, (x) interest on a Capitalized Lease Obligation
shall be deemed to accrue at an interest rate reasonably determined to be the
rate of interest implicit in such Capitalized Lease Obligation in accordance
with GAAP (including Statement of Financial Accounting Standards No. 13 of the
Financial Accounting Standards Board), and (y) Consolidated Interest Expense
attributable to any Indebtedness represented by the guarantee by such Person or
a Subsidiary of such Person other than with respect to Indebtedness of such
Person or a Subsidiary of such Person shall be deemed to be the interest expense
attributable to the item guaranteed.
"Consolidated Net Income" of any Person for any period means the net
income (loss) of such Person and its Consolidated Subsidiaries for such period,
determined in accordance with GAAP, plus asset impairment charges, less (without
duplication) (i) all extraordinary, unusual and nonrecurring gains (but not
losses), (ii) the net income, if positive, of any other Person, other than a
Consolidated Subsidiary, in which such Person or any of its Consolidated
subsidiaries has an interest, except to the extent of the amount of any
dividends or distributions actually paid in cash to such Person or a
Consolidated Subsidiary of such Person during such period, but not in excess of
such Person's pro rata share of such other Person's aggregate net income earned
during
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<PAGE> 11
such period or earned during the immediately preceding period and not
distributed during such period, (iii) the net income, if positive, of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition, and (iv) the net income, if positive, of any Subsidiary of
such Person to the extent that the declaration or payment of dividends or
similar distributions is not at the time permitted by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute,
rule, or governmental regulation applicable to such Subsidiary.
"Consolidated Subsidiary" means, for any Person, each Subsidiary of
such Person (whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should have been) consolidated for
financial statement reporting purposes with the financial statements of such
Person in accordance with GAAP.
"Continuation Notice" means a notice of continuation duly executed by
an authorized officer of Borrower substantially in the form of Exhibit I hereto.
"Contract Rate" means an interest rate per annum equal to the sum of
(i) the Alternate Base Rate plus (ii) one percent (1%); provided, however, the
Contract Rate shall not at any time exceed the Highest Lawful Rate or be less
than 6%.
"Court Order" means the order of the Bankruptcy Court, in form and
substance acceptable to Lender in its sole and absolute discretion, authorizing
Borrower, inter alia, to enter into this financing arrangement with Lender.
"Credit Risk" means the risk of loss resulting solely and exclusively
from a Customer's financial inability to pay at maturity with respect to any
Receivable constituting collateral hereunder.
"Customer" means and includes the account debtor with respect to any
Receivable and/or any party who enters into any contract or other arrangement
with Borrower pursuant to which Borrower is to deliver any personal property or
perform any services.
"Default Rate" means a rate equal to two (2%) percent per annum in
excess of the Contract Rate, or the Overadvance Rate, as the case may be.
"Dispute" means any cause asserted for nonpayment of Receivables,
including, without limitation any alleged defense, counterclaim, offset, dispute
or other claim (real or merely asserted) whether arising from or relating to the
sale of goods or rendition of services or arising from or relating to any other
transaction or occurrence (other than returns, discounts, offsets, claims,
credits and allowances against such Receivables as provided in clause (n) of the
definition of Eligible Receivables).
"Disqualified Capital Stock" means, with respect to any Person, any
Capital Stock of such Person or its Subsidiaries that, by its terms or by the
terms of any security into which it is convertible or exchangeable, is, or upon
the happening of an event or the passage of time would be, required to be
redeemed or repurchased by such Person or its Subsidiaries, including at the
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<PAGE> 12
option of the holder, in whole or in part, or has, or upon the happening of an
event or passage of time would have, a redemption or similar payment due, on or
prior to the maturity date of the Indenture Notes.
"Dollar-Denominated Production Payments" means production payment
obligations recorded as liabilities in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"Drilling Program" means any current or future arrangement between the
Borrower or any Subsidiary of the Borrower and another Person pursuant to which
(i) such Person agrees to drill, complete or perform operations to enhance
recovery from, a well or wells on mineral interests owned by the Borrower or
such Subsidiary and (ii) the Borrower or such Subsidiary agrees to convey or
assign to such person an interest in such well or wells in accordance with
clause (e) of the definition of "Permitted Liens."
"Eligible Institution" means a domestic commercial banking institution
that has combined capital and surplus of not less than $500,000,000, that is
rated "A" (or higher) according to Moody's Investors Service, Inc. or Standard &
Poor's Ratings Group (a division of McGraw Hill, Inc.) at the time as of which
any investment or rollover therein is made.
"Eligible Inventory" means Inventory used in the Borrower's oil and gas
drilling, and production business which Lender, in the exercise of its
reasonable discretion, determines: (a) is subject to the security interest of
Lender and is subject to no other Liens whatsoever (other than Permitted Liens);
(b) is in good condition and meets all standards imposed by any governmental
agency, or any department or division thereof having regulatory authority over
such Inventory, its use or sale including but not limited to the Federal Fair
Labor Standards Act of 1938 as amended, and all rules, regulations and orders
thereunder; (c) is currently either usable or salable in the normal course of
Borrower's oil and gas drilling and production business; (d) is located in a
location listed on Schedule 13(c) attached hereto, as amended from time to time;
and (e) is not determined by Lender, in the exercise of its reasonable
discretion, to be ineligible for any other reason.
"Eligible Receivables" means and includes each Receivable which
conforms to the following criteria: (a) shipment of the merchandise or the
rendition of services has been completed; (b) no return, rejection or
repossession of the merchandise has occurred; (c) merchandise or services shall
not have been rejected or disputed by the Customer and there shall not have been
asserted any Dispute (provided that such Receivable shall be deemed ineligible
only to the extent of such Dispute); (d) continues to be in full conformity with
the representations and warranties made by Borrower to Lender with respect
thereto; (e) Lender is, and continues to be, satisfied in its reasonable
discretion with the credit standing of the Customer in relation to the amount of
credit extended; (f) is or by the 15th day of the following month will be
documented by an invoice in a form approved by Lender and shall not be unpaid
more than 45 days from invoice date with respect to the sale of condensate and
60 days from invoice date with respect to the sale of gas or more than 30 days
from due date with respect to the sale of condensate or gas; (g) less than 25 %
of the unpaid amount of invoices due from such Customer remain unpaid more than
45 days from invoice date with respect to the sale of condensate and 60 days
from
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<PAGE> 13
invoice date with respect to the sale of gas or more than 30 days from due date
with respect to the sale of condensate or gas; (h) is not evidenced by chattel
paper or an instrument of any kind with respect to or in payment of the
Receivable unless such instrument is duly endorsed to and in possession of
Lender or represents a check in payment of a Receivable; (i) if the Customer is
located outside of the United States, the goods which gave rise to such
Receivable were shipped after receipt by Borrower from or on behalf of the
Customer of an irrevocable letter of credit, assigned and delivered to Lender
and confirmed by a financial institution acceptable to Lender and in form and
substance acceptable to Lender in its sole and absolute discretion, payable in
the full amount of the Receivable in United States dollars at a place of payment
located within the United States; (j) such Receivable is not subject to any
Lien, other than Permitted Liens; (k) does not arise out of transactions with
any employee, officer, agent, director or stockholder or any Subsidiary of
Borrower; (l) is payable to Borrower, (m) does not arise out of a bill and hold
sale prior to shipment and, if the Receivable arises out of a sale to any Person
to which Borrower is indebted, the amount of such Indebtedness, and any
anticipated Indebtedness, is deducted in determining the face amount of such
Receivable; (n) is net of any returns, discounts, claims, offsets, credits and
allowances; (o) if the Receivable arises out of contracts between Borrower and
the United States, any state, or any department, agency or instrumentality of
any of them, Borrower has so notified Lender, in writing, prior to the creation
of such Receivable, and, if Lender so requests, there has been compliance with
any governmental notice or approval requirements, including without limitation,
compliance with the Federal Assignment of Claims Act; (p) is a good and valid
account representing an bona fide obligation incurred by the Customer therein
named, for a fixed sum as is or will be set forth in the invoice relating
thereto with respect to an unconditional sale and delivery upon the stated terms
of goods sold by Borrower or work, labor and/or services rendered by Borrower;
(q) if such Receivable at such time is not evidenced by an invoice, Borrower has
a purchase order, confirmation, contract or other written evidence of the
existence of an agreement with the Customer giving rise to such Receivable; (r)
if such Receivable arose from the sale of Hydrocarbons by the Borrower, the
Borrower was the owner of such Hydrocarbons or was contractually entitled to
sell such Hydrocarbons immediately prior to such sale and such Receivable was
invoiced by Borrower and (s) is otherwise satisfactory to Lender as determined
in good faith by Lender in its reasonable discretion.
"Event of Default" means the occurrence of any of the events set forth
in Section 19.
"Federal Funds Rate" means, for any day, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day which is a Business Day, the average of quotations for such day on such
transactions received by The Bank of New York from three Federal funds brokers
of recognized standing selected by The Bank of New York.
"Formula Amount" shall have the meaning set forth in Section 2(c).
"GAAP" means generally accepted accounting principles, practices and
procedures in effect from time to time.
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<PAGE> 14
"GMACCC" means GMAC Commercial Credit LLC.
"Guarantor" means (i) each Material Subsidiary of Borrower joining in
the execution of this Agreement for the purposes of evidencing its Guaranty and
of agreeing to bound by the terms of this Agreement, (ii) each Material
Subsidiary of Borrower that becomes (or is required to become) a Guarantor of
the Obligations of Borrower under this Agreement in accordance with Section 34,
and (iii) each Material Subsidiary of Borrower executing a joinder agreement in
which such Material Subsidiary agrees to become and be a Guarantor of the
obligations of Borrower under this Agreement and to be bound by the terms of
this Agreement.
"Guaranty" means the guaranty of the Obligations made by each Guarantor
in favor of Lender as provided in Section 34 of this Agreement.
"Hazardous Substance" means, without limitation, any flammable
explosives, radon, radioactive materials, friable asbestos, urea formaldehyde
foam insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, hazardous wastes, hazardous or toxic substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, et. seq.), RCRA, or any other
applicable Environmental Law and in the regulations adopted pursuant thereto.
"Hedging Subsidiary" means a Subsidiary of the Borrower which engages
solely in the business of facilitating Hedging Transactions which constitute
Permitted Hedging Transactions.
"Hedging Transaction" means non-speculative transactions in futures,
forwards, swaps or option contracts (including both physical and financial
settlement transactions) engaged in by Borrower or any of its Subsidiaries as
part of its normal business operations as a risk management strategy or hedge
against adverse changes in market conditions in the oil and natural gas
industry.
"Highest Lawful Rate" means, as of a particular date, the maximum
nonusurious interest rate that may under applicable law then be contracted for,
charged or received by the Lender in connection with its Loans.
"Hydrocarbons" means oil, gas, condensate and natural gas liquids.
"Incipient Event of Default" means any act or event which, with the
giving of notice or passage of time or both, would constitute an Event of
Default.
"Indebtedness" means, with respect to any Person, without duplication
(i) all liabilities contingent or otherwise, of such Person (a) for borrowed
money (whether or not the recourse of the lender is to the whole of the assets
of such Person or only to a portion thereof), (b) evidenced by bonds, notes,
debentures, or similar instruments or letters of credit or representing the
balance deferred and unpaid of the purchase price of any property acquired by
such Person or services received by such Person (other than long-term service or
supply contracts which require minimum periodic payments), (c) evidenced by
bankers' acceptances or similar instruments
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<PAGE> 15
issued or accepted by banks or Swap Obligations, (d) for the payment of money
relating to a Capitalized Lease Obligation, and (e) the Attributable
Indebtedness associated with any Sale and Leaseback Transaction; (ii)
reimbursement obligations of such Person with respect to letters of credit;
(iii) all liabilities of others of the kind described in the preceding clause
(i) or (ii) that such Person has guaranteed or that is otherwise its legal
liability (to the extent of such guaranty or other legal liability) other than
for endorsements, with recourse, of negotiable instruments in the ordinary
course of business; (iv) all obligations secured by a Lien (other than Permitted
Liens, except to the extent the obligations secured by such Permitted Liens are
otherwise included in clause (i), (ii) or (iii) of this definition and are
obligations of such Person) to which the property or assets (including, without
limitation, leasehold interests and any other tangible or intangible property
rights) of such Person are subject, regardless of whether the obligations
secured thereby shall have been assumed by or shall otherwise be such Person's
legal liability (but, if such obligations are not assumed by such Person or are
not otherwise such Person's legal liability, the amount of such Indebtedness
shall be deemed to be limited to the fair market value of such property or
assets determined as of the end of the preceding fiscal quarter); and (v) any
and all deferrals, renewals, extensions, refinancings, and refundings (whether
direct or indirect) of, or amendments, modifications, or supplements to, any
liability of the kind described in any of the preceding clauses (i) through (iv)
regardless of whether between or among the same parties; provided, however,
that, notwithstanding the foregoing, "Indebtedness" shall include obligations
related to Drilling Production Payments, whether denominated as
Dollar-Denominated Production Payments or Volumetric Production Payments, but
shall not include Dollar-Denominated Production Payments or Volumetric
Production Payments related to Drilling Programs.
"Indenture" means the Indenture dated as of the date hereof by
Borrower, Galveston Bay Pipeline Company, Galveston Bay Processing Corporation
and Trustee, for $200,000,000 of Senior Secured Notes due 2004, as the same may
be amended, supplemented or modified from time to time.
"Intercreditor Agreement" means the intercreditor agreement dated as of
March, 2000 by and among Lender, Trustee and GMACCC as agent for the lenders
under the Oil & Gas Credit Facility
"Inventory" means and includes, as to any Person, all of such Person's
now owned or hereafter acquired "Inventory" as such term is defined in Article 9
of the Uniform Commercial Code in the State of New York including, without
limitation, all of such person's now owned or hereafter acquired casing, drill
pipe and other supplies accounted for as inventory (whether or not constituting
equipment for purposes of any applicable Uniform Commercial Code) by such Person
on its financial statements (excluding any Hydrocarbons), all proceeds thereof,
and all documents of title, books, records, ledger cards, files, correspondence,
and computer files, tapes, disks and related data processing software that at
any time evidence or contain information relating to the foregoing.
"Inventory Advance Rate" shall have the meaning set forth in the
definition of Inventory Availability.
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<PAGE> 16
"Inventory Availability" means the amount of Revolving Credit Advances
against Eligible Inventory Lender may from time to time in its sole and absolute
discretion during the Term make available to the Borrower up to the lesser of
(a) $1,000,000 or (b) 50% ("Inventory Advance Rate") of the value of the
Eligible Inventory (calculated on the basis of the lower of cost or market, on a
first-in first-out basis).
"Investment" by any Person in or with respect to any other Person means
(a) the acquisition (whether for cash, property, services, securities or
otherwise) of capital stock, bonds, notes, debentures, partnership or other
ownership interests or other securities of such other Person or any agreement to
make any such acquisition; (b) the making by such Person of any deposit with, or
advance, loan or other extension of credit to, such other Person (including the
purchase of property from another Person subject to an understanding or
agreement, contingent or otherwise, to resell such property to such other
Person) and (without duplication) any amount committed to be advanced, lent or
extended to such other Person; (c) the entering into of any guarantee (other
than any Guaranty hereunder) of, or other contingent obligation with respect to,
Indebtedness or other liability of such other Person; (d) the entering into of
any Interest Swap Obligation with such other Person; or (e) the making of any
capital contribution by such Person to such other Person.
"Investment Grade Rating" means, with respect to any Person or an issue
of debt securities or preferred stock, a rating in one of the four highest
letter rating categories (without regard to "+" or "-" or other modifiers) by
any rating agency or if any such rating agency has ceased using such letter
rating categories or the four highest of such letter rating categories are not
considered to represent "investment grade" ratings, then the comparable
"investment grade" ratings (as designated by any such rating agency).
"Letter of Credit" shall have the meaning set forth in Section 2(j).
"Letter of Credit Agreement" shall have the meaning set forth in
Section 2(j).
"Letter of Credit Liabilities" shall mean, at any time, with respect to
any Letter of Credit then in effect, the sum of (i) the undrawn face amount of
such Letter of Credit plus (ii) the aggregate unpaid amount, if any, of all
obligations of the Borrower then due and payable to reimburse the issuing bank
and the Lender in respect of drawings under such Letter of Credit which have not
been reimbursed.
"Letter of Credit Sublimit" shall have the meaning set forth in Section
2(j).
"Lien" means any mortgage, lien, pledge, charge, security interest, or
other encumbrance of any kind, regardless of whether filed, recorded or
otherwise perfected under applicable law (including any conditional sale or
other title retention agreement and any lease deemed to constitute a security
interest and any option or other agreement to give any security interest).
"Loan Year" means each period of 12 consecutive months commencing on
the Closing Date and ending on the day prior to each anniversary thereof.
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<PAGE> 17
"Loans" means the Revolving Credit Advances and all other extensions of
credit hereunder.
"Material Subsidiary" means, at any particular time, any Subsidiary
that, together with its Subsidiaries, was the owner of more than 5% of the
consolidated assets of the Borrower and its Subsidiaries at the end of the most
recent fiscal year of the Borrower, as shown on the consolidated financial
statements of the Borrower and its Subsidiaries for such fiscal year.
"Matured Funds Rate" means the rate of interest per annum equal to the
lesser of (i) the Federal Funds Rate from time to time or (ii) the difference of
the Prime Rate from time to time minus 3%, such Matured Funds Rate to be
adjusted automatically on the effective date of any change in such rates as
determined by Lender.
"Maximum Loan Amount" at any time means $15,000,000.
"Obligations" means and includes all Loans, all advances, debts,
liabilities, obligations, covenants and duties owing by Borrower to Lender (or
any corporation that directly or indirectly controls or is controlled by or is
under common control with Lender) of every kind and description (whether or not
evidenced by any note or other instrument and whether or not for the payment of
money or the performance or non-performance of any act), direct or indirect,
absolute or contingent, due or to become due, contractual or tortious,
liquidated or unliquidated, whether existing by operation of law or otherwise
now existing or hereafter arising, under or as a result of this Agreement and
the Ancillary Agreements including, without limitation, all interest, charges or
any other payments Borrower is required to make by law or otherwise, together
with all reasonable expenses and reasonable attorneys' fees chargeable to
Borrower's account or incurred by Lender in connection with Borrower's account
whether provided for herein or in any Ancillary Agreement and including
obligations due to the lenders in connection with the Oil & Gas Credit Facility
in an amount equal to the O&G Reserve.
"Oil & Gas Credit Facility" means the Oil & Gas Revolving Credit and
Term Loan Agreement dated the date hereof among Lender, the other financial
institutions party thereto, Lender as agent for itself and such other financial
institutions, and Borrower, pursuant to which a $30,000,000 revolving credit
facility and a $22,500,000 term loan facility is made available to Borrower, as
the same may be amended or supplemented from time to time.
"O&G Reserve" shall mean $500,000 on the Closing Date, increased by
$500,000 on the fifteenth day of each month thereafter to a maximum of
$2,500,000 unless, following receipt by Lender of the audited year end financial
statements for the fiscal year ending January 31, 2001, there would be no event
of default in existence under the Oil & Gas Credit Facility or event which, with
the passage of time, or giving of notice, or both, would constitute an event of
default thereunder, in which case the O&G Reserve shall be permanently reduced
to $0.
"Overadvance" means the amount by which the sum of the outstanding
balance of Loans (including the aggregate of the then outstanding Letter of
Credit Liabilities) exceeds the lesser of (x) the Maximum Loan Amount or (y) the
Formula Amount.
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"Overadvance Rate" means a rate equal to one and one-half percent
(1.50%) per annum in excess of the Contract Rate.
"Permitted Hedge Transactions" means non-speculative transactions in
futures, forwards, swaps or option contracts (including both physical and
financial settlement transactions) engaged in by Borrower or any of its
Subsidiaries as part of its normal business operations as a risk-management
strategy or hedge against adverse changes in market conditions in the oil and
natural gas industry; provided, that such transactions do not, on a monthly
basis, relate to more than 90% of the Borrower's average net oil and natural gas
production per month for the most recent 3-month period measured at the time of
incurrence; and provided, further, that, at the time of such transaction (i) the
counterparty to any such transaction is an Eligible Institution or a Person that
has an Investment Grade Rating or has an issue of debt securities or preferred
stock outstanding with an Investment Grade Rating or (ii) such counterparty's
obligation pursuant to such transaction is unconditionally guaranteed in full
by, or secured by a letter of credit issued by, an Eligible Institution or a
Person that has an Investment Grade Rating or has an issue of debt securities or
preferred stock outstanding with an Investment Grade Rating.
"Permitted Investment" means, when used with reference to Borrower and
its Subsidiaries:
(i) trade credit extended to Persons in the ordinary course of
business;
(ii) purchases of Cash Equivalents;
(iii) Investments by Borrower or its wholly owned Subsidiaries in
wholly owned Subsidiaries of Borrower;
(iv) Swap Obligations;
(v) the receipt of Capital Stock in lieu of cash in connection
with the settlement of litigation;
(vi) advances to officers and employees in connection with the
performance of their duties in the ordinary course of business in an amount not
to exceed $500,000 in the aggregate outstanding at any time;
(vii) margin deposits in connection with Permitted Hedging
Transactions;
(viii) Investments and expenditures made in the ordinary course
of business by Borrower and its Subsidiaries, and of a nature that, at the time
of expenditure, is customary in the oil and gas business as a means of actively
exploiting, exploring for, acquiring, developing, processing, gathering,
marketing or transporting oil or gas through agreements, transactions, interests
or arrangements which permit a Person to share risks or costs, comply with
regulatory requirements regarding local ownership or satisfy other objectives
customarily achieved through the conduct of the oil and gas business jointly
with third parties, including, without limitation, (a) ownership interests in
oil and gas properties or gathering systems and (b) Investments and
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<PAGE> 19
expenditures in the form of or pursuant to operating agreements, processing
agreements, farm-in agreements, farm-out agreements, development agreements,
area of mutual interest agreements, unitization agreements, pooling
arrangements, joint bidding agreements, service contracts, joint venture
agreements, partnership agreements (whether general or limited), subscription
agreements, stock purchase agreements and other similar agreements with third
parties; provided, however, that in the case of any joint venture engaged in
processing, gathering, marketing or transporting oil or gas, (1) all Debt of
such joint venture that would not otherwise constitute Debt of one of Borrower
Entities shall be deemed Debt of Borrower in proportion to its direct or
indirect ownership interest in such joint venture, and (2) such joint venture
shall be reasonably anticipated, at the time of Investment, to enhance the value
of the reserves of Borrower Entities or marketability of production from such
reserves;
(ix) the Guaranty and any guaranty by Borrower or any Subsidiary
of Borrower that is permitted under Section 13(d);
(x) deposits permitted by the definition of Permitted Liens or
any extension, renewal, or replacement of any of them,
(xi) an Investment in Capital Stock resulting from an Asset Sale
pursuant to Section 6.2 of the Oil & Gas Credit Facility,
(xii) any Guaranty by Borrower of the obligations of any wholly
owned Subsidiary of Borrower to the extent such obligations so guaranteed (A) do
not constitute Indebtedness unless and only to the extent such Indebtedness is
otherwise permitted under Section 13(d), and (B) except to the extent such
obligations constitute Indebtedness otherwise permitted under Section 13(d),
such obligations are of the type customarily incurred by such wholly owned
Subsidiary in favor of third parties in the ordinary course of conducting its
Related Business, or
(xiii) other Investments, provided, however, that such
Investments do not exceed $1 million in the aggregate at any time.
"Permitted Liens" means:
(a) Liens imposed by Governmental Bodies for taxes, assessments,
or other Charges not yet due or which are being contested in good faith and by
appropriate proceedings, if (1) adequate reserves with respect thereto are
maintained on the books of any of the Borrower Entities in accordance with GAAP
and (2) such Liens other than with respect to Permitted Prior Liens that do not
prime the Liens of Agent on the Collateral;
(b) statutory Liens of landlords, carriers, warehousemen,
mechanics, materialmen, repairmen, mineral interest owners, or other like Liens
arising by operation of law in the ordinary course of business, provided,
however, that (1) the underlying obligations are not overdue for a period of
more than 45 days, or (2) such Liens are being contested in good faith and by
appropriate proceedings and adequate reserves with respect thereto are
maintained on the books of any of Borrower Entities in accordance with GAAP;
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<PAGE> 20
(c) pledges of assets or deposits of cash or Cash Equivalents to
secure (1) the performance of bids, trade contracts (other than borrowed money),
leases, statutory obligations, surety bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of business (or to
secure reimbursement obligations or letters of credit in support of such bonds)
in an aggregate amount not in excess of 5% of the PV10 indicated on Borrower's
most recent Proved Reserve Report (as defined in the Oil & Gas Credit Facility)
at the time such pledges or deposits are made, (2) appeal or supercedeas bonds
(or to secure reimbursement obligations or letters of credit in support of such
bonds) in an amount not to exceed $10 million at any one time outstanding, or
(3) pledges or deposits made in the ordinary course of business in connection
with worker's compensation, unemployment insurance, and other types of social
security legislation, property insurance and liability insurance;
(d) Liens encumbering customary initial deposits and margin
deposits of cash and Cash Equivalents securing Swap Obligations or Permitted
Hedging Transactions and Liens encumbering contract rights under Permitted
Hedging Transactions;
(e) pledges of cash and Cash Equivalents to secure margin
obligations, settlement obligations, reimbursement obligations or letters of
credit in connection with Permitted Hedging Transactions; provided, however,
that, at the time such pledge is made (or, if such pledge secures future
Permitted Hedging Transactions, at the time any such Permitted Hedging
Transaction is entered into), the maximum aggregate exposure under such
Permitted Hedging Transactions does not exceed the greater of (1) $10 million or
(2) 5% of the PV10 indicated on Borrower's then most recent Proved Reserves
Report (as defined in the Oil & Gas Credit Facility);
(f) Liens arising by operation of law in connection with
judgments, only to the extent, for an amount and for a period not resulting in
an Event of Default with respect thereto;
(g) Liens securing (1) Allowed Priority Tax Claims under the
Plan, (2) Allowed Claims in classes 2, 5, 6A or 6B under the Plan, (3) Debt
incurred pursuant to Section 6.3(j) of the Oil & Gas Credit Facility, or (4)
refinancing Indebtedness incurred pursuant to Section 6.3(f) of the Oil & Gas
Credit Facility with respect to Liens described in subsections (1), (2) or (3)
of this clause (g);
(h) Liens granted on Equipment to the extent granted to secure
Indebtedness incurred pursuant to Section 13(d) in a manner satisfactory to
Lender under this Agreement and Agent under the Oil & Gas Credit Facility, as
the case may be;
(i) Liens granted in connection with the Presale of Gas;
(j) Liens created on or Production Payments granted with respect
to undivided interests in, acreage drilled or to be drilled pursuant to Drilling
Programs, on Hydrocarbons produced therefrom and on the proceeds of such
Hydrocarbons to secure or to provide provision for payment of the Borrowed
Obligations under such Drilling Programs,
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<PAGE> 21
provided, however, that (1) the number of wells included in such program
commenced in any fiscal year does not exceed 30 per fiscal year (plus the number
of wells included in programs commenced in prior years but not yet completed),
(2) such obligations are limited to a percentage of production from such wells,
(3) such Liens survive only until the Person to whom such Lien was granted has
received production with a value equal to the costs, expenses and fees related
to property and services provided or paid for by such Person plus an agreed-upon
interest component, and (4) such Liens secure obligations that are nonrecourse
to each of Borrower or its Subsidiaries;
(k) Liens on the assets of any entity existing at the time such
assets are acquired by any of Borrower Entities, whether by merger,
consolidation, purchase of assets or otherwise so long as such Liens (1) are not
created, incurred or assumed in contemplation of such assets being acquired by
any of Borrower Entities and (2) do not extend to any other assets of any of
Borrower or its Subsidiaries;
(l) any extension, renewal, or replacement of Liens created
pursuant to any of clauses (a) through (f), (i) through (k), or (o) and (p) of
this definition, provided, however, that such Liens would have otherwise been
permitted under such clauses, and provided further, that the Liens permitted by
this clause (n) do not secure any additional Indebtedness or encumber any
additional property;
(m) Liens constituting of securing (1) Royalty Payment
Obligations referred to in clause (iii) of the definition of such term and (2)
Drilling Production Payments;
(n) Liens on the assets of any of the Borrower Entities in favor
of another Borrower Entity;
(o) Liens on the proceeds of any property subject to a Permitted
Lien or on deposit accounts containing any such proceeds;
(p) Liens (including extensions and renewals thereof) on real or
personal property, acquired after the Closing Date ("New Property"); provided,
however, that (1) such Lien is created solely for the purpose of securing
Indebtedness incurred to finance the cost (including the cost of improvements or
construction) of New Property subject thereto and such Lien is created prior to
or within six months after the later of the acquisition, the completion of
construction, or the commencement of full operation of such New Property, (2)
the principal amount of the Indebtedness secured by such Lien does not exceed
100% of such cost including costs and fees related to the financing thereof, and
(3) any such Lien shall not extend to or cover any property or assets other than
such item of New Property, any improvements on such New Property and any
throughput, capacity or similar agreements related to the operation of such New
Property;
(q) Liens under this Agreement; and
(r) Liens securing the Oil & Gas Credit Facility.
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<PAGE> 22
"Permitted Prior Liens" means:
(a) Liens imposed by Governmental Bodies for taxes, assessments,
or other Charges consisting of severance taxes not yet due or which are being
contested in good faith and by appropriate proceedings, if adequate reserves
with respect thereto are maintained on the books of any of the Borrower Entities
in accordance with GAAP
(b) statutory Liens of landlords, carriers, warehousemen,
mechanics, materialmen, repairmen, mineral interest owners, or other like Liens
arising by operation of law in the ordinary course of business, provided,
however, that (1) the underlying obligations are not overdue for a period of
more than 45 days, or (2) such Liens are being contested in good faith and by
appropriate proceedings and adequate reserves with respect thereto are
maintained on the books of any of Borrower Entities in accordance with GAAP;
provided, further, that no further action must be taken by the holders of such
liens in order to obtain priority over the liens of Agent or the Collateral;
(c) pledges or deposits of cash or Cash Equivalents to secure (1)
the performance of bids, trade contracts (other than borrowed money), leases,
statutory obligations, surety bonds, performance bonds and other obligations of
a like nature incurred in the ordinary course of business (or to secure
reimbursement obligations or letters of credit in support of such bonds) in an
aggregate amount not in excess of 5% of the PV10 indicated on Borrower's most
recent Proved Reserve Report at the time such pledges or deposits are made, (2)
appeal or supercedeas bonds (or to secure reimbursement obligations or letters
of credit in support of such bonds) in an amount not to exceed $10 million at
any one time outstanding, or (3) pledges or deposits made in the ordinary course
of business in connection with worker's compensation, unemployment insurance,
and other types of social security legislation, property insurance and liability
insurance;
(d) Liens encumbering customary initial deposits and margin
deposits of cash or Cash Equivalents securing Swap Obligations or Permitted
Hedging Transactions and Liens encumbering contract rights under Permitted
Hedging Transactions;
(e) Liens on the assets of any entity existing at the time such
assets are acquired by any of Borrower Entities, whether by merger,
consolidation, purchase of assets or otherwise so long as such Liens (1) are not
created, incurred or assumed in contemplation of such assets being acquired by
any of Borrower Entities and (2) do not extend to any other assets of any of
Borrower or its Subsidiaries;
(f) Liens on the proceeds of any property subject to a Permitted
Prior Lien to the extent the holder of such Lien has done all acts necessary to
maintain its priority claim to such proceeds;
(g) Liens (including extensions and renewals thereof) on
Inventory acquired after the Closing Date ("New Property"); provided, however,
that (1) such Lien is created solely for the purpose of securing Debt incurred
to finance the cost of acquiring the New Property subject thereto and such Lien
is concurrent with the acquisition of such New Property, (2) the
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<PAGE> 23
principal amount of the Debt secured by such Lien does not exceed 100% of such
cost including costs and fees related to the financing thereof, and (3) any such
Lien shall not extend to or cover any property or assets other than such item of
New Property, and (4) the holder of such Lien has done all acts necessary to
maintain its priority claim with respect to such Lien;
(h) Liens with respect to which Agent has released or
subordinated the Lien of the Security Documents in accordance with the terms of
this Agreement;
(i) any extension, renewal, or replacement of Permitted Prior
Liens, provided, however, that such Liens would have otherwise been Permitted
Prior Liens, and provided further, that the Liens described by this clause (i)
do not secure any additional Debt or encumber any additional property and the
holder of such Lien has done all acts necessary to maintain its priority claim
with respect to such Lien.
"Permitted Production Payment Obligations" means Volumetric Production
Payments and Dollar-Denominated Production Payments each as permitted to be made
under the Indenture, and similar burdens on the property of Borrower to the
extent such burdens are limited in recourse to (x) the properties subject to
such interests or agreements, (y) the Hydrocarbons produced from such
properties, and (z) the proceeds of such Hydrocarbons.
"Person" means an individual, partnership, corporation, limited
liability company, trust or unincorporated organization, or a government or
agency or political subdivision thereof.
"Presale of Gas" means any advance payment agreement or other
arrangement pursuant to which Borrower or any Guarantor having received full
payment of the purchase price for a specified quantity of Hydrocarbons prior to
the first scheduled date of delivery, is required to deliver, in one or more
installments subsequent to the date of such agreement or arrangement, such
quantity of Hydrocarbons to the purchaser of such Hydrocarbons pursuant to and
during the term of such agreement or arrangement, provided, however, that the
term "Presale of Gas" shall not include (i) any such agreement or other
arrangement covering deliveries of Hydrocarbons for a period not exceeding three
calendar months and pursuant to which Borrower or such Guarantor has received
full payment of the purchase price within 120 days of the last scheduled date of
delivery, (ii) a transaction to the extent and only to the extent that it
results in the creation of any Permitted Lien under clauses (e) or (h) of the
definition of "Permitted Liens," (iii) Permitted Hedging Transactions or (iv) an
asset sale of Hydrocarbon reserves.
"Prime Rate" means the prime commercial lending rate of the Bank as
publicly announced in New York, New York to be in effect from time to time, such
rate to be adjusted automatically, without notice, on the effective date of any
change in such rate. This rate of interest is determined from time to time and
is neither tied to any external rate of interest or index nor does it
necessarily reflect the lowest rate of interest actually charged to any
particular class or category of customers.
"Qualified Capital Stock" means any Capital Stock of the Borrower that
is not Disqualified Capital Stock.
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"Receivables" means and includes any and all of a Person's now owned or
hereafter acquired "accounts" as such term is defined in Article 9 of the
Uniform Commercial Code in the State of New York, all products and proceeds
thereof, and all books, records, ledger cards, files, correspondence, and
computer files, tapes, disks or software that at anytime evidence or contain
information relating to the foregoing.
"Receivables Advance Rate" shall have the meaning set forth in the
definition of Receivables Availability.
"Receivables Availability" means the sum of (x) 85% of the face amount
of Eligible Receivables arising from the sale of condensate and oil plus (y) 55%
of the face amount of Eligible Receivables arising from the sale of gas provided
that in calculating Receivables Availability there shall be deducted from the
face amount of Eligible Receivables an amount equal to of such reserves as
Lender deems appropriate in its sole and absolute discretion in connection with
any material claim asserted or threatened against Lender or of which Lender
becomes aware due to material facts leading Lender to reasonably believe that an
action or claim may be asserted against Lender arising out of or relating to
this financing arrangement, including but not limited to, amounts which lessors,
royalty holders, working interest holders and other Persons would be entitled to
assert are secured by a UCC 9.319 Lien on the Receivables or proceeds thereof,
whether or not such lessors, royalty holders, working interest holders or
Persons, or any of them, have asserted or claimed any such UCC 9.319 Lien.
"Related Business" means (i) the exploration for, acquisition of,
development of, production, transportation, gathering, marketing and processing
(in connection with natural gas and natural gas liquids only) of, crude oil,
natural gas, condensate, and natural gas liquids; provided, however, that the
Related Business shall not include any refining or distilling of Hydrocarbons
other than processing and fractionating natural gas and natural gas liquids,
(ii) the drilling and energy services business and pipeline services business,
(iii) owning and operating a Hedging Subsidiary, or (iv) owning or operating
facilities designed for separation, dehydration, treatment, stabilization,
processing or storage of Hydrocarbons and related operations.
"Reports" shall have the meaning set forth in Section 15.
"Reserve Report" means a report prepared by independent petroleum
engineers with respect to Hydrocarbon reserves in accordance with guidelines
published by the SEC.
"Revolving Credit Advances" shall have the meaning set forth in Section
2(c).
"Royalty Payment Obligations" means (i) royalties, overriding
royalties, revenue interests, net revenue interests, net profit interests,
reversionary interests and production payments, (ii) the interests of others in
pooling or unitization agreements, production sales contracts and operating
agreements, (iii) Liens arising under, in connection with or related to
farm-out, farm-in, joint operating or area of mutual interest agreements or
other similar or customary arrangements, agreements or interests, and (iv)
similar burdens on the property of the Borrower or any Subsidiary of the
Borrower, each as incurred in the ordinary course of business and to the extent
such burdens are limited in recourse to (x) the properties subject to such
interests or agreements, (y) the Hydrocarbons produced from such properties and
(z) the proceeds of such Hydrocarbons.
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<PAGE> 25
"Sale and Leaseback Transaction" means an arrangement relating to
property owned on the Closing Date or thereafter acquired whereby the Borrower
or a Subsidiary of the Borrower transfers such property to a Person and leases
it back from such Person pursuant to a Capital Lease.
"SEC" means the Securities and Exchange Commission.
"Senior Indebtedness" means, with respect to any Person, any
Indebtedness that is not Subordinated Indebtedness.
"Services Agreement" means that certain Services Agreement of even date
herewith between Borrower and TNGC Holdings Corporation.
"Settlement Date" means one (1) Business Day after the day on which the
applicable Receivable is actually collected by Lender.
"Subordinated Indebtedness" means Indebtedness of Borrower that (i)
requires no payment of principal prior to or on the date on which the Term is
scheduled to end and (ii) is subordinate and junior in right of payment to the
Obligations in the event of a liquidation.
"Subsidiary" with respect to any Person, means (i) a corporation at
least fifty percent of whose Capital Stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by such Person and one or more Subsidiaries of such Person or by
one or more Subsidiaries of such Person, or (ii) a partnership in which such
Person or a subsidiary of such Person is, at the time, a general partner of such
partnership and has more than 50% of the total voting power of partnership
interests entitled (without regard to the occurrence of any contingency) to vote
in the election of managers thereof, or (iii) any other Person (other than a
corporation or partnership) in which such Person, one or more Subsidiaries of
such Person, or such Person and one or more Subsidiaries of such Person,
directly or indirectly, at the date of determination thereof has (x) at least a
fifty percent ownership interest or (y) the power to elect or direct the
election of the directors or other governing body of such Person; provided,
however, that "Subsidiary" shall not include any Unrestricted Subsidiary of such
Person or an entity that would be a "Subsidiary" hereunder only because of an
investment in such entity by Borrower or its Subsidiaries in accordance with
clause (ix) of the definition of "Permitted Investment."
"Swap Obligation" of any Person means any Interest Rate or Currency
Agreement entered into with one or more financial institutions or one or more
futures exchanges in the ordinary course of business and not for purposes of
speculation that is designed to protect such Person against fluctuations in (x)
interest rates with respect to Debt incurred and which shall have a notional
amount no greater than 105% of the principal amount of the Debt being hedged
thereby, or (y) currency exchange rate fluctuations.
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"Term" means the Closing Date through March 14, 2005 subject to
acceleration upon the occurrence of an Event of Default hereunder or other
termination hereunder.
"Trustee" means Firstar Bank, N.A., as the Trustee under the Indenture.
"UCC 9.319 Lien" means any rights created pursuant to Section 9.319 of
the Uniform Commercial Code of the State of Texas or a comparable provision of
the law of any other applicable jurisdiction in favor of a lessor, royalty
owner, working interest owner or other Person.
"Volumetric Production Payments" means production payment obligations
recorded as deferred revenue in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"Voting Stock" means Capital Stock of the Borrower having generally the
right to vote in the election of directors of the Borrower.
"Wholly Owned Subsidiary" means, with respect to any Person, at any
time, a Subsidiary of such Person to the extent (i), all of the Capital Stock of
which (except any director's qualifying shares) is at the time owned directly or
indirectly by such Person or (ii) such Subsidiary is organized in a foreign
(i.e. non-U.S.) jurisdiction and is required by the applicable laws and
regulations of such foreign jurisdiction to be partially owned by the government
of such foreign jurisdiction or individual or corporate citizens of such foreign
jurisdiction in order for such Subsidiary to transact business in such foreign
jurisdiction, provided that the Company, directly or indirectly, owns the
remaining capital stock or ownership interest in such foreign Subsidiary and, by
contract or otherwise, controls the management and business of such Subsidiary
and derives the economic benefits of ownership of such Subsidiary to
substantially the same extent as if such Subsidiary were a wholly owned
Subsidiary as defined in the preceding clause (i).
(B) Accounting Terms. Any accounting terms used in this Agreement which
are not specifically defined shall have the meanings customarily given them in
accordance with GAAP.
(C) UCC Terms. All other terms used in this Agreement and defined in
the Uniform Commercial Code as adopted in the State of New York, shall have the
meaning given therein unless otherwise defined herein.
(D) Other Terms. All other terms not otherwise defined herein shall
have the meaning ascribed thereto in the Oil & Gas Credit Facility. As a matter
of construction, all provisions of the Oil & Gas Credit Facility to which
reference is made herein shall survive termination of Oil & Gas Credit Facility.
2. Conditions; Accounts Receivables Management; Loans.
(a) In addition to the other terms and conditions hereof, the
obligation of the Lender to enter into this Agreement is subject to the
conditions (any of which may be waived, in whole or in part, only by Lender in
writing) that:
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<PAGE> 27
(i) Lender shall have received, in form and substance satisfactory to
Lender and its counsel, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may deem reasonably necessary or
desirable in order to permit, protect and perfect its Liens upon the Collateral
or to effectuate the provisions or purposes of this Agreement and the Ancillary
Agreements, including, without limitation, waivers by landlords and mortgagees
of any Liens by such Persons on the Collateral and agreements permitting Lender
access to the premises to exercise its rights and remedies and otherwise deal
with the Collateral;
(ii) Lender shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Ancillary Agreements, in
form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as an insured or co-insured, as its
interests may appear;
(iii) The Ancillary Agreements and all instruments and documents
hereunder and thereunder shall have been executed and delivered to Lender, in
form and substance satisfactory to Lender;
(iv) Borrower shall have paid to Lender the fees due on the Closing
Date required by this Agreement;
(v) Lender shall have received the following documents, each to be in
form and substance satisfactory to Lender and its counsel:
(A) copies of all filing receipts or acknowledgments issued by
any governmental authority to evidence any filing or recordation
(including, without limitation, filing of UCC-3 financing statement
amendments and UCC-1 financing statements in all appropriate counties
and in all appropriate central filing offices) necessary to perfect
the Liens of Lender in the Collateral and evidence to Lender that such
Liens constitute valid and perfected Liens, having the lien priority
specified in Section 7(a) hereof;
(B) a copy of the Certificate of Incorporation, certificate of
limited partnership, or certificate of formation of limited liability
company, as the case may be, of Borrower and each Guarantor and all
amendments thereto, certified within 15 days before the Closing Date
by the Secretary of State or other appropriate official of its
jurisdiction of incorporation or formation;
(C) a copy of the bylaws, partnership agreement or limited
liability company agreement, as the case may be, of Borrower and each
Guarantor and all amendments thereto, certified as of the Closing Date
by the Secretary or Assistant Secretary of Borrower and such
Guarantor;
(D) good standing certificates for Borrower and each Guarantor
issued within 30 days before the Closing Date by the Secretary of
State or other appropriate official of Borrower's or such Guarantor's
jurisdiction of incorporation or formation and each jurisdiction where
the conduct of Borrower's or such Guarantor's business activities or
the ownership of its properties
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necessitates qualification (other than from those jurisdictions the
failure in which to be in good standing would not reasonably be
expected to have a material adverse effect);
(E) a closing certificate signed by the Chief Financial Officer
of Borrower dated as of the Closing Date, stating that (i) the
representations and warranties set forth in Section 7 hereof are true
and correct on and as of such date, (ii) Borrower and each Guarantor
is on such date in compliance with all the terms and provisions set
forth in this Agreement, and the Ancillary Agreements, and (iii) on
such date no Incipient Event of Default or Event of Default has
occurred or is continuing;
(F) the favorable, written opinion of Gardere & Wynne, LLP,
special counsel to Borrower, regarding Borrower, the Ancillary
Agreements and the transactions contemplated hereby and by the
Ancillary Agreements, in form and substance satisfactory to Lender;
(G) a duly executed letter agreement from Borrower and Guarantors
regarding consent to jurisdiction in form and substance satisfactory
to Lender;
(H) the initial report pursuant to Section 8(h) in form and
substance, and in such detail, as is satisfactory to the Lender;
(I) this Agreement duly executed by Borrower and each Guarantor;
(J) the Oil & Gas Credit Facility shall close effective the
Closing Date;
(K) a duly executed Intercreditor Agreement;
(L) the Bankruptcy Court shall have entered the Confirmation
Order and the Confirmation Order shall have become a Final Order;
(M) A certificate of solvency and financial condition,
substantially in the form of Exhibit III hereto, duly executed by the
chief financial officer of Borrower along with a copy of Pro Forma
Financial Statements and Projections which shall be satisfactory in
all respects to Lender;
(N) Borrower shall have established procedures to ensure Lender
of the payment of distributions due under the Plan of Reorganization
and all ongoing payments due in connection with ongoing operations and
to the holders of royalty interests and with respect to severance
taxes, which procedures shall be satisfactory to Lender in its sole
and absolute discretion;
(O) Lender shall have reviewed all documentation relating to all
debt obligations of the Borrower and each Guarantor, and shall be
satisfied in all respects with such review. Lender shall have received
evidence that the total amount of Production Payment liability does
not exceed $60,000,000; and
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<PAGE> 29
(P) Lender shall have received such other documents, instruments
and agreements as Lender shall reasonably request in connection with
the foregoing matters.
(b) In addition to the other terms and conditions hereof, the
obligation of the Lender to make each Revolving Credit Advance and to assist
Borrower in obtaining Letters of Credit pursuant to this Agreement and the
Ancillary Agreements, including the making of the initial and any future
Revolving Credit Advances and Letters of Credit contemplated hereunder, is
subject to the conditions (any of which may be waived, in whole or in part, by
Lender in writing) that:
(i) All representations and warranties contained herein (except those
contained in Sections 12(e) and 12(h) hereof) and in the Ancillary
Agreements shall be true and correct in all material respects as of the
date made (except representations and warranties that relate solely to an
earlier date and were true and correct on such earlier date);
(ii) Either (x) all representations and warranties contained in
Sections 12(e) and (h) hereof shall be true and correct in all respects as
of the date made or (y) the Borrower shall have notified the Lender in
writing of the occurrence of any and all events, facts or circumstances
which make any such representations and warranties untrue or incorrect and
the Lender shall either (i) have consented in writing with respect thereto,
or (ii) have funded such Revolving Credit Advance pursuant hereto (which
funding shall be deemed to be such consent); and
(iii) No Event of Default shall have occurred and be continuing and no
Incipient Event of Default shall have occurred and be continuing;
(c) Subject to the terms and conditions set forth herein and in the
Ancillary Agreements, Lender shall make revolving credit advances (the
"Revolving Credit Advances") to Borrower from time to time during the Term
which, in the aggregate at any time outstanding together (without duplication)
with the aggregate of then outstanding Letter of Credit Liabilities, will not
exceed the lesser of (x) the Maximum Loan Amount or (y) an amount equal to the
difference of:
(i) Receivables Availability plus Inventory Availability, minus
(ii) such reserves as Lender may in its sole and absolute discretion
deem proper and necessary from time to time, including, without limitation,
the (A) O&G Reserve, (B) a reserve for unpaid mortgage payments due under
that certain Deed of Trust and Security Agreement from Borrower to Barnet
B. Skelton, Jr., Trustee for the benefit of Mallard Bay Drilling, L.L.C. ,
dated March 15, 2000 ("Mallard Bay Mortgage"), which reserve may be imposed
by Agent in its sole and absolute discretion, after the occurrence of a
default under the Mallard Bay Mortgage (whether or not notice from the
trustee under the Mallard Bay Mortgage is received), and (C) a reserve in
such amount as Lender deems necessary to cover fees and expenses payable by
Borrower to Lender under this Agreement and to Lender and the other
financial institutions party to the Oil & Gas Credit Facility.
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The difference of the foregoing (i) minus (ii) shall be referred to as the
"Formula Amount". To the extent Lender receives proceeds of any Receivable which
proceeds are not necessary to maintain outstanding Obligations within the
Formula Amount (after giving effect to the application of such proceeds to the
Formula Amount), Lender agrees to advance such funds to the Borrower.
Notwithstanding the foregoing provisions of this Paragraph, prior to remittance
by Lender to Borrower of any Revolving Credit Advances, Lender shall be entitled
to segregate an amount equal to: (x) the aggregate claims of each alleged O&G
Lienor (as defined in the Court Order) asserting a right to adequate protection
under the O&G Lienor Adequate Protection Provision (as defined by the Court
Order) such claims being herein defined as the "O&G Lienor Claims"; (y) any
severance or other similar tax due in connection with any Receivables received
by Lender. Lender shall release such segregated funds (i) for payment of such
O&G Lienor Claims or tax or (ii) upon demonstration to Lender's sole and
absolute satisfaction that provision for payment for such O&G Lienor Claims has
otherwise been made.
(d) Notwithstanding the limitations set forth above, Lender retains the
right to lend to Borrower from time to time such amounts in excess of such
limitations as Lender may determine in its sole and absolute discretion which
excess amounts shall be payable on demand.
(e) If Borrower does not pay any interest, fees, costs, charges or
commissions to Lender when due in accordance with the terms of this Agreement,
any Ancillary Agreement or under the Oil & Gas Credit Facility, Borrower shall
thereby be deemed to have requested, and Lender is hereby authorized to make and
charge to Borrower's account, a Revolving Credit Advance to Borrower as of such
date in an amount equal to such unpaid interest, fees, costs, charges or
commissions.
(f) Any sums expended by Lender in accordance with the terms of this
Agreement or any Ancillary Agreement or under the Oil & Gas Credit Facility due
to Borrower's or any Subsidiary or Guarantor's failure to perform or comply with
its obligations under this Agreement, or any other Ancillary Agreement or under
the Oil & Gas Credit Facility, as the case may be, including but not limited to
the payment of taxes, insurance premiums or leasehold obligations, shall be
charged to Borrower's account as a Revolving Credit Advance and added to the
Obligations.
(g) Lender will account to Borrower monthly with a statement of all Loans
and other advances, charges and payments made pursuant to this Agreement, and
such account rendered by Lender shall be deemed final, binding and conclusive
unless Lender is notified by Borrower in writing to the contrary within thirty
(30) days of the date each account was rendered specifying the item or items to
which objection is made.
(h) During the Term, Borrower may borrow, prepay and reborrow Revolving
Credit Advances, all in accordance with the terms and conditions hereof.
(i) The aggregate balance, without duplication, of Revolving Credit
Advances plus Letter of Credit Liabilities outstanding at any time shall not
exceed the Maximum Loan Amount. Except as provided in Section 2(d), the
aggregate balance, without duplication, of Revolving Credit Advances plus Letter
of Credit Liabilities outstanding at any time shall not exceed the Formula
Amount. The aggregate balance of Letter of Credit Liabilities outstanding at any
time shall not exceed the Letter of Credit Sublimit.
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<PAGE> 31
(j) In connection herewith, Borrower has entered into a letter with the
Lender dated the Closing Date Re: Letter of Credit Financing Supplement to Third
Amended and Restated Accounts Receivable Management and Security Agreement (the
"Letter of Credit Agreement") pursuant to which Lender agrees to assist the
Borrower in obtaining letters of credit (herein "Letters of Credit") from time
to time. The aggregate Letter of Credit Liabilities in respect of all Letters of
Credit at any time outstanding shall not exceed $3,500,000 (such amount the
"Letter of Credit Sublimit"). No Letter of Credit will have an expiry date of
than 180 days from the date of issuance or an expiry date which is later than
the last day of the Term.
3. Repayment.
(a) Borrower shall be required to (i) make a mandatory prepayment
hereunder at any time that the aggregate outstanding principal balance of the
Loans made by Lender hereunder plus, without duplication, the aggregate of the
then outstanding Letter of Credit Liabilities is in excess of the lesser of the
Maximum Loan Amount or the Formula Amount, in an amount equal to such excess,
and (ii) repay on the expiration of the Term (x) the then aggregate outstanding
principal balance of Revolving Credit Advances made by Lender hereunder together
with accrued and unpaid interest, fees, charges and commissions and (y) all
other amounts owed Lender under this Agreement and the Ancillary Agreements,
including, without limitation, the Letter of Credit Liabilities. Notwithstanding
the foregoing, any amount paid hereunder with respect to unmatured Letter of
Credit Liabilities shall be held by Lender as Collateral. All such amounts shall
be returned to Borrower upon expiration of the relevant Letter of Credit, less
any amounts necessary to satisfy any draws thereunder.
In the event that a Change of Control shall occur, Borrower shall
immediately notify Lender in writing of such Change in Control and unless Lender
shall consent to such Change of Control, the obligation of the Lender to make
Loans under this Agreement shall terminate, and Borrower shall within 20 days of
Borrower's receipt of written notice from the Lender repay the then aggregate
outstanding principal balance of Revolving Credit Advances made by Lender
hereunder together with accrued and unpaid interest, fees, charges and
commissions and all other amounts and obligations owed Lender under this
Agreement (including, without limitation, Section 18(c)) and the Ancillary
Agreements, including, without limitation, the Letter of Credit Liabilities.
Notwithstanding the foregoing, any amount paid hereunder with respect to
unmatured Letter of Credit Liabilities shall be held by Lender as Collateral.
All such amounts shall be returned to Borrower upon expiration of the relevant
Letter of Credit, less any amounts necessary to satisfy any draws thereunder.
In the event of any sale by Borrower, or any sale, transfer or issuance
by any of its Subsidiaries, of any shares of Capital Stock of any Subsidiary to
any Person other than Borrower or a Wholly Owned Subsidiary of Borrower (other
than the sale of director's qualifying shares or shares of foreign Subsidiaries
which after giving effect to the sale of such shares are Wholly Owned
Subsidiaries as provided in clause (ii) of the definition of Wholly Owned
Subsidiary), the Borrower shall pay all overadvances, if any, pursuant to
Section 2(d).
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<PAGE> 32
4. Procedure for Revolving Credit Advances.
The Borrower may by written notice request a borrowing of Revolving
Credit Advances prior to 1:00 P.M. New York time one (1) Business Day prior to
the date on which it requests to incur a Revolving Credit Advance (provided that
such advance may be made on the same Business Day as the request is submitted if
the request is submitted before noon New York time), such request to specify the
amount of the Revolving Credit Advance requested. All Revolving Credit Advances
shall be disbursed from whichever office or other place Lender may designate
from time to time and, together with any and all other Obligations of Borrower
to Lender, shall be charged to Borrower's account on Lender's books. The
proceeds of each Revolving Credit Advance made by the Lender shall be made
available to the Borrower on the day so requested as aforesaid by way of credit
to Borrower's operating account maintained with Lender. Any and all Obligations
due and owing to Lender hereunder may be charged to the Borrower's account.
5. Interest; Fees; Commissions.
(a) Interest.
(i) Except as modified by paragraph 5(a)(iii) below, interest on Loans
shall be payable in arrears on the last day of each month. Interest
payments hereunder may, at Lender's option, be charged by Lender to
Borrower's account. Interest charges shall be computed on the unpaid
balance of the Loans for each day they are outstanding at a rate per annum
equal to the Contract Rate. In the event the aggregate amount, without
duplication, of Revolving Credit Advances plus the aggregate amount of
Letter of Credit Liabilities exceeds the Formula Amount, the average daily
balance of Revolving Credit Advances in that month shall bear interest at
the Overadvance Rate.
(ii) Interest shall be computed on the basis of actual days elapsed
over a 360-day year.
(iii) Upon the occurrence and during the continuance of an Event of
Default, interest shall be payable at the Default Rate.
(iv) Notwithstanding the foregoing, in no event shall interest exceed
the Highest Lawful Rate, and if any provision of this Agreement or any
Ancillary Agreement is in contravention of any law or regulation, such
provision shall be deemed amended to provide for interest at said Highest
Lawful Rate and any excess amount shall either be applied, at Lender's
option, to the outstanding Loans in such order as Lender shall determine or
refunded by Lender to Borrower.
(v) Borrower shall pay principal, interest and all other amounts
payable hereunder, or under any Ancillary Agreement, without any deduction
whatsoever, including, but not limited to, any deduction for any set-off or
counterclaim.
(b) Fees.
(i) Closing Fee. Upon execution of this Agreement by the Borrower and
Lender, Borrower shall pay to Lender a closing fee in an amount equal to
$100,000.
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(ii) Unused Line Fee. In the event the average of the sum of closing
daily unpaid balances of all Revolving Credit Advances hereunder plus,
without duplication, outstanding Letter of Credit Liabilities during any
calendar month is less than the Maximum Loan Amount, Borrower shall pay to
Lender a fee at a rate per annum equal to 1/4 of one percent (0.25%) on the
amount by which the Maximum Loan Amount exceeds such average sum. Such fee
shall be calculated on the basis of a year of 360 days and actual days
elapsed, and shall be charged to Borrower's account on the first day of
each month with respect to the prior month.
(iii) Collateral Monitoring Fee. Upon Lender's performance of any
collateral monitoring - namely any field examination, collateral analysis
or other business analysis, the need for which is to be determined by
Lender and which monitoring is undertaken by Lender or for Lender's
benefit, an amount equal to Lender's standard rates and fees per day, per
person, for each person employed to perform such monitoring (insofar as the
amount billed to Lender by outside examiners) together with all reasonable
costs, disbursements and expenses incurred by the Lender and the persons
performing such collateral monitoring shall be charged to Borrower's
account; provided, however that the maximum amount that the Lender shall
charge for a Collateral Monitoring Fee during any period during which no
Event of Default shall be in existence or during which the results of such
Collateral monitoring are satisfactory in Lender's reasonable judgment for
each contract year, is $60,000, and for any such period during which an
Event of Default shall be in existence or the results of such collateral
monitoring are deemed unsatisfactory in Lender's reasonable judgment, there
is no such maximum amount.
(iv) Letter of Credit Fee. Borrower shall pay Lender a fee each month
at the rate of one quarter of one percent (.25 %) per annum times the total
amount of the undrawn face amount of outstanding Letters of Credit of
Borrower for each day during the prior month. This fee shall be increased
to an overadvance rate of five sixteenths (5/16) of one percent per annum
for each day in any month in which the aggregate amount of Revolving Credit
Advances plus the aggregate amount of Letter of Credit Liabilities exceeds
the Formula Amount or the Letter of Credit Liabilities exceed the Letter of
Credit Sublimit. Upon the occurrence and during the continuance of an Event
of Default, the applicable letter of credit fee for any month within such
period shall be increased by an additional one sixth (1/6) of one percent
per annum.
(c) Increased Costs. In the event that any applicable law, treaty or
governmental regulation, or any change therein or in the interpretation or
application thereof, or compliance by Lender (for purposes of this Section 5(c),
the term "Lender" shall include Lender and any corporation or bank controlling
Lender) with any request or directive (whether or not having the force of law)
from any central bank or other financial, monetary or other authority, shall:
(i) subject Lender to any tax of any kind whatsoever with respect to
this Agreement or any Ancillary Agreement or any Letter of Credit or change
the basis of taxation of payments to Lender of principal, fees, interest or
any other amount payable hereunder or under any Ancillary Agreements
(except for changes in the rate of tax on the overall net income, gross
receipts or franchise taxes of Lender);
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(ii) impose, modify or hold applicable any reserve, special deposit,
assessment or similar requirement against assets held by, or deposits in or
for the account of, advances or loans or letters of credit by, or other
credit extended by, any office of Lender, including (without limitation)
pursuant to Regulation D of the Board of Governors of the Federal Reserve
System; or
(iii) impose on Lender any other condition with respect to this
Agreement or any Ancillary Agreements;
and the result of any of the foregoing is to increase the cost to Lender of
making, renewing or maintaining its Loans or Letters of Credit hereunder by an
amount that Lender deems to be material or to reduce the amount of any payment
(whether of principal, interest or otherwise) in respect of any of the Loans or
Letters of Credit by an amount that Lender deems to be material, then, in any
case Borrower shall promptly pay Lender, upon its demand, such additional amount
as will compensate Lender for such additional cost or such reduction, as the
case may be. Lender shall certify the amount of such additional cost or reduced
amount to Borrower, and such certification shall be presumed correct.
If Lender is owed such additional amounts or amounts at any one time
pursuant to this Section 5(c) in excess of three-fourths of one percent (3/4 of
1%) of the average daily balance of Revolving Credit Advances for the preceding
30 days, then the Borrower shall have the right to terminate this Agreement,
subject to the terms and provisions of Sections 18(d) and (e) of this Agreement;
provided, however, (i) no such termination shall be effective until Borrower has
paid all of the Obligations (except as set forth in clause (ii) below) in
immediately available funds and (ii) Borrower shall not be obligated to pay to
Lender any termination charge described in Section 18(c) of this Agreement.
(d) Capital Adequacy.
(i) In the event that Lender shall have determined that any
applicable law, rule, regulation or guideline regarding capital
adequacy, or any change therein, or any change in the interpretation
or administration thereof by any governmental authority, central bank
or comparable agency charged with the interpretation or administration
thereof, or compliance by Lender (for purposes of this Section 5(d),
the term "Lender" shall include Lender and any corporation or bank
controlling Lender) with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on Lender's capital as a
consequence of its obligations hereunder or under any Letter of Credit
to a level below that which Lender could have achieved but for such
adoption, change or compliance (taking into consideration Lender's
policies with respect to capital adequacy) by an amount deemed by
Lender to be material, then, from time to time, Borrower shall pay
upon demand to Lender such additional amount or amounts as will
compensate Lender for such reduction. In determining such amount or
amounts, Lender may use any reasonable averaging or attribution
methods. The protection of this Section shall be available to Lender
regardless of any possible contention of invalidity or inapplicability
with respect to the applicable law, regulation or condition.
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(ii) A certificate of Lender setting forth such amount or amounts
as shall be necessary to compensate Lender with respect to Section
5(d) hereof when delivered to Borrower shall be presumed correct.
(iii) If Lender is owed such additional amounts or amounts at any
one time pursuant to Section 5(d) hereof in excess of three-fourths of
one percent (3/4 of 1 %) of the average daily balance of Revolving
Credit Advances for the preceding 30 days, then the Borrower shall
have the right to terminate this Agreement, subject to the terms and
provisions of Sections 18(d) and (e) of this Agreement; provided,
however, (i) no such termination shall be effective until Borrower has
paid all of the Obligations (except as set forth in clause (ii) below)
in immediately available funds and (ii) Borrower shall not be
obligated to pay to Lender any termination charge described in Section
18(c) of this Agreement.
(e) Commission. Borrower shall pay to Lender monthly, on the fifteenth
day of each month, a commission at the rate of the greater of $1,500 in the
aggregate or $50 per invoice evidencing any Receivable pledged or assigned
hereunder during the previous month. The procedure manual Lender has delivered
to Borrower describes Lender's current practices and procedures regarding its
accounts receivable management and record keeping services. Lender reserves the
right to vary such practices and procedures from time to time in its sole and
absolute discretion. Lender's liability to Borrower and the Guarantors for any
alleged failure on Lender's part to provide adequate accounts receivable
management and record keeping services shall be expressly limited to a refund of
commissions paid by Borrower during the period of such alleged failure and
Lender shall have no liability of any kind whatsoever for consequential or other
damages of any type or penalties based upon any such alleged failure on Lender's
part.
(f) Interest on Borrower's Account. On the last day of each month
during the Term, Lender shall credit Borrower's account with interest at the
Matured Funds Rate in effect during such month on the average daily balance
during such month of any amounts payable by Lender to Borrower hereunder which
are not drawn by Borrower on the Settlement Date.
(g) Time Limit. Notwithstanding anything to the contrary in Sections
5(c) or (d), Borrower shall not be required to reimburse or pay any costs or
expenses to Lender under such sections which have accrued more than 120 days
prior to Lender's giving notice to Borrower that Lender has suffered or incurred
such costs or expenses; provided, however, if such costs and expenses accrued
more than 120 days prior to Lender's giving of such notice because Lender did
not have knowledge of the events or circumstances that gave rise to such costs
and expenses and Lender provides Borrower with such notice within 60 days after
obtaining knowledge of such events or circumstances, then the foregoing time
limit shall not apply with respect to such costs and expenses.
6. Security Interest.
(a) Borrower, to secure the prompt payment to Lender of the Obligations
and of any debt, liability or obligation owing from Borrower to others which
Lender may have obtained by assignment or otherwise, hereby assigns, pledges and
grants to Lender a continuing security interest in and Lien on its Collateral,
whether now owned or existing or hereafter acquired or
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arising and wheresoever located (whether or not the same is subject to Article 9
of the Uniform Commercial Code). Each confirmatory assignment schedule or other
form of assignment hereafter executed by Borrower shall be deemed to include the
foregoing grant, whether or not the same appears therein.
(b) To the extent permitted by applicable law, Lender may file one or
more financing statements disclosing Lender's security interest in the
Collateral without Borrower's signature appearing thereon or Lender may sign on
Borrower's behalf as provided in Section 14 hereof. The parties agree that a
carbon, photographic or other reproduction of this Agreement shall be sufficient
as a financing statement. If any Receivable in excess of $250,000 or any
Eligible Receivable becomes evidenced by a promissory note or any other
instrument for the payment of money, Borrower will immediately deliver such
instrument to Lender, appropriately endorsed.
7. Representations Concerning the Collateral. Borrower represents and
warrants (each of which such representations and warranties shall be deemed
repeated upon the making of each request for a Revolving Credit Advance and made
as of the time of each and every Revolving Credit Advance hereunder):
(a) (i) all the Collateral is owned by Borrower free and clear of all
Liens except (A) those in Lender's favor and (B) Permitted Liens and (ii) none
of the Collateral is subject to any enforceable agreement prohibiting or
restricting the granting of a security interest to the Lender or requiring
notice of or consent to the granting of a security interest;
(b) all Receivables for Hydrocarbon sales (i) represent complete bona
fide transactions which, with the exception of delivery of invoices, require no
further act under any circumstances on Borrower's part to make such Receivables
payable by Customers, (ii) to the best of Borrower's knowledge, except as
disclosed to Lender, are not subject to any present or contingent Disputes and
(iii) do not represent bill and hold sales, consignment sales, guaranteed sales,
sale or return or other similar understandings or obligations of any Affiliate
or Guarantor.
8. Covenants Concerning the Collateral. During the Term, Borrower
covenants that it shall:
(a) not dispose of any of its Collateral whether by sale, lease or
otherwise except for the sale of Inventory in the ordinary course of business;
(b) not encumber, mortgage, pledge, assign or grant a Lien on any of
its Collateral except Permitted Liens;
(c) place notations upon Borrower's books of account and any annual
audited consolidated financial statement of Borrower and its Subsidiaries
prepared by Borrower to disclose Lender's security interest in the Collateral;
(d) defend the Collateral against the claims and demands of all
Persons;
(e) not extend the payment terms of any (i) Eligible Receivable or (ii)
other Receivable in excess of $250,000 in the aggregate for all such other
Receivables more than 30 Business Days, without prompt notice thereof to Lender;
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(f) perform all other steps reasonably requested by Lender to create
and maintain in Lender's favor a valid perfected first security interest in all
Collateral;
(g) promptly provide Lender with duplicate originals of all credits
which it issues to its Customers and immediately notify Lender of any Disputes.
Each of Borrower shall bear the cost of resolving all Disputes at no cost or
expense to Lender. Should Lender so elect, upon the occurrence and during the
continuation of any Event of Default, Lender may at any time in its discretion
(i) withdraw Borrower's authority to issue credits to its Customers without
Lender's prior written consent or (ii) litigate Disputes or settle them directly
with Customers on terms acceptable to Lender;
(h) supply Lender each Business Day a report through the close of
business the immediately preceding Business Day concerning the Collateral in
form and substance satisfactory to Lender which report will contain, among other
items (i) a listing of all additional Receivables created since the date of the
previous report delivered pursuant to this Section 8(h), and setting forth the
amount of such additional Receivables, the Customers of such Receivables,
identified by Receivable, the volume of natural gas shipped to such Customers to
create such Receivables, (ii) a listing of all invoices, by date, Customer and
amount, issued since the date of the previous report delivered pursuant to this
Section 8(h), together with a reconciliation in reasonable detail of any
differences between invoices issued and Receivables created as described in the
preceding clause (i), (iii) a computation in reasonable detail of the Formula
Amount as of the close of business the immediately preceding Business Day, (iv)
a listing as of the close of business of the immediately preceding Business Day
of the Inventory located at the locations specified in Schedule 13(c), (v) a
listing in reasonable detail as of the close of business of the immediately
preceding Business Day setting forth the amount of obligations of Borrower
secured by a UCC 9.319 Lien, whether or not the Person entitled to such Lien has
asserted or claimed such Lien, including, without limitation, a listing broken
down by month incurred of an (a) obligations of Borrower to royalty interest
owners, (b) obligations of Borrower to any other Hydrocarbon interest owners,
(c) the payment of severance taxes on taxable wells and (d) a calculation in
reasonable detail showing the percentage of production from the Borrower's
wells, which would be entitled to the benefits of a UCC 9.319 Lien (provided
that notwithstanding the foregoing, prior to the occurrence and continuation of
an Event of Default, unless otherwise requested by Lender, Borrower shall only
be obligated to deliver a report containing the information described in the
foregoing clause (iv) and in this clause (v) monthly, within two Business Days
after the 15th of the month) and (vi) such other information as Lender may
reasonably request concerning the Collateral; and
(i) deliver to Lender, monthly, on or before the fifteenth day of each
month, a report, showing in detail all obligations of Borrower created during
any previous month which remain unpaid as of the date of such report and which
are secured by a UCC 9.319 Lien, whether or not the Person entitled to such Lien
has asserted or claimed such Lien.
(j) immediately notify Lender if Borrower shall drill and complete or
acquire any oil or gas well, of any interest therein, located other than in
Wayne, Warren and Issaquena Counties County, Mississippi, Billings, Dunn or
Starks Counties, North Dakota, Lee County, Florida or Austin, Brazoria, Calhoun,
Chambers, Galveston, Hidalgo, Jim Hogg, Kent, Live Oak, Starr, Val Verde,
Wharton or Zapata Counties, Texas which notice will specify the location of such
well or
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wells and shall contain such information as needed to enable Lender to perfect
its security interest in Receivables generated by production from such well or
wells.
9. Collection and Maintenance of Collateral and Records. Lender may at
any time verify Borrower's Receivables utilizing an audit control company or any
other agent of Lender provided that prior to an Event of Default, Lender shall
do so only at reasonable intervals. Lender or Lender's designee may notify
Customers, at any time at Lender's sole discretion, of Lender's security
interest in Receivables, collect them directly and charge the collection costs
and expenses to Borrower's account, but, unless and until Lender does so or
gives Borrower other instructions, Borrower shall instruct all of their
Customers to make payments on account of Receivables to an account under
Lender's dominion and control at such bank as Lender may designate, as provided
by the terms of Section 24. To the extent Borrower receives any payments on
account of Receivables, it shall hold such payments for Lender's benefit in
trust as Lender's trustee and immediately deliver them to Lender in their
original form with all necessary endorsements or, as directed by Lender, deposit
such payments as directed by Lender pursuant to Section 23 hereof. Lender will
credit (conditional upon final collection) all payments to the Borrower's
account on the Settlement Date; provided that if the amount credited to
Borrower's account as of the close of business on the Business Day immediately
preceding such Settlement Date is in excess of an amount equal to the sum of (i)
the total Obligations outstanding (after giving effect to any requests for
Revolving Credit Advances or Letters of Credit to be made or issued on such
Settlement Date), plus (ii) all unpaid liabilities owing to lessors, royalty
holders, working interest holders, the State of Texas and other Persons who
would be entitled to assert a UCC 9-319 Lien on the proceeds of Borrower's
previously collected Receivables on such Settlement Date, then the Lender, if
requested by the Borrower, will make such excess available to the Borrower on
such Settlement Date or the next Business Day following such Settlement Date.
Promptly after the creation of any Receivables by Borrower, Borrower shall
provide Lender with schedules describing all Receivables created or acquired by
Borrower and shall execute and deliver confirmatory written assignments of such
Receivables to Lender, but Borrower's failure to execute and deliver such
schedules or written confirmatory assignments of such Receivables shall not
affect or limit Lender's security interest or other rights in and to the
Receivables. Borrower shall furnish, at Lender's request, copies of contracts,
invoices or the equivalent, and any original shipping and delivery receipts for
all merchandise sold or services rendered and such other documents and
information as Lender may require. All of Borrower's invoices shall bear the
terms stated on the applicable customer order, and no material change from the
original terms of such customer order shall be made without the prior written
consent of Lender. Borrower shall provide Lender on a monthly (within fifteen
(15) days after the end of each month), or more frequent basis, as requested by
Lender, certified as true and accurate by its President or Chief Financial
Officer, an aged trial balance of its existing accounts payable. Borrower shall
provide Lender, as requested by Lender, such other schedules, documents and/or
information regarding the Collateral as Lender may require.
10. Inspections. At all times during normal business hours, Lender
shall have the right to (a) visit and inspect Borrower's office, and the
Collateral, (b) inspect, audit and make extracts from Borrower's relevant books
and records, including, but not limited to, management letters prepared by
independent accountants, and (c) discuss with Borrower's principal officers and
independent accountants, the business, assets, liabilities, financial condition
results of operations and business prospects of Borrower. Lender may conduct
inspections at Borrower's office no
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more than four (4) times per Loan Year unless an Event of Default has occurred
or the results of any audit report are not satisfactory to Lender in its
discretion, in which event there shall be no limit on the number of inspection
performed. Borrower will deliver to Lender any instrument necessary for Lender
to obtain records from any service bureau maintaining records for such Borrower.
11. Information.
(a) Disclosure of Material Collateral Matters. Immediately upon
learning thereof, report to Lender all matters materially affecting the value,
enforceability or collectability of the Collateral including, without
limitation, claims or disputes asserted by any Customer or other obligor.
(b) Material Occurrences. Promptly notify Lender in writing upon the
occurrence of (a) any Event of Default or Incipient Event of Default; (b) any
event of default under the Indenture; (c) any event which with the giving of
notice or lapse of time, or both, would constitute an event of default under the
Indenture; (d) any event, development or circumstance whereby any financial
statements or other reports furnished to Lender fail in any material respect to
present fairly, in accordance with GAAP consistently applied, the financial
condition or operating results of Borrower as of the date of such statements;
(e) any accumulated retirement plan funding deficiency which, if such deficiency
continued for two plan years and was not corrected as provided in Section 4971
of the Internal Revenue Code of 1986 (as amended, the "Code"), could subject
Borrower to a tax imposed by Section 4971 of the Code; (f) each and every
default by Borrower which might reasonably be expected to result in the
acceleration of the maturity of any Indebtedness in excess of $5,000,000
including the names and addresses of the holders of such Indebtedness with
respect to which there is a default existing or with respect to which the
maturity has been or could be accelerated, and the amount of such Indebtedness;
and (g) any other development in the business or affairs of Borrower which could
reasonably be expected to have a Material Adverse Effect; in each case
describing the nature thereof and the action Borrower proposes to take with
respect thereto.
(c) SEC Reports. Whether or not the Borrower is subject to the
reporting requirements of Section 13 or Section 15(d) of the Exchange Act, the
Borrower shall deliver to the Lender, within 60 days after the end of each
fiscal quarter (other than any fiscal quarter ending a fiscal year) and within
105 days after the end of each fiscal year quarterly and annual financial
statements, respectively, substantially equivalent to financial statements that
would have been included in the reports filed with the Securities and Exchange
Commission (the "SEC") if the Borrower were subject to the reporting
requirements of Section 13 or Section 15(d) of the Exchange Act, including, with
respect to annual information only, a report thereon by the Borrower's
independent certified public accountants as such would be required in such
reports to the SEC, and, in each case, together with a management's discussion
and analysis of financial condition and results of operations which would be so
required and, unless the SEC will not accept such reports, file with the SEC the
annual, quarterly and other reports which it is or would have (if it were
subject to such reporting obligations) been required to file with the SEC.
Annual and quarterly financial statements required to be delivered by Borrower
under this Section 11(c) shall be accompanied by comparable consolidating
balance sheets and consolidating income statements for each Material Subsidiary
(reviewed, with respect to annual information only, by Borrower's independent
certified public accountants).
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<PAGE> 40
(d) Other Reports. Furnish Lender as soon as available, but in any
event within ten (10) days after the issuance thereof, (i) with copies of such
financial statements, reports and returns as Borrower shall send to its
stockholders and (ii) copies of all material notices sent pursuant to the
Indenture.
(e) Projected Operating Budget. Furnish Lender, no later than thirty
(30) days prior to the beginning of each of Borrower's fiscal years commencing
with fiscal year 2001, a month by month projected operating budget and cash flow
of Borrower on a consolidated or consolidating basis for such fiscal year
(including an income statement for each month and a balance sheet as at the end
of the last month in each fiscal quarter), such projections to be accompanied by
a certificate signed by Borrower's President or President and/or Chief Financial
Officer to the effect that such projections have been prepared on the basis of
sound financial planning practice consistent with past budgets and financial
statements and that such officer has no reason to question the reasonableness of
any material assumptions on which such projections were prepared.
(f) In addition to the foregoing, promptly upon incurring any
Indebtedness in a principal amount in excess of $10,000,000, Borrower shall
furnish Lender a copy of the principal documents relating to such Indebtedness.
12. Additional Representations and Warranties.Borrower represents and
warrants as to itself and each Guarantor (each of which such representations and
warranties (except those contained in Sections 12(e) and 12(h) (except
representations and warranties that relate solely to an earlier date and were
true and correct on such earlier date)) shall be deemed repeated upon the making
of a request for a Revolving Credit Advance or the issuance of a Letter of
Credit and made as of the time of each Revolving Credit Advance made hereunder
or Letter of Credit issued hereunder and either (x) all representations and
warranties contained in Sections 12(e) and 12(h) shall be deemed repeated in all
respects upon the making of a request for a Revolving Credit Advance or the
issuance of a Letter of Credit and made as of the time of each Revolving Credit
Advance made hereunder or Letter of Credit issued hereunder or (y) Borrower
shall have notified Lender in writing of the occurrence of any and all events,
facts or circumstances which makes any such representations and warranties in
Sections 12(e) and 12(h) untrue or incorrect and Lender shall have either (i)
consented in writing with respect thereto in its sole discretion) or (ii) have
funded such Revolving Credit Advance pursuant hereto or issued the requested
Letter of Credit (which funding or issuance shall be deemed to be such consent):
(a) each of Borrower and each Guarantor is a corporation, partnership
or limited liability company duly organized and validly existing under the laws
of the State of its organization and is duly qualified and in good standing in
every other state or jurisdiction in which the nature of its business requires
such qualification except to the extent failure to be so qualified or in good
standing would not have a material adverse effect upon its business, assets,
operations, condition, business prospects, financial or otherwise of the
Borrower and its Subsidiaries, taken as whole, or upon the Collateral or upon
Borrower's or such Guarantor's ability to perform its obligations hereunder or
under any of the other Ancillary Agreements;
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<PAGE> 41
(b) the execution, delivery and performance of this Agreement and the
Ancillary Agreements (i) have been duly authorized, (ii) are not in
contravention of either Borrower's or any Guarantor's certificate of
incorporation, by-laws, certificate of limited partnership, certificate of
formation, limited liability company agreement or partnership agreement, of the
Indenture or of any other material agreement or undertaking to which Borrower or
any Guarantor is a party or by which Borrower or any Guarantor is bound and
(iii) are within each of Borrower's and each Guarantor's powers;
(c) this Agreement and the Ancillary Agreements executed and delivered
by Borrower, or any Guarantor are their respective legal, valid and binding
obligations, enforceable in accordance with their terms except as such
enforcement may be limited by bankruptcy, insolvency or similar laws relating to
the enforcement of creditors' rights generally and by general principles of
equity;
(d) each of Borrower and each Guarantor keeps all of its books and
records concerning the Collateral at its executive offices located at the
address set forth in the introductory paragraph of this Agreement or at such
other address as notified to Lender in writing pursuant to Section 26;
(e) Except as disclosed on Schedule 12(e) hereto, on the Closing Date
the operation of each of Borrower's and each Guarantor's businesses is in
compliance in all material respects with all applicable federal, state and local
laws, including but not limited to all applicable environmental laws and
regulations. At all times after the Closing Date when this representation is
deemed made, except as disclosed on Schedule 12(e) hereto or otherwise disclosed
in writing to the Lender, or the operation of each of Borrower's and each
Guarantor's business is in compliance with such laws, except where the failure
to comply would not reasonably be expected to have a material adverse effect on
Borrower and Guarantors taken as a whole.
(f) based upon the Employee Retirement Income Security Act of 1974 (as
amended from time to time, "ERISA"), and the regulations and published
interpretations thereunder: (i) neither Borrower nor any Guarantor has engaged
in any Prohibited Transaction as defined in Section 406 of ERISA and Section
4975 of the Internal Revenue Code, as amended; (ii) Borrower and its Guarantors
taken as a whole have met all applicable minimum funding requirements under
Section 302 of ERISA for which an administrative or statutory exemption was not
available in respect of its plans; (iii) neither Borrower nor any Guarantor has
any knowledge of any event or occurrence which would cause the Pension Benefit
Guaranty Corporation to institute proceedings under Title IV of ERISA to
terminate any employee benefit plan(s); (iv) neither Borrower nor any Guarantor
has any fiduciary responsibility for investments with respect to any plan
existing for the benefit of Persons other than such Borrower's or such
Guarantor's employees; and (v) neither Borrower nor any Guarantor has withdrawn,
completely or partially, from any multi-employer pension plan so as to incur
liability under the Multiemployer Pension Plan Amendments Act of 1980 the effect
of which in any case described in clauses (i) through (v) would have a material
adverse effect on Borrower and its Guarantors taken as a whole;
(g) giving effect to the Plan, the Order and the transactions
contemplated thereunder each of Borrower and each Guarantor is solvent, able to
pay its debts as they mature, has capital sufficient to carry on its business
and all businesses in which it is about to engage and the fair
37
<PAGE> 42
saleable value of its assets (calculated on a going concern basis and taking
into account their respective rights of reimbursement and contribution in
respect of any Guaranty) is in excess of the amount of its liabilities;
(h) except as disclosed on Schedule 12(h) hereto or otherwise in
writing to the Lender, there is no pending or to Borrower's knowledge threatened
litigation, action or proceeding which could reasonably be expected to have a
material adverse effect on Borrower's and its Subsidiaries' (taken as a whole)
business, assets, operations, condition or prospects, financial or otherwise, or
the ability of any of Borrower or any Guarantor to perform this Agreement or any
of the Ancillary Agreements to which it is a party;
(i) all consolidated balance sheets and income statements of Borrower
and its Subsidiaries which have been delivered to Lender present fairly in all
material respects the Borrower's consolidated financial condition on the date as
of which such financial statements were prepared on a basis consistent with that
of previous financial statements and there has been no material adverse change
in Borrower's consolidated financial condition as reflected in the most recent
of such statements since the date thereof and such statements do not fail to
disclose any fact or facts which could reasonably be expected to materially and
adversely affect Borrower's and its Subsidiaries' financial condition taken as a
whole;
(j) (x) each of Borrower and each Guarantor possesses all of the
material licenses, patents, copyrights, trademarks, tradenames and permits
necessary to conduct its business and (y) there has been no assertion or claim
of violation or infringement with respect thereof which could reasonably be
expected to have a material and adverse effect on Borrower's and its
Subsidiaries' financial condition, taken as a whole; and
(k) all financial projections of Borrower's or any Guarantor's
performance prepared by Borrower or at Borrower's direction and delivered to
Lender represent, at the time of delivery to Lender, its reasonable estimate of
such Borrower's or such Guarantor's future financial performance and are based
upon assumptions that are reasonable in light of such Borrower's or such
Guarantor's past performance and then current business conditions.
13. Covenants. Borrower hereby covenants as to itself and each
Guarantor covenants as to itself that from the date hereof and until
satisfaction in full of the Obligations the Borrower shall, and shall cause the
Guarantors to, comply with the following:
(a) Each of Borrower's and each Guarantor's businesses will continue to
be in compliance in all material respects with all applicable federal, state and
local laws, including but not limited to all applicable environmental laws and
regulations.
(i) Each of Borrower and each Guarantor will do all things
necessary to systematically assure and monitor continued compliance in
all material respects with all applicable environmental laws,
including periodic reviews of such compliance.
(ii) In the event any of Borrower, any of the Guarantors obtains,
gives or receives notice of any material release or threat of release
of a reportable quantity of any Hazardous Substances on its property
(any such event being hereinafter referred to as a "Hazardous
Discharge") or receives any notice of material violation, request for
38
<PAGE> 43
information or notification that it is potentially responsible for
investigation or cleanup of environmental conditions on its property,
demand letter or complaint, order, citation, or other written notice
with regard to any material Hazardous Discharge or material violation
of any environmental laws affecting its property or its interest
therein (any of the foregoing is referred to herein as an
"Environmental Complaint") from any governmental authority, including
any state agency responsible in whole or in part for environmental
matters in the state in which such property is located or the United
States Environmental Protection Agency (any such governmental
authority hereinafter the "Authority"), then it shall, within five (5)
Business Days, give written notice of same to the Lender detailing
facts and circumstances of which it is aware giving rise to the
Hazardous Discharge or Environmental Complaint and periodically inform
Lender of the status of the matter. Such information is to be provided
to allow the Lender to protect its security interest in the Collateral
and is not intended to create nor shall it create any obligation upon
the Lender with respect thereto.
(iii) Each of Borrower and each Guarantor of Borrower shall
respond promptly to any Hazardous Discharge or Environmental Complaint
applicable to it and take all necessary action in order to safeguard
the health of any Person and to avoid subjecting the Collateral to any
claim or Lien other than a Permitted Lien.
(iv) Borrower and the Guarantors shall each jointly and severally
defend and indemnify the Lender, its officers, directors, employees
and agents and hold the Lender, its officers, directors, employees and
agents harmless from and against all loss, liability, damage and
expense, claims, costs, fines and penalties, including attorney's
fees, suffered or incurred by the Lender, its officers, directors,
employees and agents under or on account of any violation by Borrower
or any Guarantor of any environmental laws, including, without
limitation, the assertion of any Lien thereunder other than Permitted
Liens, with respect to any Hazardous Discharge, the presence of any
Hazardous Substances in violation of applicable environmental laws
affecting Borrower's or such Guarantor's property, whether or not the
same originates or emerges from Borrower's or such Guarantor's
property or any contiguous real estate, including any loss of value of
the Collateral as a result of the foregoing, except to the extent such
loss, liability, damage and expense is directly attributable to any
Hazardous Discharge resulting from actions on the part of the Lender,
its officers, directors, employees and agents. The obligations of
Borrower and the Guarantors under this Section 13(a) shall arise upon
the discovery of the presenceof any Hazardous Substances in violation
of applicable environmental laws on Borrower's or such Guarantor's
property, whether or not any federal, state, or local environmental
agency has taken or threatened any action in connection with the
presence of any Hazardous Substances. The obligation and the
indemnifications hereunder shall survive the termination of this
Agreement.
(v) For purposes of Section 13(a) all references to Borrower's or
Guarantor's property shall be deemed to include all of such Borrower's
or Guarantor's right, title and interest in and to all owned and/or
leased premises;
(b) Each of Borrower and each Guarantor shall, and shall cause each of
its Subsidiaries to, pay or discharge when due or cause to be paid or discharged
when due all taxes, assessments
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<PAGE> 44
and governmental charges or levies (including withholding taxes and any
penalties, interest, and additions to taxes) levied or imposed upon Borrower or
any of its Subsidiaries or any of their respective properties and assets;
provided, however, that neither Borrower nor any Guarantor shall be required to
pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or levy whose amount, applicability or validity is being contested in
good faith by appropriate proceedings and for which disputed amounts adequate
reserves have been established in accordance with GAAP.
(c) Borrower will promptly inform Lender in writing of (i) the
commencement of all proceedings and investigations by or before and/or the
receipt of any notices from, any governmental body and all actions and
proceedings in any court or before any arbitrator against or in any way
concerning any of Borrower's or any Guarantor's properties, assets or business,
which singly or in the aggregate could reasonably be expected to have a material
adverse effect on Borrower and the Guarantors taken as a whole; (ii) any
material amendment of Borrower's or any Guarantor's certificate of
incorporation, by-laws, certificate of formation, certificate of limited
partnership, limited liability company agreement or partnership agreement; (iii)
any change in any of Borrower's or any Guarantor's business, assets,
liabilities, condition (financial or otherwise), results of operations or
business prospects which has had or could reasonably be expected to have a
material adverse effect on the Borrower, and the Guarantors, taken as a whole,
or the Collateral; (iv) any Event of Default or Incipient Event of Default; (v)
any default or any event which with the passage of time or giving of notice or
both would constitute a default under any agreement for the payment of money to
which Borrower or any Guarantor is a party or by which Borrower or any Guarantor
or any of Borrower's or any Guarantor's properties may be bound which would have
a material adverse effect on Borrower's and the Guarantors' (taken as a whole)
business, operations, property or condition (financial or otherwise) or the
Collateral; (vi) any change in the location of Borrower's or a Guarantor's
executive offices; (vii) any change in the location of Borrower's or a
Guarantor's Inventory from the locations listed on Schedule 13(c) attached
hereto (other than Inventory in transit for use by Borrower or such Guarantor
(which notice shall be deemed to amend Schedule 13(c)); (viii) any change in
Borrower's or a Guarantor's corporate name; (ix) any material delay in
Borrower's or a Guarantor's performance of any of its obligations to any
Customer and of any assertion of any material Disputes by any Customer and of
any allowances, credits and/or other monies granted by it to any Customer; and
(x) all material adverse information known to Borrower or its Subsidiaries
relating to the financial condition of any account debtor with accounts in
excess of $1,000,000 in the aggregate.
(d) Limitations on Incurrences of Additional Indebtedness and Issuances
of Disqualified Stock. Borrower shall not, and shall not permit any Guarantor
to, directly or indirectly, create, incur, assume, guarantee or otherwise become
liable for, contingently or otherwise (to "Incur" or, as appropriate, an
"Incurrence"), any Indebtedness or issue any Disqualified Capital Stock (other
than Capital Stock of a Subsidiary of Borrower issued to the Borrower or a
Wholly Owned Subsidiary of Borrower) except any such Indebtedness or
Disqualified Capital Stock which Borrower and its Subsidiaries would be
permitted to incur in compliance with Section 6.3 of the Oil & Gas Credit
Facility provided that for purposes of this Section 13(d) the term "Subordinated
Indebtedness" as used in Section 6.3 of the Oil & Gas Credit Facility shall have
the meaning assigned to such term in this Agreement; provided, further, that
notwithstanding the foregoing, Borrower will not Incur any Attributable
Indebtedness in respect of any Sale and Leaseback Transaction involving the
Collateral. Indebtedness Incurred and Disqualified Capital Stock
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<PAGE> 45
issued by any Person that is not a Subsidiary, which Indebtedness is outstanding
at the time such Person becomes, or is merged into, or consolidated with, a
Borrower or Subsidiary of Borrower shall be deemed to have been Incurred or
issued, as the case may be, at the time such Person becomes, or is merged into,
or consolidated with Borrower or such Subsidiary.
(e) neither Borrower nor any Guarantor will (i) declare, pay or make
any dividend or distribution of any shares of the common stock or preferred
stock of Borrower or apply any of its funds, property or assets to the purchase,
redemption or other retirement of any common or preferred stock of Borrower
except as set forth in Section 6.6 of the Oil & Gas Credit Facility, (ii)
directly or indirectly, prepay any Indebtedness (other than to Lender), or
repurchase, redeem, retire or otherwise acquire any Indebtedness of Borrower or
any Guarantor or any Unrestricted Subsidiary of Borrower if an Event of Default
exists or if, after giving effect thereto an Incipient Event of Default or an
Event of Default shall exist; (iii) enter into any merger, consolidation or
other reorganization with or into any other Person (other than the Borrower or a
Guarantor) or permit any other Person (other than the Borrower or a Guarantor)
to consolidate with or merge with Borrower except as permitted by Section 6.1 of
the Oil & Gas Credit Facility; (iv) materially change the nature of its business
to a business that is not a Related Business; (v) change its fiscal year or make
any changes in accounting treatment and reporting practices without prior
written notice to Lender except as required by GAAP or in the tax reporting
treatment or except as required by law; (vi) enter into any transaction with any
Subsidiary or Affiliate, except as permitted by Section 6.8 of the Oil & Gas
Credit Facility as in effect on the date of this Agreement; or (vii) bill
Receivables under any name except the present name of Borrower or any Guarantor;
(f) neither Borrower nor any Guarantor will enter into or be a party to
any Presale of Gas unless (i) Borrower or such Guarantor has provided Lender
prior written notice of such Presale of Gas, (ii) Borrower has paid to Lender a
fee equal to 2% of the aggregate amount of the purchase price for such Presale
of Gas and (iii) the aggregate purchase price for all Presales of Gas in a
calendar month does not exceed $5,000,000;
(g) none of the proceeds of the Loans or Letters of Credit hereunder
will be used directly or indirectly to "purchase" or "carry" "margin stock"
including the repurchase of Borrower's Capital Stock or to repay Indebtedness
incurred to "purchase" or "carry" "margin stock" within the respective meanings
of each of the quoted terms under Regulation U of the Board of Governors of the
Federal Reserve System as now and from time to time hereafter in effect;
(h) Insurance. Borrower will bear the full risk of loss from any loss
of any nature whatsoever with respect to the Collateral. Borrower at its own
cost and expense in amounts and with carriers reasonably acceptable to Lender,
shall (i) keep all of its insurable properties and properties in which it has an
interest insured against the hazards of fire, flood, sprinkler leakage, those
hazards covered by extended coverage insurance and such other hazards, and for
such amounts, as is customary in the case of companies engaged in businesses
similar to its business; (ii) maintain public and product liability insurance
against claims for personal injury, death or property damage suffered by others
as is customary in the case of companies engaged in businesses similar to its;
(iii) maintain all such workmen's compensation or similar insurance as may be
required under the laws of any state or jurisdiction in which it is engaged in
business; (iv) furnish Lender with (x) certificates evidencing insurance
policies and other evidence of the
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<PAGE> 46
maintenance of such policies at least fifteen (15) days before any expiration
date, and (y) appropriate loss payable endorsements (with respect to Collateral
only) in form and substance satisfactory to Lender, naming Lender and the
Trustee under the Indenture as their interests may appear as loss payee (with
respect to Collateral only) and providing that as to Lender the insurance
coverage shall not be impaired or invalidated by any act or neglect of Borrower
and the insurer will provide Lender with at least fifteen (15) days notice prior
to cancellation. Borrower shall instruct the insurance carriers that in the
event of any loss thereunder, the carriers shall make payment for such loss
(with respect to Collateral only) to Lender and Agent under the Oil & Gas Credit
Facility, as their interests may appear. Upon the occurrence and during the
continuance of an Event of Default, if any insurance losses payable with respect
to the Collateral are paid by check, draft or other instrument payable to
Borrower, Lender may endorse Borrower's name thereon and do such other things as
Lender may deem advisable to reduce the same to cash. Lender is hereby
authorized to adjust and compromise claims with respect to the Collateral at any
time after the occurrence and during the continuance of an Event of Default.
Upon the occurrence and during the continuance of an Event of Default, all loss
recoveries received by Lender upon any such insurance may be applied to the
Obligations in such order as Lender in its sole discretion shall determine. Any
surplus shall be paid by Lender to the Borrower or applied as may be otherwise
required by law. Any deficiency thereon shall be paid by Borrower to Lender, on
demand;
(i) Borrower will not make any Investment in any Person except
Permitted Investments;
(j) Borrower will cause each of its Material Subsidiaries hereafter
formed or acquired to execute and deliver a joinder of this Agreement and the
documents, opinions, instruments and certificates listed in Sections 2(a)(i) and
2(a)(v)(A), (B), (C), (D), and (G) with respect to such Subsidiary promptly
following such formation or acquisition provided that if no Incipient Event of
Default or Event of Default shall have occurred and be continuing, the Lender
will release the Guaranty of a Guarantor and any unapplied Collateral from such
Guarantors within five Business Days from the receipt of the written request of
the Borrower in the form of an officer's certificate if such officer's
certificate shall certify that no Incipient Event of Default or Event of Default
shall have occurred and be continuing and either, (i) the stock of such
Subsidiary is sold or transferred by the Borrower and such Guarantor ceases to
be a Subsidiary or (ii) all or substantially all of the assets of such Guarantor
are sold or transferred and such Subsidiary has ceased or then ceases to be a
Material Subsidiary, so long as, in each case under the foregoing (i) and (ii)
any outstanding over advance, if any, pursuant to Section 2(d) is concurrently
repaid or such Guarantor is Galveston Bay Processing Corporation, and (i)
substantially all of the assets of such Subsidiary are sold, transferred,
mortgaged or collaterally assigned or (ii) release is requested in connection
with a GB Facility Financing made in compliance with Section 6.3 of the Oil &
Gas Credit Facility;
(k) within 60 days following the Closing Date, deliver to Lender lien
search reports, in form and substance satisfactory to Lender and its counsel, on
the properties of Borrower located in the counties listed in Section 8(j) of
this Agreement (to the extent not delivered to Lender on the Closing Date) and
evidencing that the Liens of the Lender on the Collateral have the lien priority
specified in Section 7(a) hereof.
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<PAGE> 47
(l) Financial Covenants.
(i) Consolidated Coverage Ratio. Not permit Consolidated Coverage
Ratio for Borrower and its Subsidiaries on a consolidated basis at the end of
each fiscal quarter with respect to the immediately preceding fiscal period set
forth below (ending on the last day of such fiscal quarter) to be less than
Consolidated Coverage Ratio set forth below as corresponds to the applicable
fiscal period:
<TABLE>
<CAPTION>
Period Coverage Ratio
------ --------------
<S> <C>
One quarter ended 4/30/00 .33 to 1
Two quarters ended 7/31/00 .40 to 1
Three quarters ended 10/31/00 .45 to 1
Four Quarters Ended
1/31/01 .50 to 1
4/30/01 .55 to 1
7/31/01 .60 to 1
10/31/01 .65 to 1
1/31/02 .70 to 1
4/30/02 .75 to 1
7/31/02 .80 to 1
10/31/02 .85 to 1
1/31/03 .90 to 1
4/30/03 1.00 to 1
7/31/03 1.10 to 1
10/31/03 1.20 to 1
1/31/04 and thereafter to 1.25 to 1
the end of the Term
</TABLE>
(ii) Consolidated Net Income. Not permit the sum of (i)
Consolidated Net Income for Borrower and its Subsidiaries on a consolidated
basis plus (ii) dividend requirements of Borrower and its consolidated
Subsidiaries (whether in cash or otherwise (except dividends payable solely in
shares of Qualified Capital Stock)) with respect to Preferred Stock paid,
accrued, or scheduled to be paid or accrued during each period set forth below
(in each case to the extent attributable to such period and excluding items
eliminated in consolidation) at the end of each fiscal quarter with respect to
the immediately preceding fiscal period set forth below (ending on the last day
of such fiscal quarter) to be less than the amount set forth below as
corresponds to the applicable fiscal period:
<TABLE>
<CAPTION>
Fiscal Period Net Income
------------- ----------
<S> <C>
One quarter ended 4/30/00 ($12,000,000)
Two quarters ended 7/31/00 ($25,000,000)
Three quarters ended 10/31/00 ($38,000,000)
</TABLE>
43
<PAGE> 48
<TABLE>
Four Quarters Ended
-------------------
<S> <C>
1/31/01 ($40,000,000)
4/30/01 ($37,500,000)
7/31/01 ($35,000,000)
10/31/01 ($32,500,000)
1/31/02 ($30,000,000)
4/30/02 ($27,500,000)
7/31/02 ($25,000,000)
10/31/02 ($22,500,000)
1/31/03 ($20,000,000)
4/30/03 ($15,000,000)
7/31/03 ($10,000,000)
10/31/03 ($ 5,000,000)
1/31/04 and thereafter to 0
the end of the Term
</TABLE>
(iii) Consolidated EBITDA Not permit Consolidated EBITDA for Borrower
and its Subsidiaries on a consolidated basis at the end of each fiscal
quarter with respect to the immediately preceding fiscal period set
forth below (ending on the last day of such fiscal quarter) to be less
than the consolidated EBITDA set forth below as corresponds to the
applicable fiscal period:
<TABLE>
Fiscal Period EBITDA
------------- ------
<S> <C>
One quarter ended 4/30/00 $18,000,000
Two quarters ended 7/31/00 $38,000,000
Three quarters ended 10/31/00 $60,000,000
Four Quarters Ended
1/31/01 $80,000,000
4/30/01 $82,500,000
7/31/01 $85,000,000
10/31/01 $87,500,000
1/31/02 $90,000,000
4/30/02 $92,500,000
7/31/02 $95,000,000
10/31/02 $97,500,000
1/31/03 $100,000,000
4/30/03 $102,500,000
7/31/03 $105,000,000
10/31/03 $107,500,000
1/31/04 and thereafter to $110,000,000
the end of the Term
</TABLE>
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<PAGE> 49
(iv) Upon the repayment in full of all obligations of Borrower under
the Oil & Gas Credit Facility and the irrevocable termination thereof,
Borrower and Lender shall use good faith efforts to reset the financial
covenants set forth in this Section 13(l) to levels satisfactory to
Borrower and Lender and pursuant to a mutually acceptable amendment to
this Agreement, provided, however, until Borrower and Lender have so
agreed, the financial covenants set forth herein shall continue in full
force and effect.
(m) Dismissal of Appeals. Borrower shall use commercially reasonable
efforts to have dismissed any presently pending appeals filed to the
Confirmation Order, including, without limitation such appeal pending by High
River Limited Partnership in the United States District Court, Southern District
of Texas, and shall immediately make application to have such appeals dismissed
on the grounds of mootness.
14. Power of Attorney. Borrower hereby appoints Lender (or any other
Person whom Lender may designate as its attorney) with power to: (i) endorse
Borrower's name on any uniform commercial code financing statements, any checks,
notes, acceptances, money orders, drafts or other forms of payment or security
that may come into Lender's possession; (ii) sign Borrower's name on any invoice
or bill of lading relating to any Receivables, drafts against Customers,
schedules and notices of assignment financing statements and other public
records, verifications of account and notices to or from Customers; (iii) verify
the validity, amount or any other matter relating to any Receivable by mail,
telephone, telegraph or otherwise with Customers; (iv) execute customs
declarations and such other documents as may be required to clear Inventory
through Customs; (v) do all things necessary to carry out this Agreement, any
Ancillary Agreement and all related documents; and (vi) on or after the
occurrence and during the continuation of an Event of Default, notify the post
office authorities to change the address for delivery of Borrower's mail to an
address designated by Lender, and to receive, open and dispose of all mail
addressed to Borrower. Each of Borrower and each Guarantor hereby ratifies and
approves all acts of the attorney-in-fact permitted pursuant to this Section 14.
Neither Lender nor the attorney-in-fact will be liable for any acts or omissions
or for any error of judgment or mistake of fact or law made by Lender in good
faith and in the absence of willful misconduct and gross negligence. This power,
being coupled with an interest, is irrevocable so long as any Receivable in
which Lender has a security interest remains unpaid and until the Obligations
have been fully satisfied.
15. Expenses. Borrower shall pay all of Lender's out-of-pocket costs
and expenses, including without limitation reasonable fees and disbursements of
counsel retained or employed by Lender and appraisers, in connection with the
preparation, execution and delivery of this Agreement and the Ancillary
Agreements, and in connection with the prosecution or defense of any action,
contest, dispute, suit or proceeding concerning any matter in any way arising
out of, related to or connected with this Agreement or any Ancillary Agreement.
Borrower shall also pay all of Lender's out-of-pocket costs and expenses,
including without limitation reasonable fees and disbursements of counsel
retained or employed by Lender, in connection with (a) the preparation,
execution and delivery of any waiver, any amendment thereto or consent proposed
or executed in connection with the transactions contemplated by this Agreement
or the Ancillary Agreements, (b) Lender's obtaining performance of the
Obligations under this Agreement and any Ancillary Agreements, including, but
not limited to, the enforcement or defense of Lender's Liens hereunder as valid
perfected security interests, (c) any attempt to protect, collect, sell,
45
<PAGE> 50
liquidate or otherwise dispose of any Collateral, (d) after the occurrence and
during the continuance of an Event of Default, any consultations in connection
with any of the foregoing and (e) subject to the cost limitations of Section
5(b)(iii) for any period during which an Event of Default does not exist any
attempt to inspect or verify any Collateral. Borrower shall also pay Lender's
then standard price for furnishing Borrower or any Guarantor or their respective
designees copies of any statements, records, files or other data (collectively,
"Reports") requested by Borrower or any Guarantor or their respective designees,
other than reports of the kind furnished to Borrower and the Guarantors and
Lender's other borrowers on a regular, periodic basis in the ordinary course of
Lender's business. Borrower shall also pay Lender's customary bank charges,
including, without limitation, all wire transfer fees incurred by Lender, for
all bank services performed or caused to be performed by Lender for Borrower or
any Guarantor at its request. All such costs and expenses together with all
filing, recording and search fees, reimbursable taxes and interest payable by
Borrower or any Guarantor to Lender shall be payable on demand and shall be
secured by the Collateral. If any tax by any governmental authority is or may be
imposed on or as a result of any transaction between Borrower or any Guarantor
and Lender (other than any franchise taxes or income taxes imposed on or
measured by the net income, assets, net worth or shareholders' capital of the
Lender or any lending office of the Lender) which Lender is or may be required
to withhold or pay, each of Borrower and each Guarantor agrees to indemnify and
hold Lender harmless in respect of such taxes, and each of Borrower and each
Guarantor will repay to Lender the amount of any such taxes paid by Lender,
which shall be charged to Borrower's account; and until Borrower or such
Guarantor shall furnish Lender with indemnity therefor (or supply Lender with
evidence satisfactory to it that due provision for the payment thereof has been
made), Lender may hold without interest any balance standing to Borrower's or
such Guarantor's credit (but only to the extent of the amount of such taxes,
penalties and interest) and Lender shall retain its security interests in any
and all Collateral. Each of Borrower and each Guarantor hereby acknowledges that
Lender shall not be liable in any manner whatsoever for any selling expenses,
orders, purchases or contracts of any kind resulting from any transaction
between Borrower or any Guarantor and any other Person and each of Borrower and
each Guarantor hereby indemnifies and holds Lender harmless with respect
thereto, which indemnity shall survive termination of this Agreement.
16. Assignment By Lender. (a) Lender, subject to clause (b) below, may
at any time and from time to time assign this Agreement or any or all of the
Obligations together with any or all of the security therefor and any transferee
shall succeed to all of Lender's rights with respect to the interest so
assigned. Upon such transfer, Lender shall be released from all responsibility
with respect to the interest so assigned (from the effective date of such
assignment forward) and for the Collateral to the extent same is assigned to any
transferee and Borrower shall have no further obligations to Lender with respect
to the interests so assigned, provided such transferee has assumed all of
Lender's responsibilities and obligations with respect to the interest and
Collateral so assigned. Lender, subject to clause (b) below, may from time to
time sell or otherwise grant participations in any of the Obligations to any
bank, finance company, insurance company, or other financial services company,
and the holder of any such participation shall, subject to the terms of any
agreement between Lender and such holder, be entitled to the same benefits as
Lender with respect to any security for the Obligations in which such holder is
a participant. Any agreement pursuant to which the Lender may grant such a
participating interest shall provide that the Lender shall retain the sole right
and responsibility to enforce the obligations of
46
<PAGE> 51
the Borrower hereunder including, without limitation, the right to approve any
amendment, modification or waiver of any provision of this Agreement; provided
that such participation agreement may provide that the Lender will not agree to
any modification, amendment or waiver of this Agreement that (i) increases the
Maximum Loan Amount, (ii) decreases the interest rate applicable to Revolving
Credit Advances or (iii) releases Collateral (other than, in each instance, as
expressly permitted or allowed by this Agreement or the applicable Ancillary
Document) without the consent of the participant. Borrower agrees that each such
holder may exercise any and all rights of banker's lien, set-off and
counterclaim with respect to its participation in the Obligations as fully as
though Borrower were directly indebted to such holder in the amount of such
participation.
Notwithstanding anything to the contrary in clause (a) above, unless an
Event of Default shall have occurred and during the continuance thereof, no
Lender shall (i) sell, without the prior written consent of Borrower, a
participating interest or (ii) sell, assign or transfer any part of its rights
hereunder to any Person listed on Schedule 16(b) or to a direct competitor of
the Borrower or any Guarantor or to a Person engaged as one of its principal
activities in a Related Business.
17. Waivers. Borrower waives presentment and protest of any instrument
and notice thereof, notice of default (except as expressly required hereunder),
notice of intent to accelerate, notice of acceleration and, to the extent
permitted under applicable law, all other notices to which it might otherwise be
entitled.
18. Term of Agreement. (a) This Agreement shall continue in full force
and effect until the expiration of the Term. The Term may be extended for
successive periods of one (1) year upon the request of Borrower, at least ninety
(90) days prior to the expiration of the initial Term or any renewal Term and
the consent of Lender at least forty-five (45) days prior to such expiration.
(b) Notwithstanding the foregoing, but subject to the other terms and
provisions of this Section 18, upon at least ten (10) days prior written notice
to Lender, Borrower may, at its option, terminate this Agreement; provided,
however, no such termination shall be effective until Borrower has paid all of
the Obligations in immediately available funds.
(c) At the effective date of any such termination by Borrower or if
this Agreement is otherwise deemed terminated upon an Event of Default under
Section 19(i) of this Agreement, Borrower shall pay to Lender (in addition to
the then outstanding principal, accrued interest and other charges owing under
the terms of this Agreement and any of the other Ancillary Agreements), as
liquidated damages for the loss of the bargain and not as a penalty, an amount
equal to $600,000 if termination occurs prior to March 15, 2001; $400,000 if
termination occurs during the period from March 15, 2001 through March 14, 2002;
$200,000 if termination occurs during the period from March 15, 2002 through
March 14, 2003; $150,000 if termination occurs during the period March 15, 2003
through March 14, 2004 and $100,000 if termination occurs after March, 2004 and
before the 30th day prior to the end of the Term.
(d) All of the Obligations shall be forthwith due and payable upon any
termination of this Agreement. Except as otherwise expressly provided for in
this Agreement or the Ancillary Documents, no termination or cancellation
(regardless of cause or procedure) of this Agreement
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<PAGE> 52
or any of the other Ancillary Agreements shall in any way affect or impair the
rights, powers or privileges of Lender or the obligations, duties or liabilities
of Borrower, the Guarantors or Lender in any way relating to any transaction or
event occurring prior to such termination or cancellation. All of the
undertakings, agreements, consents, warranties or representations of Borrower,
or the Guarantors contained in this Agreement or any of the other Ancillary
Agreements shall survive termination or cancellation of this Agreement and the
other Ancillary Agreements and Lender shall retain its Liens in the Collateral
and all of its rights and remedies under this Agreement and the other Ancillary
Agreements notwithstanding such termination or cancellation until all of the
Obligations have been paid in full, in immediately available funds. Upon payment
in full of all Obligations and the termination of this Agreement, the Liens
granted herein and in the other Ancillary Agreements shall terminate, all rights
to the Collateral shall revert to the Borrower or the respective Guarantors, as
the case may be, and the Lender will, at the Borrower's expense, execute and
deliver to the Borrower and each Guarantor, as the case may be, such documents
as the Borrower or such Guarantor shall request to evidence such termination;
provided, however, that notwithstanding the foregoing, such termination and
reversion, and the delivery of such documents evidencing such termination, shall
be subject to the conditions precedent that Borrower and the Guarantors and any
Person whose loans to Borrower are used in whole or in part to satisfy the
Obligations shall first have executed an agreement indemnifying Lender from any
loss or damage Lender may incur as the result of dishonored checks or other
items of payment received by Lender from Borrower, the Guarantor or any Customer
and applied to the Obligations.
(e) It is understood that Borrower may elect to terminate this
Agreement in its entirety only; no section or lending facility may be terminated
singly.
19. Events of Default. The occurrence of any of the following shall
constitute an Event of Default:
(a) failure to make payment of any of the Obligations when required
hereunder;
(b) failure by Borrower to perform or observe any term or covenant in
Section 13 of this Agreement (other than Section 13(l) which failure shall
constitute an Event of Default upon the occurrence thereof) and such failure or
breach shall continue for ten (10) days after the occurrence thereof.
(c) Borrower or any Subsidiary or any Guarantors shall fail to perform
under and/or commit any breach of this Agreement or any Ancillary Agreement to
which it is a party, or all or any of them, (which failure or breach is not
otherwise an Event of Default under this Section 19) and such failure or breach
shall continue for thirty (30) days after written notice from Lender to Borrower
or such Subsidiary or Guarantor.
(d) occurrence of a default under any agreement to which (i) Borrower
is a party with third parties which default has a material adverse effect upon
Borrower's and its Subsidiaries' business, operations, property or condition
(financial or otherwise, including, without limitation, all leases for premises
where inventory is located), taken as a whole, or (ii) any Subsidiary or
Guarantor of Borrower is a party with third parties which default has a material
adverse effect upon Borrower's and its Subsidiaries' business, operations,
property or condition (financial or otherwise), taken as a whole.
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<PAGE> 53
(e) any representation, warranty or statement made by Borrower or any
Subsidiary or the Guarantor hereunder, in any Ancillary Agreement to which it is
a party, any written certificate; statement or document delivered by Borrower or
such Subsidiary or Guarantor pursuant to the terms hereof, or in connection with
the transactions contemplated by this Agreement should be false or misleading in
any material respect when made or deemed made;
(f) an attachment or levy is made upon any of Borrower's or any
Subsidiary's or Guarantor's assets having an aggregate value in excess of
$1,000,000, or a judgment is rendered either against Borrower or any Subsidiary
or Guarantor or any of their property involving a liability of more than
$1,000,000, which shall not have been vacated, discharged, stayed or bonded
pending appeal within thirty (30) days from the entry thereof;
(g) any change in Borrower's or any Guarantor's condition or affairs
(financial or otherwise) which in Lender's good faith opinion, acting
reasonably, materially impairs the Collateral or the ability of Borrower to
perform its Obligations;
(h) any Lien on the Collateral (other than Inventory which is not a
material portion of the Inventory) created hereunder or under any Ancillary
Agreement for any reason ceases to be or is not a valid and perfected Lien on
the Collateral having a first priority interest except for Permitted Liens;
(i) Borrower or any Subsidiary or Guarantor shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part of
its property, (ii) make a general assignment for the benefit of creditors, (iii)
commence a voluntary case under the federal bankruptcy laws (as now or hereafter
in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vi) acquiesce to, or fail to have dismissed, within sixty (60) days, any
petition filed against it in any involuntary case under such bankruptcy laws, or
(vii) take any action for the purpose of effecting any of the foregoing;
(j) Borrower or any Subsidiary or Guarantor shall admit in writing its
inability, or be generally unable to pay its debts as they become due or cease
operations of its present businesses;
(k) a default by Borrower or any Subsidiary or Guarantor in the
payment, when due (after any applicable grace period, or extension for the
payment thereof), of any principal of or interest on any Indebtedness having a
principal amount, individually or in the aggregate, in excess of $500,000,
except so long as the holder or holders of such Indebtedness shall have waived
such default;
(l) if any Guarantor (i) attempts to terminate (other than as permitted
hereunder) or (ii) challenges the validity of, or its liability under, any
Guaranty;
(m) should any Guarantor default in the payment of any of its payment
obligations under the Guaranty and such default shall continue for a period of
ten (10) days hereunder or under the
49
<PAGE> 54
Guaranty or if any proceeding shall be brought to challenge the validity,
binding effect of this Agreement or the Guaranty, or should this Agreement or
the Guaranty cease to be a valid, binding and enforceable obligation of a
Guarantor;
(n) the occurrence and continuation of any Event of Default under the
Indenture unless waived thereunder;
(o) the occurrence and continuation of any Event of Default under the
O&G Credit Facility unless waived thereunder.
20. Remedies. Upon the occurrence of an Event of Default pursuant to
Section 19(i), all Obligations shall be immediately due and payable and this
Agreement shall be deemed terminated; upon the occurrence and continuation of
any other of the Events of Default, Lender shall have the right to demand
repayment in full of all Obligations, whether or not otherwise due. Until all
Obligations have been fully satisfied, Lender shall retain its security interest
in all Collateral. Lender shall have, in addition to all other rights provided
herein, the rights and remedies of a secured party under the Uniform Commercial
Code in effect in any applicable jurisdiction, and under other applicable law,
all other legal and equitable rights to which Lender may be entitled, including
without limitation, the right to take immediate possession of the Collateral, to
require each of Borrower and each Guarantor to assemble the Collateral, at its
expense, and to make it available to Lender at a place designated by Lender
which is reasonably convenient to all parties and to enter any of the premises
of Borrower or such Guarantor or wherever the Collateral shall be located, with
or without force or process of law, and to keep and store the same on said
premises until sold (and if said premises be the property of Borrower or such
Guarantor, Borrower or such Guarantor, as the case may be, agrees not to charge
Lender for storage thereof. Further, Lender may, at any time or times after the
occurrence and during the continuance of an Event of Default, sell and deliver
all Collateral held by or for Lender at public or private sale for cash, upon
credit or otherwise, at such commercially reasonable prices and upon such
commercially reasonable terms as Lender, in Lender's sole discretion, deems
advisable or Lender may otherwise recover upon the Collateral in any
commercially reasonable manner as Lender, in its sole discretion, deems
advisable. Except as to that part of the Collateral which is perishable or
threatens to decline speedily in nature or is of a type customarily sold on a
recognized market, the requirement of reasonable notice shall be met if such
notice is mailed postage prepaid to Borrower and the Guarantors at their
respective addresses as shown in Lender's records, at least ten (10) days before
the time of the event of which notice is being given. Lender may be the
purchaser at any sale, if it is public. The proceeds of sale shall be applied
first to all costs and expenses of sale, including all reasonable attorneys'
fees, and second to the payment (in whatever order Lender elects) of all
Obligations. Lender will return any excess to the Borrower or such Guarantor, as
the case may be, and the Borrower and the Guarantors shall remain liable to
Lender for any deficiency to the extent not prohibited by applicable law.
21. Waiver Cumulative Remedies. Failure by Lender to exercise any
right, remedy or option under this Agreement or any supplement hereto or any
other agreement between Borrower or any Guarantor, or any or all of them, and
Lender or delay by Lender in exercising the same, will not operate as a waiver;
no waiver by Lender will be effective unless it is in writing and then only to
the extent specifically stated. Lender's rights and remedies under this
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<PAGE> 55
Agreement will be cumulative and not exclusive of any other right or remedy
which Lender may have.
22. Application of Payments. Each of Borrower and each Guarantor
irrevocably waives the right to direct the application of any and all payments
at any time or times hereafter received by Lender from or on Borrower's behalf
and each of Borrower and each Guarantor hereby irrevocably agrees that following
an Event of Default Lender shall have the continuing exclusive right to apply
and reapply any and all payments received at any time or times hereafter against
Borrower's Obligations and any Guarantor's obligations under the Guaranty in
such manner as Lender may deem advisable notwithstanding any entry by Lender
upon any of Lender's books and records.
23. Depository Accounts. Any payment received by Borrower or any
Guarantor on account of any Collateral shall be held by it in trust for Lender
and shall promptly be delivered in kind to Lender or deposited into a cash
collateral account at such bank as Lender may designate for application to
payment of the Obligations. Each of Borrower and each Guarantor shall also
execute such further documents as Lender may deem necessary to establish such an
account and Lender's dominion and control over all funds deposited in such
account.
24. Lock Box Accounts. Borrower shall instruct all of its Customers to
make such payments on account of Borrower's Receivables to, if by wire, Bank of
New York, 48 Wall Street, New York, New York, ABA #021-0000-18 for credit to
TransTexas Gas Corporation Account #809-065-3114, and if by mail, to P.O. Box
730086, Dallas, TX 75373-0086, or, if notified by Lender to Borrower, to an
account under Lender's dominion and control at such bank as Lender may
designate. Borrower shall also execute such further documents as Lender may deem
necessary to establish such an account and Lender's dominion and control over
all funds deposited in such account.
25. Revival. Each of Borrower and each Guarantor further agrees that to
the extent Borrower or such Guarantor makes a payment or payments to Lender,
which payment or payments or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy act, state
or federal law, common law or equitable cause, then, to the extent of such
payment or repayment, the Obligations or part thereof intended to be satisfied
shall be revived and continued in full force and effect as if said payment had
not been made.
26. Notices. Any notice or request hereunder may be given to Borrower,
each Guarantor or Lender at the respective addresses set forth below or as may
hereafter be specified in a notice designated as a change of address under this
paragraph. Any notice or request hereunder shall be given by registered or
certified mail, return receipt requested, or by overnight courier or by telecopy
(with electronic confirmation of same). Notices and requests shall be, in the
case of those by mail or overnight courier, deemed to have been given when
deposited in the mail or with the overnight courier, and, in the case of a
telecopy, when confirmed electronically.
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<PAGE> 56
Notices shall be provided as follows:
If to the Lender: GMAC Commercial Credit LLC
1290 Avenue of the Americas
New York, New York 10104
Attention: Jack MacGowan
Telephone: (212) 408-7531
Telecopy: (212) 408-4384
If to TransTexas: TransTexas Gas Corporation
1300 North Sam Houston Parkway East, Suite 310
Houston, Texas 77032-2949
Attention: Ed Donahue
Telephone: (281) 987-8600
Telecopy: (281) 986-8877
27. Governing Law; Consent to Exclusive Jurisdiction and Waiver of Jury
Trial. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. LENDER SHALL HAVE THE RIGHTS
AND REMEDIES OF A SECURED PARTY UNDER APPLICABLE LAW INCLUDING, BUT NOT LIMITED
TO, THE UNIFORM COMMERCIAL CODE OF NEW YORK.
EACH OF BORROWER AND EACH GUARANTOR HEREBY AGREES THAT ALL ACTIONS AND
PROCEEDINGS RELATING DIRECTLY OR INDIRECTLY TO OR ARISING IN ANY WAY FROM THIS
AGREEMENT OR ANY ANCILLARY AGREEMENT TO WHICH BORROWER OR SUCH GUARANTOR IS A
PARTY OR ANY OBLIGATIONS SHALL BE LITIGATED EXCLUSIVELY IN THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR, AT LENDER'S OPTION, IN
ANY OTHER COURT OF COMPETENT JURISDICTION LOCATED IN NEW YORK STATE AS LENDER
MAY SELECT EXCEPTING ONLY THAT LENDER MAY BRING AN ACTION WHENEVER IT MAY BE
NECESSARY TO PROTECT ITS RIGHTS IN COLLATERAL. EACH OF BORROWER AND EACH
GUARANTOR HEREBY FURTHER AGREES THAT SUCH COURTS ARE CONVENIENT FORUMS AND EACH
OF BORROWER AND EACH GUARANTOR HEREBY SUBMITS TO THE PERSONAL JURISDICTION OF
SUCH COURTS. IT IS THE EXPRESS INTENT OF THE PARTIES HERETO TO CONFINE ALL SUCH
ACTIONS AND PROCEEDINGS TO COURTS LOCATED WITHIN THE STATE OF NEW YORK EXCEPTING
ONLY TO SUITS BY LENDER TO PROTECT ITS RIGHTS TO ITS COLLATERAL AS PREVIOUSLY
SET FORTH, AND EACH OF BORROWER AND EACH GUARANTOR HEREBY WAIVES ANY AND ALL
PROCEDURAL RIGHTS OR DEVICES INSOFAR AS SUCH RIGHTS OR DEVICES WOULD PREVENT OR
INTERFERE WITH THE REALIZATION OF THAT INTENT.
EACH OF BORROWER AND EACH GUARANTOR HEREBY AGREES NOT TO JOIN ANY CLAIM
AGAINST LENDER WITH ANY CLAIM AGAINST ANY OTHER PERSON OR ENTITY (OTHER THAN ANY
TRANSFEREE OR ASSIGNEE UNDER SECTION 16), AND EACH OF BORROWER AND EACH
GUARANTOR HEREBY AGREES THAT ANY SUCH JOINDER OF CLAIMS SHALL BE DEEMED TO BE
FRAUDULENT PER SE. IN THE EVENT ANY CLAIM AGAINST LENDER IS JOINED WITH ANY
CLAIM AGAINST ANY OTHER PERSON OR ENTITY (OTHER THAN ANY
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<PAGE> 57
TRANSFEREE OR ASSIGNEE UNDER SECTION 16), EACH OF BORROWER AND EACH GUARANTOR
HEREBY AGREES THAT UPON DEMAND BY LENDER THEY SHALL TAKE ALL STEPS NECESSARY TO
SECURE THE SEVERANCE OF SUCH CLAIMS. EACH OF BORROWER AND EACH GUARANTOR FURTHER
AGREES THAT VENUE IN THE COURTS OF ANY STATE OTHER THAN THE STATE OF NEW YORK
(INCLUDING THE STATE OF TEXAS) IS INCONVENIENT FOR LENDER AND THAT TRANSFER OF
VENUE TO THE COUNTY OF NEW YORK, NEW YORK IS APPROPRIATE UNDER THE DOCTRINE OF
FORUM NON CONVENIENS.
EACH OF BORROWER AND EACH GUARANTOR, WAIVES PERSONAL SERVICE OF PROCESS
AND CONSENTS THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO IT AT ITS ADDRESS
APPEARING ON LENDER'S RECORDS, AND SERVICE SO MADE SHALL BE DEEMED COMPLETED TWO
(2) BUSINESS DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED.
ALL THE PARTIES HERETO WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING BETWEEN BORROWER OR A GUARANTOR, OR BOTH, AND LENDER. BORROWER AND
EACH GUARANTOR WAIVES THE RIGHT TO ASSERT IN ANY ACTION OR PROCEEDING WITH
REGARD TO THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR ANY OF THE OBLIGATIONS ANY
OFFSETS OR COUNTERCLAIMS (OTHER THAN COMPULSORY COUNTERCLAIMS) WHICH THEY MAY
HAVE.
EACH OF BORROWER AND EACH GUARANTOR ACKNOWLEDGES THAT THE PROVISIONS OF
THIS SECTION 27 ARE A MATERIAL INDUCEMENT TO THE LENDER TO ENTER INTO THIS
AGREEMENT AND THE ANCILLARY DOCUMENTS AND THAT IN LIGHT OF THE VOLUME AND NATURE
OF LITIGATION THAT BORROWER AND ITS AFFILIATES HAVE BEEN INVOLVED IN, IF
BORROWER AND THE GUARANTORS HAD NOT AGREED TO THE FOREGOING, LENDER WOULD NOT
HAVE ENTERED INTO THIS AGREEMENT OR ANY OF THE ANCILLARY AGREEMENTS.
EACH OF BORROWER AND EACH GUARANTOR FURTHER ACKNOWLEDGES THAT IT HAS
REVIEWED THIS SECTION WITH, AND HAS HAD THE ADVICE OF, COMPETENT LEGAL COUNSEL
OF ITS OWN CHOOSING, WITH RESPECT TO THIS SECTION.
28. Limitation of Liability. Borrower acknowledges and understands that
in order to assure repayment of the Obligations hereunder Lender may be required
to exercise any and all of Lender's rights and remedies hereunder and agree that
neither Lender nor any of Lender's agents shall be liable for acts taken or
omissions made in connection therewith except for actual bad faith, gross
negligence or willful misconduct.
29. Entire Understanding. This Agreement and the Ancillary Agreements
contain the entire understanding between Borrower, the Guarantors and Lender and
any promises,
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representations, warranties or guarantees not herein contained shall have no
force and effect unless in writing, signed by the Borrower's, the Guarantor's or
Lender's respective officers.
30. Modification. Neither this Agreement, the Ancillary Agreements, nor
any portion or provisions thereof may be changed, modified, amended, waived,
supplemented, discharged, cancelled or terminated orally or by any course of
dealing, or in any manner other than by an agreement in writing, signed by the
party to be charged.
31. Severability. Wherever possible each provision of this Agreement or
the Ancillary Agreements shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Agreement or the
Ancillary Agreements shall be prohibited by or invalid under applicable law such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
thereof.
32. Captions. All captions are and shall be without substantive meaning
or content of any kind whatsoever.
33. Confidentiality. Lender agrees that it will use reasonable efforts
not to disclose (other than to its employees, affiliates, auditors or counsel or
to any other party hereto provided that such employees, affiliates, auditors or
counsel are informed of this confidentiality provision and agree to be bound
hereby) any information with respect to the Borrower or the Subsidiaries which
is furnished pursuant to this Agreement or any other Ancillary Agreement
executed pursuant hereto, without the prior written consent of the Borrower or
the Subsidiaries, as applicable, provided that the foregoing shall not apply to,
and Lender may disclose any such information (a) as has become generally
available to the public by no fault of Lender, (b) to any of its examiners or as
may be required by any municipal, state or Federal regulatory body having or
claiming to have jurisdiction over Lender or by the Federal Reserve Board or the
Federal Deposit Insurance Corporation or similar organizations (whether in the
United States or elsewhere) or their successors, (c) as may be required in
response to any summons or subpoena issued by any court having jurisdiction over
Lender, (d) in order to comply with any law, order, regulation or ruling
applicable to Lender, (e) to any prospective transferee or participant consented
to by Borrower (which consent will not be unreasonably withheld or delayed) in
connection with any contemplated transfer of any interest herein by Lender in
accordance with Section 16, provided, that such prospective transferee or
participant (other than an Affiliate of Lender) executes an agreement with the
Borrower containing provisions substantially identical to those contained in
this Section 33, (f) with the prior written authorization of the Borrower or the
Subsidiaries, as applicable, (g) already known by, or in the possession of
Lender without restrictions on the disclosure thereof at the time such
information was received by Lender or (h) in connection with the exercise of any
remedies by Lender.
34. Guarantee.
(a) Guaranty. Each Guarantor jointly and severally unconditionally
guaranties to each Lender the prompt payment when due (whether by acceleration
or otherwise) of all present and future Obligations, and irrespective of the
genuineness, validity, regularity or enforceability of such Obligations, or of
any instrument evidencing any of the Obligations or of any collateral
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<PAGE> 59
therefor or of the existence or extent of such collateral, and irrespective of
the allowability, allowance or disallowance of any or all of the Obligations in
any case commenced by or against Borrower under Title 11, United States Code,
including, without limitation, post-petition interest, fees, costs and charges
that would have accrued or been added to the Obligations but for the
commencement of such case.
(b) No Impairment. Agent may at any time and from time to time, either
before or after the maturity thereof, without notice to or further consent of
any Guarantor, extend the time of payment of, exchange or surrender any
collateral for, renew or extend any of the Obligations or increase or decrease
the interest rate thereon, and may also make any agreement with Borrower or with
any other party to or person liable on any of the Obligations, or interested
therein, for the extension, renewal, payment, compromise, discharge or release
thereof, in whole or in part, or for any modification of the terms thereof or of
any agreement between any Lender and Borrower or any such other party or Person,
or make any election of rights any Lender may deem desirable under the United
States Bankruptcy Code, as amended, or any other federal or state bankruptcy,
reorganization, moratorium or insolvency law relating to or affecting the
enforcement of creditors' rights generally (any of the foregoing, an "Insolvency
Law") without in any way impairing or affecting the obligations of Guarantors
hereunder. The obligations of Guarantors hereunder shall be effective regardless
of the subsequent incorporation, merger or consolidation of Borrower, or any
change in the composition, nature, personnel or location of Borrower and shall
extend to any successor entity to Borrower, including a debtor in possession or
the like under any Insolvency Law.
(c) Guaranty Absolute. Each Guarantor guarantees that the Obligations
will be paid strictly in accordance with the terms of this Agreement and/or any
other document, instrument or agreement creating or evidencing the Obligations,
regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of Borrower with respect
thereto. Each Guarantor hereby knowingly accepts the full range of risk
encompassed within a contract of "continuing guaranty" which risk includes the
possibility that Borrower will contract additional indebtedness for which such
Guarantor may be liable hereunder after Borrower's financial condition or
ability to pay its lawful debts when they fall due has deteriorated, whether or
not Borrower has properly authorized incurring such additional indebtedness.
Each Guarantor acknowledges that (i) no oral representations, including any
representations to extend credit or provide other financial accommodations to
Borrower, have been made by Agent or any Lender to induce such Guarantor to
enter into this Agreement and (ii) any extension of credit to Borrower shall be
governed solely by the provisions of this Loan Agreement and the Ancillary
Agreements. The liability of each Guarantor under this Agreement shall be
absolute and unconditional, in accordance with its terms, and shall remain in
full force and effect without regard to, and shall not be released, suspended,
discharged, terminated or otherwise affected by, any circumstance or occurrence
whatsoever, including, without limitation: (a) any waiver, indulgence, renewal,
extension, amendment or modification of or addition, consent or supplement to or
deletion from or any other action or inaction under or in respect of this
Agreement and the Ancillary Agreements or any other instruments or agreements
relating to the Obligations or any assignment or transfer of any thereof; (b)
any lack of validity or enforceability of any of this Agreement, the Ancillary
Agreements or any assignment or transfer of any thereof; (c) any furnishing of
any additional security to Agent and Lenders or its assignees or any acceptance
thereof or any release of any security by Agent and Lenders or its
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<PAGE> 60
assignees; (d) any limitation on any party's liability or obligation under this
Agreement, the Ancillary Agreements or any other documents, instruments or
agreements relating to the Obligations or any assignment or transfer of any
thereof or any invalidity or unenforceability, in whole or in part, of any such
document, instrument or agreement or any term thereof; (e) any bankruptcy,
insolvency, reorganization, composition, adjustment, dissolution, liquidation or
other like proceeding relating to Borrower, or any action taken with respect to
this Agreement by any trustee or receiver, or by any court, in any such
proceeding, whether or not the undersigned shall have notice or knowledge of any
of the foregoing; (f) any exchange, release or nonperfection of any Collateral,
or any release, or amendment or waiver of or consent to departure from any
guaranty or security, for all or any of the Obligations; or (g) any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, any Guarantor. Any amounts due from any Guarantor to Agent and
Lenders shall bear interest until such amounts are paid in full at the highest
rate then applicable to the Obligations.
(d) Waivers. (i) This is a guaranty of payment and not of collection.
Neither Agent nor any Lender shall be under any obligation to institute suit,
exercise rights or remedies or take any other action against Borrower or any
other person liable with respect to any of the Obligations or resort to any
collateral security held by it to secure any of the Obligations as a condition
precedent to any Guarantor being obligated to perform as agreed herein and each
Guarantor hereby waives any and all rights which it may have by statute or
otherwise which would require Agent or any Lender to do any of the foregoing.
Each Guarantor further consents and agrees that Lender shall not be under any
obligation to marshal any assets in favor of any Guarantor, or against or in
payment of any or all of the Obligations. Each Guarantor hereby waives all
rights of suretyship. Each Guarantor hereby waives any rights to interpose any
defense, counterclaim or offset of any nature and description (other than
affirmative defenses and compulsory counterclaims) which it may have or which
may exist between and among Agent, any Lender, Borrower and/or any Guarantor
with respect to any Guarantor's obligations hereunder, or which Borrower may
assert on the underlying debt, including but not limited to failure of
consideration, breach of warranty, fraud, payment (other than cash payment in
full of the Obligations), statute of frauds, bankruptcy, infancy, statute of
limitations, accord and satisfaction, and usury.
(ii) Each Guarantor further waives (i) notice of the acceptance
of this Agreement, of the making of any such loans or extensions of credit, and
of all notices and demands of any kind to which such Guarantor may be entitled,
including, without limitation, notice of adverse change in Borrower's financial
condition or of any other fact which might materially increase the risk of any
Guarantor and (ii) presentment to or demand of payment from anyone whomsoever
liable upon any of the Obligations, protest, notices of presentment, non-payment
or protest and notice of any sale of collateral security or any default of any
sort.
(e) Payments from Guarantor. Agent, with or without notice to any
Guarantor, may apply on account of the Obligations any payment from any
Guarantor or any other guarantor, or amounts realized from any security for the
Obligations.
(f) No Termination. This is a continuing irrevocable guaranty and shall
remain in full force and effect and be binding upon each Guarantor and each
Guarantor's successors and assigns, until all of the Obligations have been paid
in full and this Agreement has been terminated or until the Guaranty is released
or terminated in accordance with the terms of this
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<PAGE> 61
Agreement. If any of the present or future Obligations are guaranteed by Persons
in addition to Guarantors, the death, release or discharge in whole or in part
or the bankruptcy, merger, consolidation, incorporation, liquidation or
dissolution of one or more of them shall not discharge or affect the liabilities
of any Guarantor hereunder.
(g) Recapture. Anything in this Agreement to the contrary
notwithstanding, if Agent or any Lender receives any payment or payments on
account of the liabilities guarantied hereby, which payment or payments or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver, or
any other party under any Insolvency Law, common law or equitable doctrine, then
to the extent of any sum not finally retained by Agent or any Lender, each
Guarantor's obligations to Agent or such Lender shall be reinstated and this
Agreement shall remain in full force and effect (or be reinstated) until payment
shall have been made to Lender, which payment shall be due on demand.
(h) Contribution. In order to provide for just and equitable
contribution among the guarantors, the guarantors agree, inter se, that in the
event any payment or distribution is made by any Guarantor (a "Funding
Guarantor") under the Guaranty, such Funding Guarantor shall be entitled to a
contribution from each other Guarantor in a pro rata amount based on the
Adjusted Net Assets of each Guarantor (including the Funding Guarantor) for all
payments, damages and expenses incurred by that Funding Guarantor in discharging
Borrower's obligations with respect to the Obligations or any other Guarantor's
obligations with respect to the Guaranty.
35. Disposition of Certain Collateral Without Requesting Release.
Borrower or its Subsidiaries may, so long as an Event of Default shall not have
occurred and be continuing or would exist after giving effect thereto and
without requesting or receiving the consent of Lender, make cash payments
(including repayments of Indebtedness permitted to be incurred hereby) that are
not otherwise prohibited by this Agreement, provided, however, Borrower shall
not dispose of or transfer any Collateral included in Receivables Availability
or Inventory Availability or make any payment if after giving effect thereto an
Overadvance shall exist.
36. Requesting Release of Collateral.
(a) Upon receipt of a Release Request, Agent shall execute and
deliver, within five Business Days from the receipt of such Release Request, any
instruments deemed by Borrower to be reasonably necessary or reasonably
appropriate to release all or a part of the Collateral from the security
interests of Agent, if the provisions of this Section 36 have been complied
with. Any such Release Request shall request Lender to execute one or more
specifically described release instruments (which release instruments shall
accompany such Release Request) and shall certify (i) that no Event of Default
has occurred and is continuing and (ii) that no Collateral included in
Receivables Availability or Inventory Availability shall be disposed if after
giving effect to such disposition on Overadvance shall exist, and (iii) that
either (A) the release of the Inventory to be released is required pursuant to,
or is required in order to effect compliance with, the Plan or a Plan Order or
(B) the Collateral is Inventory which will be disposed of in compliance with
Section 8(a).
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(b) At the request of Borrower Agent shall, in lieu of releasing
any Collateral pursuant to this Section 36, execute and deliver a Subordination
Agreement with respect to such Collateral in form and substance acceptable to
Agent.
35. 37. Counterparts; Telecopied Signatures. This Agreement may be
executed in any number of and by different parties hereto on separate
counterparts, all of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
36. 38. Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
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THIRD AMENDED AND RESTATED
ACCOUNTS RECEIVABLE MANAGEMENT
AND SECURITY AGREEMENT
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
GMAC COMMERCIAL CREDIT LLC
By:
----------------------------
Name:
Title:
TRANSTEXAS GAS CORPORATION
By:
----------------------------
Name:
Title:
59
<PAGE> 1
EXHIBIT 10.58
SERVICES AGREEMENT
THIS SERVICES AGREEMENT (this "Agreement") dated March 17, 2000, is
entered into by and among TNGC Holdings Corporation, a Delaware corporation
("TNGC"), and TransTexas Gas Corporation, a Delaware corporation ("TransTexas").
TNGC and its affiliates, including, without limitation, TransAmerican Natural
Gas Corporation ("TransAmerican"), are referred to in this Agreement as the
"Services Buyers."
The Services Buyers wish to retain TransTexas to render the services
described in Section 1.1 hereof, and TransTexas wishes to provide such services,
pursuant to the terms and conditions stated herein.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the sufficiency of which is
hereby acknowledged, the parties agree as follows:
I.
SERVICES
1.1 Services. Subject to the terms and provisions set forth in this
Agreement, TransTexas shall, at a Services Buyer's request, provide to such
Services Buyer administrative, legal, accounting (including accounts payable and
accounts receivable), purchasing, treasury, tax, risk management, information
systems, human resources and employee benefits services (the "Services").
1.2 Personnel Matters. Without limiting the generality of Section 1.1
of this Agreement, TransTexas shall provide all labor and administrative,
supervisory and other personnel necessary to perform the Services; provided that
TransTexas shall have the right to use independent contractors (at its own
expense unless the prior written approval of the Services Buyers has been
obtained) in performing such Services as it may deem advisable in its reasonable
judgment.
1.3 Independent Contractor Status. TransTexas shall perform the
Services as an independent contractor. The number of employees, the selection
and retention of such employees, the hours of labor and the compensation for
services to be paid to any and all such employees of TransTexas shall be
determined by TransTexas. A supervisor, manager or officer of TransTexas with
whom the Services Buyers may consult concerning the Services shall be available
to the Services Buyers at all reasonable times. None of the employees, agents,
contractors and subcontractors hired by TransTexas to perform services hereunder
shall be deemed to be the employees, agents, contractors and subcontractors of
the relevant Services Buyer unless separately contracted by the relevant
Services Buyer.
1
<PAGE> 2
1.4 Necessary Information. The Services Buyers shall furnish to
TransTexas all information, programs, know-how, methods or methodology within
the Services Buyers' control as may be necessary or appropriate for the
performance of the Services by TransTexas.
1.5 Waiver of Conflicts in Providing Legal Services.
Each of the parties acknowledges that the provision of legal services
hereunder by lawyers of TransTexas' Legal Department may result in conflicts of
interest between one or more of the Services Buyers and TransTexas and its
affiliates (the "TransTexas Group"). The parties agree that such lawyers will
not represent any of the Services Buyers in any matter in which their interests
are opposed to the interests of one or more members of the TransTexas Group.
However, it is agreed that such lawyers may represent one or more members of the
TransTexas Group and at the same time provide legal services to one or more of
the Services Buyers in connection with unrelated matters.
Rule 1.06 of the Texas Disciplinary Rules of Professional Conduct (the
"Rules"), by which Texas lawyers are governed, allows for multiple
representation in the circumstances described above if (i) the lawyer reasonably
believes that the representation of each client will not be materially affected
and (ii) each potentially affected client consents to such representation after
full disclosure of the existence, nature, implications and possible adverse
consequences of the common representation and the advantages involved, if any.
Some of the potential adverse consequences of representation of both
one or more members of the TransTexas Group and one or more of the Services
Buyers in unrelated matters at the same time are as follows:
(a) A lawyer representing a member of the TransTexas Group against
a Services Buyer might have feelings of divided loyalty, and
as a result might give preference to the interests of one
client over those of the other client.
(b) A lawyer might have to withdraw from representation if an
unwaivable conflict appears.
(c) A lawyer representing a Services Buyer might fail to recognize
a viable claim by such Services Buyer against a member of the
TransTexas Group because of such lawyer's relationship with
TransTexas and representation of members of the TransTexas
Group in unrelated matters. Conversely, a lawyer representing
a member of the TransTexas Group might fail to recognize a
viable claim by such member of the TransTexas Group against a
Services Buyer, for the reasons stated in Paragraph (a) above.
(d) A lawyer might intentionally or inadvertently share one
client's confidential information with another.
2
<PAGE> 3
Each party hereto consents to such multiple representations by the
lawyers in the TransTexas Legal Department and waives the potential conflicts to
the extent that the Rules permit such waiver; provided, however, that either
party may revoke such waiver by giving written notice to the other party with a
copy to the TransTexas Legal Department.
Each party hereto acknowledges that, by paying the Services Fee
(defined below), it may be deemed to be reimbursing TransTexas for compensation
paid to lawyers of the TransTexas Legal Department. Each party hereto receiving
legal services from members of the TransTexas Legal Department pursuant hereto
hereby consents to the lawyers of the TransTexas Legal Department receiving
compensation for such services from TransTexas.
II.
COMPENSATION
2.1 Services Fees. In consideration of the Services to be provided by
TransTexas pursuant to this Agreement, the Services Buyers shall pay to
TransTexas, in cash, a fee in the amount of $2,000.00 per month (the "Services
Fee").
2.2 Reimbursable Expenses. In addition to the Services Fee provided for
in Section 2.1 above, TransTexas shall be entitled to be reimbursed by each
Services Buyer for expense items paid by TransTexas to third parties and
directly attributable to Services provided to that Services Buyer.
2.3 Allocation. The Services Buyers may allocate the obligation for
payments under this Agreement at their discretion, provided no such allocation
shall relieve any Services Buyer from liability to TransTexas to pay TransTexas
for Services provided to such Services Buyer.
2.4 Joint and Several Liability. The Services Buyers shall be jointly
and severally liable for the Services Fee.
III.
MISCELLANEOUS
3.1 Insurance Policies and Benefits Plans. The parties acknowledge that
certain insurance policies of TNGC or TransAmerican include coverage for
TransTexas, and that certain insurance policies of TransTexas include coverage
for the Services Buyers. The parties hereto agree to use commercially reasonable
efforts promptly to amend or replace such policies so that TransTexas is not
insured under any Services Buyers' policy and no Service Buyer is insured under
any TransTexas policy. TransTexas is currently included in TransAmerican's 401K
plan. The parties agree to use commercially reasonable efforts promptly to
create a new 401K plan in which only TransTexas employees will participate.
3.2 Term. This Agreement shall become effective upon the date first
noted above and shall continue in effect until (i) terminated, with respect to
such party's rights and obligations
3
<PAGE> 4
hereunder, by any party hereto upon 30 days written notice to the other party or
(ii) September 30, 2001.
3.3 Amendments. This Agreement may not be amended.
3.4 Notice. All notices and other communications required or permitted
hereunder shall be in writing and, unless otherwise provided in this Agreement,
shall be deemed to have been duly given when delivered in person or my mail or
when dispatched by telegram or electronic facsimile transfer (confirmed in
writing by mail simultaneously dispatched) to the addressee at the address
specified below:
If to any of the Services Buyers:
c/o TNGC Holdings Corporation
1300 North Sam Houston Parkway East
Suite 300
Houston, Texas 77032
If to TransTexas:
c/o TransTexas Gas Corporation
1300 North Sam Houston Parkway East
Suite 310
Houston, Texas 77032
or such other address as either party may from time to time designate
by like notice.
3.5 Limitations on Assignment. No party to this Agreement shall assign
or transfer any of its rights or obligations under this Agreement without the
prior written consent of the other parties. Notwithstanding the foregoing,
nothing herein shall prohibit TransTexas from hiring any subcontractors or
agents to provide the Services; provided that such hiring shall not relieve
TransTexas of any of its obligations hereunder.
3.6 Governing Law. This Agreement shall be governed by the internal
laws of the State of Texas without regard to principles of conflicts of law.
3.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed an original, but
all of such counterparts together shall constitute one and the same instrument.
3.8 Entire Agreement. This Agreement constitutes the entire agreement
of the parties with respect to the subject matter hereof.
3.9 Headings. The section headings of this Agreement are only for the
purpose of reference and shall not affect the meaning hereof.
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<PAGE> 5
3.10 Cancellation of Prior Services Agreements. Upon execution and
delivery of this Agreement, any and all services agreements between TNGC or any
of its affiliates and TransTexas which may be in effect immediately prior to
such execution and delivery shall be deemed canceled and of no further force or
effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
TNGC HOLDINGS CORPORATION
By:
---------------------------------------------
TRANSTEXAS GAS CORPORATION
By:
---------------------------------------------
5
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS
We consent to the incorporation by reference in the registration statement
of TransTexas Gas Corporation (the "Company") on Form S-3 (33-91494) of, and the
references to, our reserve report dated February 1, 2000 ("Reserve Report"), and
to the use of our name under the caption "Experts" and elsewhere therein in the
form and context in which they appear. We also consent to the references to our
Reserve Report and to the use of our name in the Company's Annual Report on Form
10-K for the year ended January 31, 2000 in the form and context in which they
appear.
NETHERLAND, SEWELL & ASSOCIATES, INC.
By: /s/ DANNY D. SIMMONS
-------------------------------------
Danny D. Simmons
Senior Vice President
Houston, Texas
May 1, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT JANUARY 31, 2000 AND THE CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE YEAR ENDED JANUARY 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> FEB-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 18,288
<SECURITIES> 0
<RECEIVABLES> 20,699
<ALLOWANCES> 0
<INVENTORY> 1,741
<CURRENT-ASSETS> 41,654
<PP&E> 327,087
<DEPRECIATION> 0
<TOTAL-ASSETS> 369,254
<CURRENT-LIABILITIES> 32,754
<BONDS> 251,570
0
0
<COMMON> 740
<OTHER-SE> (740)
<TOTAL-LIABILITY-AND-EQUITY> 369,254
<SALES> 111,400
<TOTAL-REVENUES> 113,732
<CGS> 0
<TOTAL-COSTS> 123,364
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,526
<INCOME-PRETAX> 2,825
<INCOME-TAX> 101,000
<INCOME-CONTINUING> (7,175)
<DISCONTINUED> 0
<EXTRAORDINARY> 436,490
<CHANGES> 0
<NET-INCOME> 429,315
<EPS-BASIC> 7.46
<EPS-DILUTED> 7.46
</TABLE>
