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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 COMMISSION FILE NUMBER 1-13916
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UNION PACIFIC RESOURCES GROUP INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
UTAH 13-2647483
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
801 CHERRY STREET
FORT WORTH, TEXAS 76102
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (817) 877-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH NAME OF EACH EXCHANGE ON WHICH
CLASS REGISTERED
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COMMON STOCK NEW YORK STOCK EXCHANGE, INC.
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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. / /
As of February 27, 1998, the aggregate market value of the registrant's
common stock held by non-affiliates (using the New York Stock Exchange closing
price) was approximately $5.5 billion.
The number of shares outstanding of the registrant's common stock as of
February 27, 1998 was 251,043,100.
Certain portions of the registrant's definitive Proxy Statement for the
Annual Meeting of Shareholders to be held on May 20, 1998 (the 'Proxy
Statement') are incorporated in Part III by reference.
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TABLE OF CONTENTS
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PART I
Item 1. Business....................................................................................... 1
Item 2. Properties..................................................................................... 10
Item 3. Legal Proceedings.............................................................................. 13
Item 4. Submission of Matters to a Vote of Security Holders............................................ 14
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters...................... 16
Item 6. Selected Financial Data........................................................................ 16
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................................................... 17
Item 8. Financial Statements and Supplementary Data.................................................... 32
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........... 63
PART III
Item 10. Directors and Executive Officers of the Registrant............................................. 64
Item 11. Executive Compensation......................................................................... 64
Item 12. Security Ownership of Certain Beneficial Owners and Management................................. 64
Item 13. Certain Relationships and Related Transactions................................................. 64
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................................ 65
Signatures................................................................................................ 70
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Quantities of natural gas are expressed in this report in terms of
thousand cubic feet ('Mcf'), million cubic feet ('MMcf') or billion cubic feet
('Bcf'). Oil and natural gas liquids are quantified in terms of barrels ('Bbl'),
thousands of barrels ('MBbl') or millions of barrels ('MMBbl'). Oil and natural
gas liquids are compared to natural gas in terms of thousands of cubic feet of
natural gas equivalent ('Mcfe'), millions of cubic feet of natural gas
equivalent ('MMcfe'), billions of cubic feet of natural gas equivalent ('Bcfe')
or trillions of cubic feet of natural gas equivalent ('Tcfe'). One barrel of oil
or natural gas liquids is the energy equivalent of six Mcf of natural gas. Daily
oil and gas production is signified by the addition of the letter 'd' to the end
of the terms defined above. Natural gas volumes also may be expressed in terms
of one million British thermal units ('MMBtu'), which is approximately equal to
one Mcf. With respect to information relating to working interests in wells or
acreage, 'net' oil and gas wells or acreage is determined by multiplying gross
wells or acreage by the working interest owned therein. Unless otherwise
specified, all references to wells and acres are gross wells and acres. Natural
gas liquids are referred to herein as ('NGLs').
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PART I
ITEM 1. BUSINESS
GENERAL
Union Pacific Resources Group Inc., a Utah corporation (the 'Company'), is
engaged primarily in the exploration for and the development and production of
natural gas, natural gas liquids and crude oil in several major producing basins
in the United States and Canada. The Company emphasizes natural gas in its
exploration and production activities and also owns and operates significant
assets, in proximity to its principal producing properties, dedicated to 'gas
value chain' activities, which consist of the gathering, processing,
transportation and marketing of natural gas and natural gas liquids. The
Company, through its wholly owned subsidiary, Union Pacific Fuels, Inc. ('UP
Fuels'), markets approximately 76% of the Company's natural gas, 88% of its
crude oil and 96% of its natural gas liquids, together with significant volumes
of natural gas, natural gas liquids and crude oil produced by others. In
addition, the Company engages in the hard minerals business through nonoperated
joint venture and royalty interests in several coal and trona (natural soda ash)
mines located on lands within and adjacent to its Land Grant (hereinafter
defined) holdings in Wyoming. The 'Land Grant' consists of land granted by the
Federal government to a predecessor and former affiliate of the Company in the
mid-1800s which passes through the states of Colorado and Wyoming and into Utah.
The Company has fee ownership of the mineral rights under approximately 7.9
million acres in the Land Grant. As of December 31, 1997, over 90% of the
Company's revenues are generated, and assets and reserves, are located in the
United States.
BUSINESS STRATEGY
The Company continues to be primarily in the business of developing and
exploring for natural gas and crude oil in its core geographic areas. The
Company's strategy is to focus on its core geographic areas in which the Company
can apply economies of scale, its operating experience and its expertise in
advanced drilling and completion technologies, as well as, to increase margins
through reductions in drilling and operating costs, and to add value through
effective sales and distribution networks. This focus generates increased
production and enhanced well results. The Company also increases its drill site
inventory through exploration, farm-in agreements and acquisitions of properties
and companies. The Company recently purchased the capital stock of Norcen Energy
Resources Limited ('Norcen') for approximately $2.6 billion (not including
Norcen debt). The Norcen acquisition will enhance the Company's onshore and
offshore Gulf Coast core area and add new core areas in Canada, Guatemala and
Venezuela. See page 27 for additional information including information
regarding the impact of the Norcen acquisition on the Company's debt structure.
The Company strives to improve its service to its customers and other
constituencies, including its partners, governmental agencies, interest owners,
vendors, employees, investors, bankers, and producers. The Company believes that
providing each customer with a high level of service will differentiate the
Company from its competition and provide the Company with a competitive
advantage.
PRODUCING PROPERTIES OPERATIONS
The Company's oil and gas activities currently are concentrated in six core
geographic areas: (1) the Austin Chalk trend in Texas and Louisiana, managed by
the Austin Chalk business unit, (2) the western portion of the Land Grant Area
in Wyoming and Utah, managed by the Rockies business unit, (3) the eastern
portion of the Land Grant in Colorado and Wyoming, with additional operations
primarily in Kansas, southern Texas and western Canada, managed by the South
Texas/Plains/Canada business unit, (4) the onshore and offshore Gulf Coast area,
managed by the Gulf Onshore/Offshore business unit, (5) eastern Texas, managed
by the East Texas business unit, and (6) western Texas, managed by the West
Texas business unit.
Natural gas and natural gas liquids constituted 81% of the Company's total
proved reserves of 4.1 Tcfe as of December 31, 1997, and 83% of the Company's
sales volumes of 1.9 Bcfed for the year then ended. For the same period,
approximately 69% of the Company's production from producing properties was
attributable to Company-operated properties.
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The following table sets forth certain proved reserve and production
information as of December 31, 1997 with respect to each of the Company's
business units.
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TOTAL PRODUCING
PROVED PERCENT PROPERTY PERCENT
RESERVES 1 OF VOLUME 2 OF
BUSINESS UNIT (BCFE) TOTAL (MMCFED) TOTAL
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Austin Chalk................................................... 724 18% 558 35%
Rockies........................................................ 1,203 29 414 26
South Texas/Plains/Canada...................................... 602 15 213 13
Gulf Onshore/Offshore.......................................... 327 8 122 8
East Texas..................................................... 651 16 178 11
West Texas..................................................... 593 14 114 7
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Total..................................................... 4,100 100% 1,599 100%
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1 Reflects future production attributable to (i) the Company's natural gas,
natural gas liquids and crude oil production from producing
properties and (ii) the Company's portion, by virtue of its ownership
interest in gas processing facilities, of natural gas and natural gas
liquids earned by such facilities through the processing of the Company's
production from producing properties. At some of its gas processing
facilities, the Company earns gas and natural gas liquids through the
processing of third party volumes. Volumes attributable to third party
processing are not reflected in the Company's proved reserves.
2 An additional 280 MMcfed volumes related to the Company's equity interest
in gas plant ownership were produced for the year ended December 31,
1997.
Austin Chalk Business Unit. The Austin Chalk business unit manages the
Company's oil and gas activities in the Austin Chalk trend, which extends 700
miles from southern Texas through central and eastern Texas into Louisiana. The
Austin Chalk business unit's production is located primarily in three fields:
Giddings, Brookeland and Masters Creek. The Masters Creek field in Louisiana and
the Shallow Giddings field in Texas are currently the most active. Since 1988,
the Company has participated in the drilling of approximately 1,500 wells and
has made aggregate capital expenditures over $2 billion in the Austin Chalk
trend. The Company controls approximately 2.1 million developed and undeveloped
net acres in the Austin Chalk and has increased its volumes from an average of
37 MMcfed in January 1990 to an average of 558 MMcfed during 1997. During 1997,
90% of the Austin Chalk business unit's production was attributable to
Company-operated properties.
Rockies Business Unit. The Rockies business unit manages the Company's oil
and gas activities in the western portion of the Land Grant in Wyoming and Utah.
The Rockies business unit operations are concentrated in the Green River Basin
and the Overthrust area. The Rockies business unit currently controls
approximately 3.5 million developed and undeveloped net acres, principally
attributable to the Land Grant. During 1997, 25% of the production from the
Rockies business unit was attributable to Company-operated properties.
South Texas/Plains/Canada Business Unit. The South Texas/Plains/Canada
business unit manages the Company's oil and gas activities primarily in four
areas: the eastern portion of the Land Grant in Colorado and Wyoming, the
Hugoton/Panoma field in Kansas, the Stratton/Agua Dulce area in southern Texas
and fields in western Canada. The South Texas/Plains/Canada business unit
currently controls more than 5.8 million developed and undeveloped net acres,
principally attributable to the Land Grant. During 1997, 67% of the production
from the South Texas/Plains/Canada business unit was attributable to
Company-operated properties.
Gulf Onshore/Offshore Business Unit. The Gulf Onshore/Offshore business
unit manages the Company's oil and gas activities in the Gulf of Mexico and in
the onshore Gulf Coast area. The Gulf Onshore/Offshore business unit primarily
conducts exploration activities in southern Louisiana and the Gulf of Mexico.
During 1997, the Company drilled a successful deepwater well in Mississippi
Canyon Block 755 in the Gulf of Mexico which resulted in the discovery of
significant reserves. The Company has also formed an alliance with another major
oil and gas company to evaluate a large geographic acreage position in
southwestern Louisiana. During 1997, 42% of the production from the Gulf
Onshore/Offshore business unit was attributable to Company-operated properties.
East Texas Business Unit. The East Texas business unit manages the
Company's oil and gas activities in eastern Texas. The East Texas business
unit's activities are concentrated in two major areas: the Carthage and Oakhill
fields. In addition, the Company conducted exploration activities in the Cotton
Valley Pinnacle Reef
2
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Trend. For the year ended December 31, 1997, 81% of the production from the East
Texas business unit was attributable to Company-operated properties.
West Texas Business Unit. The West Texas business unit manages the
Company's oil and gas activities in western Texas, principally in the Ozona
field in the Permian Basin area. The Company has drilled over 850 wells in the
Ozona area which is characterized by long-lived natural gas wells that typically
produce for 30 or more years. In addition, the Company has recently applied its
horizontal expertise in the western Texas area and has drilled over 50
horizontal wells. As of December 31, 1997, approximately 95% of the producing
wells in the West Texas business unit were Company-operated and 92% of the
production in West Texas business unit was attributable to Company-operated
properties.
GATHERING, PROCESSING AND MARKETING OPERATIONS
Processing. As of December 31, 1997, the Company owned interests in 24
natural gas processing plants, 19 of which it operates, with a current
throughput capacity of 3.4 Bcfd (1.8 Bcfd net to the Company). In 1997, the
Company expanded its gathering, processing and marketing business unit with the
purchase of Highlands Gas Corporation ('Highlands') which included three gas
processing plants. The Company was able to add approximately 300 MMcfd
throughput capacity with the purchase of Highlands, start-up of the new Masters
Creek plant in Louisiana and the expansion of the Patrick Draw plant in Wyoming.
Aggregate throughput of the Company's gas processing plants for the year ended
December 31, 1997 averaged 83% of the plants' aggregate design capacity. For the
year ended December 31, 1997, production of natural gas liquids attributable to
the Company's ownership interest in gas processing facilities averaged
approximately 41.7 MBbld. See 'Properties--Gas Processing Assets'.
Gathering. The Company invests in gathering systems and natural gas,
natural gas liquids and crude oil pipelines. Some of the Company's more
significant investments in pipelines and gathering systems, include: (1) the
Company's 50% interest in the Black Lake Pipeline, a 317 mile pipeline in
Louisiana which transports natural gas liquids from the Austin Chalk area to
markets on the Gulf Coast; (2) the Company's 90% interest in the Panola Pipeline
in the eastern Texas area; (3) the Company's 100% interest in the Sonora/Fin Tex
NGL Pipeline which serves the western Texas area; (4) the Company's 55% interest
in the Ferguson-Burleson County Gas Gathering System ('Ferguson-Burleson'),
which serves the Giddings area of the Austin Chalk area; (5) the Company's 99%
interest in the Overland Trail Transmission Company pipeline, a 305 mile
pipeline, serving the Green River Basin in Wyoming; and (6) the Company's 100%
interest in the Wahsatch Gathering System, a sour gas pipeline serving the
Overthrust area in Wyoming. In addition to the systems listed in the
'Properties-Pipeline Assets' table, the Company generally owns extensive
gathering systems behind each of its natural gas processing plants which it uses
to transport unprocessed gas from producing wells to the inlet of the plants.
Marketing. In 1997, the Company, primarily through UP Fuels, sold
approximately 2 Bcfd of natural gas (about 57% of which represented the
Company's equity production), 145 MBbld of natural gas liquids (including 73
MBbld of third party liquids) and 68 MBbld of crude oil and condensate
(including 15 MBbld of third party crude oil and condensate).
In addition, UP Fuels provides storage and transportation services in
certain natural gas supply and market areas and manages the Company's market
hubs in eastern Texas and the Land Grant area. The Company has a diverse
customer base for natural gas, which includes local distribution companies,
power generation facilities, pipelines, industrial plants and other wholesale
marketing companies. The natural gas liquids customers that UP Fuels targets are
wholesalers, industrial end users and traders. UP Fuels prefers to sell its
natural gas liquids in local markets, which generally offer more attractive
pricing. Natural gas liquids not sold locally are shipped from the various
plants by pipelines to the Company's partially owned fractionators in Mt.
Belvieu, Texas. To maximize profits, UP Fuels sells crude oil directly to
refiners whenever possible. UP Fuels also exchanges or sells the crude oil
volumes to major trading locations, where the crude oil is sold to both refiners
and marketers.
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VOLUMES, PRICES AND PRODUCTION COSTS
The following table sets forth certain information regarding the Company's
volumes of and average price realizations for natural gas, natural gas liquids
and crude oil sales, and average production costs per Mcfe for each of the last
three years.
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YEARS ENDED DECEMBER 31,
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1997 1996 1995
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PRODUCING PROPERTIES:
Average daily production: 1
Natural gas (MMcfd)........................................................ 1,102.3 980.3 915.6
Natural gas liquids (MBbld)................................................ 29.9 28.5 23.1
Crude oil (MBbld).......................................................... 52.9 50.6 52.8
Total (MMcfed).......................................................... 1,598.8 1,454.9 1,371.0
Average sales prices:
Natural gas (per Mcf)...................................................... $ 2.00 $ 1.86 $ 1.42
Natural gas liquids (per Bbl).............................................. 11.20 11.39 8.14
Crude oil (per Bbl)........................................................ 18.36 18.84 16.08
Production costs (per Mcfe): 2............................................... 0.50 0.49 0.42
GAS PROCESSING PLANTS:
Average daily sales volumes attributable to gas plant ownership: 3
Natural gas (MMcfd)........................................................ 30.5 26.7 23.9
Natural gas liquids (MBbld)................................................ 41.7 39.8 34.2
Total (MMcfed).......................................................... 280.5 265.4 229.1
Average sales prices:
Natural gas (per Mcf)...................................................... $ 2.40 $ 2.01 $ 1.51
Natural gas liquids (per Bbl).............................................. 11.91 13.16 9.38
</TABLE>
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1 Does not include the Company's portion, by virtue of its ownership in gas
processing facilities, of natural gas and natural gas liquids earned by
such facilities in connection with the processing of natural gas.
2 Includes lease operating costs, production overhead, other operating
expenses and taxes, other than income taxes.
3 Represents the Company's portion, by virtue of its ownership interest in
gas processing facilities, of natural gas and natural gas liquids earned
by such facilities in connection with the processing of natural gas. The
portion of the total average daily sales volumes representing the
Company's portion earned by such facilities with respect to processing
the Company's production for each of the three years ended December 31,
1997, 1996 and 1995 are 63.9 MMcfed, 77.1 MMcfed and 66.5 MMcfed,
respectively. See 'Supplementary Information--Average Daily Production
and Sales Volume'.
MINERALS OPERATIONS
Minerals operations contribute significantly to the Company's operating
income by exploiting the hard minerals portion of the Company's extensive fee
mineral interests in the Land Grant through nonoperated joint venture and
royalty arrangements in coal and trona (natural soda ash) mines. In general, the
Company reinvests the cash flow from its hard minerals operations into its oil
and gas operations. For the year ended December 31, 1997, the Minerals
operations generated $135.5 million of operating income of the Company as
follows:
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1997 OPERATING INCOME
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AMOUNT PERCENT
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(MILLIONS OF DOLLARS)
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Royalties:
Soda ash 1................................................................... $ 41.9 31%
Coal 2....................................................................... 16.4 12
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Total royalties........................................................... 58.3 43
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Nonoperated joint ventures:
Soda ash 3................................................................... 7.6 6
Coal 4....................................................................... 66.9 49
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Total joint ventures...................................................... 74.5 55
Overhead/other................................................................. 2.7 2
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Total operating income.................................................... $ 135.5 100%
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(Footnotes continued on next page)
4
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(Footnotes continued from previous page)
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1 Includes properties leased to five soda ash producers, estimated to
contain resources sufficient to support over 30 years of production at
current production levels.
2 The Company leases coal resources to six operating mines. In 1997, 58% of
the Company's coal royalties were attributable to a single mine which
supplies an adjacent power station that is owned and operated by
affiliates of the mine owners.
3 Represents a 49% interest in OCI Wyoming LP, a nonoperated joint venture.
4 Represents the Company's 50% nonoperating interest in Black Butte Coal
Company. Of this amount, $59.3 million is attributable to a single coal
supply contract, the financially beneficial terms of which terminate at
the end of year 2000. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations' and Note 12 to the
Consolidated Financial Statements.
The Company's low sulfur coal deposits compete with other western United
States coals for industrial and utility boiler markets. At current coal pricing
and extraction cost levels, however, most of the coal deposits are not economic
to extract, except for sale to local markets. As a result, there are currently
limited opportunities for new coal mine development in the Land Grant.
The world's largest deposit of trona ore, constituting 90% of the world's
known trona resources, is located in the Green River Basin in southwestern
Wyoming. Approximately 40% of this trona deposit lies within the Land Grant and
is therefore owned by the Company. Natural soda ash, which is produced by
refining trona ore, is used primarily in the production of glass for containers
and flat glass, in the paper and water treatment industries and in the
manufacture of certain chemicals and detergents. Natural soda ash production
from Wyoming has increased to 30% of the world's soda ash supply with the
remainder principally from synthetic processes. As a result of the increase in
the worldwide demand for soda ash, the Company, along with its partner Oriental
Chemical Industries, Inc. ('OCI'), plans to expand the OCI Wyoming LP soda ash
facility by 950,000 tons per year, from the plant's current nameplate capacity
of 2.3 million tons per year, by 1999. For the year ended December 31, 1997, the
Company invested an additional $19.7 million in OCI Wyoming LP and guaranteed
49% of a $100 million credit facility to finance the soda ash facility
expansion.
COMPETITION
The oil and gas industry is highly competitive. The Company actively
competes for reserve acquisitions and for exploration leases, licenses and
concessions and skilled industry personnel, frequently against companies with
substantially larger financial and other resources. The Company's competitors
include major integrated oil and gas companies and numerous other independent
oil and gas companies and individual producers and operators. To the extent the
Company's capital budget is lower than that of certain of its competitors, the
Company may be disadvantaged in effectively competing for certain reserves,
leases, licenses and concessions. Competitive factors include price, contract
terms, and types and quality of service, including pipeline distribution
logistics and efficiencies.
GOVERNMENT REGULATION
The Company's natural gas, natural gas liquids and crude oil exploration,
development and production operations are subject to extensive rules and
regulations promulgated by federal, provincial, state and local authorities.
Numerous federal, state and local departments and agencies have issued
rules and regulations binding on the oil and gas industry and its individual
members, some of which carry substantial penalties for noncompliance. State
statutes and regulations require permits for drilling operations, drilling bonds
and reports concerning operations. Most states in which the Company operates
also have statutes and regulations governing conservation and safety matters,
including the unitization or pooling of oil and gas properties, the
establishment of maximum rates of production from oil and gas wells and the
spacing of such wells. Such statutes and regulations may limit the rate at which
oil and gas otherwise could be produced from the Company's properties. The
regulatory burden on the oil and gas industry increases its cost of doing
business and, consequently, affects its profitability.
A substantial portion of the Company's oil and gas leases in the Gulf of
Mexico and a portion of its onshore leases were granted by the United States
Government and are administered by two agencies within the Department of the
Interior: the Bureau of Land Management ('BLM') and the Minerals Management
Service ('MMS'). Such leases are issued through competitive bidding, contain
relatively standardized terms and require
5
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compliance with detailed BLM and MMS regulations and orders. Certain operations
on such leases must be conducted pursuant to appropriate permits issued by the
BLM and the MMS in addition to permits required from other agencies (such as the
Coast Guard, Army Corps of Engineers and Environmental Protection Agency). The
MMS also administers bonding requirements and has the right to require lessees
to post supplemental bonds if it deems that additional security is necessary to
cover royalties due or the costs of regulatory compliance.
Under certain extraordinary circumstances, the federal agencies have the
power to suspend or terminate Company operations on federal leases. Any such
suspension or termination could materially and adversely affect the Company's
financial condition and operations. The MMS also intends to adopt financial
responsibility regulations under the Oil Pollution Act of 1990. See
'Environmental Regulation--Oil Spills.'
Currently, there are no laws that regulate the price for sales of natural
gas, natural gas liquids and crude oil by the Company. However, the Company's
rates charged and terms and conditions for the movement of gas in interstate
commerce through certain of its intrastate pipelines and production area hubs
are subject to regulation under the Natural Gas Policy Act of 1978 ('NGPA'). The
pipelines' and hubs' construction activities are, to a limited extent, also
subject to regulation under the Natural Gas Act of 1938 ('NGA'). The NGA also
establishes comprehensive controls over interstate pipelines, including the
transportation and resale of gas in interstate commerce. While these NGA
controls do not apply directly to the Company, their effect on natural gas
markets can be significant in terms of competition and cost of transportation
services. The Federal Energy Regulatory Commission ('FERC') administers the NGA
and the NGPA.
Through a series of orders, most recently the Order No. 636 Series, FERC
has taken significant steps to increase competition in the sale, purchase,
storage and transportation of natural gas. FERC's regulatory programs generally
allow more accurate and timely price signals from the consumer to the producer.
Nonetheless, the ability to respond to market forces can and does add to price
volatility, inter-fuel competition and pressure on the value of transportation
and other services. The Order No. 636 Series was largely upheld by the United
States Court of Appeals for the District of Columbia. Although a few issues were
remanded to the FERC by the Court of Appeals, the outcome of the remanded
proceedings is not expected to have a significant impact on the Company. The
remanded proceedings are pending before the FERC. Several parties petitioned the
Supreme Court to review the Court of Appeals' decision. The Court, in 1996,
denied the parties' petitions and therefore the Order No. 636 Series is no
longer subject to court review but for the remanded proceeding referenced above.
Related orders under the Order No. 636 Series are the subject of numerous
appeals to the United States Court of Appeals.
Through many interstate pipeline specific orders, the FERC has revised its
policy regarding jurisdiction over gathering facilities and services. The FERC
no longer asserts jurisdiction over these facilities and services and has stated
that it is a matter to be left to the states for regulation. In 1996, the
District of Columbia Court of Appeals largely upheld the FERC's policy. As a
result of such court decision, the Texas Railroad Commission conducted inquiries
regarding the scope of its regulation of gathering facilities and services. The
Company owns and operates extensive gathering systems in Texas. In 1996, the
Texas Railroad Commission initiated a rulemaking and ultimately issued new
regulations regarding gathering. Although the new regulations increased the
regulatory burden to a limited extent, the regulations are not expected to have
a significant impact on the Company's gathering activity. It is also possible
that other states where the Company owns gathering facilities will become more
active in the regulation of gathering.
As the owner of production area hubs and intrastate pipeline facilities in
Wyoming and Texas, the Company also is subject to regulation by those states as
to safety, rates and the provision of transportation services. As a seller of
natural gas to end users, the Company also can be affected by state regulation
of local distribution activities. While the extent of such state regulation
varies, a number of states where the Company markets its natural gas are taking
steps similar to steps taken by FERC to increase gas competition. As these
programs take hold, direct access to local markets should increase, together
with competitive pressures on prices and the value of distribution services.
Additional proposals and proceedings that might affect the natural gas
industry are considered from time to time by Congress, FERC, state regulatory
bodies and the courts. Several proposals that might affect the natural gas
industry are pending before Congress and FERC. The Company cannot predict when
or if any such proposals might become effective and their effect, if any, on the
Company's operations. Historically, the natural gas industry has been heavily
regulated; therefore, there is no assurance that the less stringent regulatory
approach recently pursued by FERC, Congress and the states will continue
indefinitely into the future.
6
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The oil and gas industry in Canada is subject to extensive controls and
regulations imposed by various levels of government. Oil and gas exported from
Canada is subject to regulation by the National Energy Board ('NEB') and the
government of Canada. Exporters are free to negotiate prices and other terms
with purchasers, provided that the export contracts meet certain criteria
prescribed by the NEB and the government of Canada. Exports may be made pursuant
to export contracts with terms not exceeding one year in the case of light crude
oil and not exceeding two years in the case of heavy crude oil and natural gas,
provided that an order approving any such export has been obtained from the NEB.
Any export to be made pursuant to a contract of longer duration requires an NEB
license and Governor in Council approval. The governments of Alberta, British
Columbia and Saskatchewan also regulate the volume of natural gas which may be
removed from those provinces for consumption elsewhere based on such factors as
reserve availability, transportation arrangements and market considerations. In
addition, each province has legislation and regulations which govern land
tenure, royalties, production rates, environmental protection and other matters.
It is not expected that any of these controls or regulations will affect the
operations of the Company in a manner materially different than they would
affect other oil and gas companies of similar size.
The Company's minerals operations are subject to a variety of federal and
state regulations with respect to safety, land use and reclamation. In addition,
the Department of the Interior regulates the leasing of federal lands for coal
development as provided in the Mineral Lands Leasing Act of 1920.
SECTION 29 TAX CREDITS
Federal tax law provides an income tax credit against regular federal
income tax liability with respect to sales of the Company's production of
certain fuels produced from nonconventional sources (including both coal seam
natural gas and natural gas produced from tight sand formations), subject to a
number of limitations ('Section 29 tax credits'). Fuels qualifying for the tax
credit must be produced from a well drilled or a facility placed in service
after December 31, 1979 and before January 1, 1993, and be sold before January
1, 2003.
The basic credit, which currently is approximately $0.52 per MMBtu of
natural gas produced from tight sand reservoirs, is computed by reference to the
price of crude oil and is phased out as the price of oil exceeds certain
specified levels. The commencement of phase-out would be triggered if the
average price for crude oil rose above approximately $45 per barrel in current
dollars. The natural gas production from wells drilled on certain of the
Company's properties in the Moxa Arch and Wamsutter areas in Wyoming, the
Carthage field in eastern Texas, the Ozona field in western Texas and certain
areas in the Austin Chalk trend qualifies for this tax credit. The Company
recorded approximately $18.8 million of Section 29 tax credits in 1997. Section
29 tax credits are not creditable against the alternative minimum tax but under
certain circumstances may be carried over and applied against regular tax
liability in future years. Therefore, no assurance can be given that the
Company's Section 29 tax credits will reduce its federal income tax liability in
any particular year.
In 1991 and 1992, the Company entered into transactions with a
privately-held company, which provided funds for the Company to drill wells
qualifying for Section 29 tax credits. Pursuant to these transactions, the
Company conveyed much of its producing and tax credit eligible acreage in the
Carthage field and Moxa Arch and Wamsutter areas to a limited partnership
('Section 29 Limited Partnership'). This Section 29 Limited Partnership utilized
drilling funds contributed by the investor as limited partner and drilled 208
wells which qualify for Section 29 tax credits. The Company was the managing
general partner of this Section 29 Limited Partnership and had broad latitude in
conducting its operations. Prior to a defined payout, the limited partner was
entitled to receive a preferential distribution of a specified quantity of
available production from this Section 29 Limited Partnership, including gas
that did not qualify for the tax credits as well as tax credit-qualified gas.
Payout occurred in December 1996, after which point the limited partner was
entitled to receive only 1% of ongoing production of this Section 29 Limited
Partnership. The historic production allocable to the limited partner has been
deducted from the Company's reserve and production statistics. Effective
December 1997, the Company purchased the limited partner's interest in this
Section 29 Limited Partnership.
TEXAS SEVERANCE TAX REDUCTION
Natural gas produced from wells that have been certified as tight
formations or deep wells by the Texas Railroad Commission ('high cost wells')
and that were spudded or completed during the period from May 24, 1989 to
September 1, 1996 qualifies for an exemption from the 7.5% severance tax in
Texas on natural gas and natural gas liquids produced by such wells. Such
exemption ends August 31, 2001. The natural gas production
7
<PAGE>
from wells drilled on certain of the Company's properties, primarily in the
Austin Chalk, West Texas and East Texas business units qualifies for this tax
reduction. In addition, high cost wells that are spudded or completed during the
period from September 1, 1996 to August 31, 2002 are entitled to receive a
severance tax reduction. Operators have until the later of 180 days after first
production or the 45th day of approval by the Texas Railroad Commission to
obtain a high cost gas certification without incurring a 10% tax penalty. The
tax reduction is based on a formula composed of the statewide 'median' as
determined by the State of Texas based on actual drilling and completion costs
reported by producers. More expensive wells will receive a greater amount of tax
reduction. This tax rate reduction remains in effect for ten years or until the
aggregate tax reductions received equals 50% of the total drilling and
completion costs.
ENVIRONMENTAL REGULATION
The Company's operations are subject to extensive federal, state,
provincial and local environmental laws and regulations governing the protection
of the environment. The Company is in compliance, in all material respects, with
applicable environmental requirements. Although future environmental obligations
are not expected to have a material impact on the results of operations or
financial condition of the Company, there can be no assurance that future
developments, such as increasingly stringent environmental laws or enforcement
thereof, will not cause the Company to incur material environmental liabilities
or costs.
Air Emissions. The primary legislation affecting the Company's air
emissions is the Federal Clean Air Act and its 1990 Amendments (the 'CAA').
Among other things, the CAA requires all major sources of air emissions to
obtain operating permits; the amendments also revised the definition of a 'major
source' such that additional equipment involved in oil and gas production may
now be covered by the permitting requirements. Although the precise requirements
of Title III of the 1990 Amendments are not yet known, the Company may incur
substantial expenditures for the additional capital, operating and maintenance
costs required to comply with these new regulations.
Hazardous Substances and Waste Disposal. The Company currently owns or
leases numerous properties that have been used for many years for hard minerals
production or natural gas and crude oil production. Although the Company has
utilized operating and disposal practices that were standard in the industry at
the time, hydrocarbons or other wastes may have been disposed of or released on
or under the properties owned or leased by the Company. In addition, some of
these properties have been operated by third parties over whom the Company had
no control. The Comprehensive Environmental Response, Compensation and Liability
Act ('CERCLA') and comparable state statutes impose strict, joint and several
liability on owners and operators of sites and on persons who disposed of or
arranged for the disposal of 'hazardous substances' found at such sites. The
Federal Resource Conservation and Recovery Act ('RCRA') and comparable state
statutes govern the disposal of 'solid wastes' and 'hazardous wastes.' Although
CERCLA currently excludes petroleum from its definition of hazardous substance,
many state laws affecting the Company's operations impose clean-up liability
regarding petroleum and petroleum related products. In addition, although RCRA
classifies certain oil field wastes as 'nonhazardous,' such exploration and
production wastes could be reclassified as hazardous wastes thereby making such
wastes subject to more stringent handling and disposal requirements. If such a
change in legislation were to be enacted, it could have a significant impact on
the Company's operating costs, as well as the oil and gas industry in general.
See 'Other Matters--Environmental Costs.'
Oil Spills. Under the Oil Pollution Act of 1990 ('OPA'), owners and
operators of onshore facilities and pipelines and lessees or permittees of an
area in which an offshore facility is located ('Responsible Parties') are
strictly liable on a joint and several basis for removal costs and damages that
result from a discharge of oil into United States waters. OPA limits the strict
liability of Responsible Parties for removal costs and damages that result from
a discharge of oil to $350 million in the case of onshore facilities and $75
million plus removal costs in the case of offshore facilities, except that these
limits do not apply if the discharge was caused by gross negligence or willful
misconduct, or by the violation of an applicable federal safety, construction or
operating regulation by the Responsible Party, its agent or subcontractor.
In addition, OPA requires certain vessels and offshore facilities to
provide evidence of financial responsibility in the amount of $150 million. The
MMS, which has jurisdiction over certain offshore facilities and pipelines, has
not yet issued a proposed rule to implement the financial responsibility
requirements and, therefore, the financial responsibility requirements
applicable under laws existing prior to OPA still apply to such
8
<PAGE>
facilities. OPA also requires offshore facilities and certain onshore facilities
to prepare facility response plans, which the Company has done, for responding
to a 'worst case discharge' of oil. Failure to comply with these requirements or
failure to cooperate during a spill event may subject a Responsible Party to
civil or criminal enforcement actions and penalties.
Offshore Production. Offshore oil and gas operations are subject to
regulations of the United States Department of the Interior which currently
impose strict liability upon the lessee under a federal lease for the cost of
clean-up of pollution resulting from the lessee's operations, and such lessee
could be subject to possible liability for pollution damages. In the event of a
serious incident of pollution, the Department of the Interior may require a
lessee under federal leases to suspend or cease operations in the affected
areas.
Canadian Environmental Regulation. The oil and gas industry in Canada
currently is subject to environmental regulation pursuant to provincial and
federal legislation. Environmental legislation provides for restrictions and
prohibitions on releases or emissions of various substances produced or utilized
in association with certain oil and gas industry operations. In addition,
legislation requires that well and facility sites be abandoned and reclaimed to
the satisfaction of provincial authorities. A breach of such legislation may
result in the imposition of fines and penalties. In Alberta, environmental
compliance has been governed by the Alberta Environmental Protection and
Enhancement Act ('AEPEA') since September 1, 1993. In addition to replacing a
variety of older statutes which related to environmental matters, AEPEA also
imposes certain environmental responsibilities on oil and natural gas operators
in Alberta and, in certain instances, imposes greater penalties for violations.
In British Columbia, regulations affecting the oil and gas industry are
administered by the Ministry of Energy, Mines and Petroleum Resources.
EMPLOYEES
The Company had 1,907 employees as of December 31, 1997, 22 of whom were
not full time employees. The Company believes that its relations with its
employees are good.
OTHER BUSINESS MATTERS
The Company's operations are subject to the usual hazards incident to the
drilling and operation of oil and gas wells and the processing and
transportation of natural gas and natural gas liquids, such as cratering,
explosions, uncontrollable flows of oil, gas or well fluids, fire, pollution and
other environmental risks. In general, many of these risks increase when
drilling at greater depths under higher pressure conditions. In addition,
certain of the Company's operations are currently offshore and subject to the
additional hazards of marine operations, such as capsizing, collision and damage
or loss from severe weather. Other operations involve the production, handling,
processing and transportation of gas containing hydrogen sulfide and other
hazardous substances. These hazards can cause personal injury and loss of life,
severe damage to and destruction of property and equipment, environmental damage
and suspension of operations. Litigation arising from a catastrophic occurrence
in the future at one of the Company's locations may result in the Company being
named as a defendant in lawsuits asserting potentially large claims. In
accordance with customary industry practices, insurance is maintained for the
Company against some, but not all, of the consequences of these risks. Losses
and liabilities arising from such events could reduce revenues and increase
costs to the Company to the extent not covered by insurance or already provided
for.
9
<PAGE>
ITEM 2. PROPERTIES
PROVED RESERVES
The following table sets forth the proved developed and undeveloped
reserves of natural gas, natural gas liquids and crude oil of the Company as of
December 31, 1997. Information set forth in the table is based on reserve
estimates of the Company, prepared in accordance with the rules and regulations
of the Securities and Exchange Commission. Ryder Scott Company Petroleum
Engineers ('Ryder Scott') has provided an opinion with respect to the Company's
estimate of its proved reserves as of December 31, 1997. Such opinion states
that, on a total Company basis, Ryder Scott is in agreement with the Company's
estimate of proved reserves for the properties which they reviewed. For further
information concerning Ryder Scott's review of the proved reserves of the
Company as of December 31, 1997, see Ryder Scott's letter, dated February 27,
1998, included as Exhibit 99 to this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
-------------------------------------------
NATURAL
NATURAL GAS
GAS LIQUIDS CRUDE OIL TOTAL
CATEGORY OF RESERVES (BCF) (MMBBL) (MMBBL) (BCFE)
- ---------------------------------------------------------------- ------- ------- ---------- -------
<S> <C> <C> <C> <C>
Proved developed................................................ 2,217.0 103.3 93.9 3,400.2
Proved undeveloped.............................................. 403.3 14.6 34.9 700.3
------- ------- ---------- -------
Total proved reserves......................................... 2,620.3 117.9 128.8 4,100.5
------- ------- ---------- -------
------- ------- ---------- -------
</TABLE>
There are numerous uncertainties inherent in estimating quantities of
proved reserves, including many factors beyond the control of the Company. The
reserve data set forth herein represent estimates only. Reserve engineering is a
subjective process of estimating underground accumulations of crude oil and
natural gas that cannot be measured in an exact manner, and the accuracy of any
reserve estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment.
ACREAGE
Land Grant and Other Fee Minerals. The following table summarizes the fee
mineral acreage by business unit owned by the Company as of December 31, 1997.
<TABLE>
<CAPTION>
TOTAL ACRES
---------------------
BUSINESS UNIT GROSS NET
- ---------------------------------------------------------------- ---------- -------
(IN THOUSANDS)
<S> <C> <C>
Austin Chalk......................................................................... 31 11
Rockies 1............................................................................ 3,253 3,252
South Texas/Plains/Canada 1.......................................................... 5,316 4,922
Gulf Onshore/Offshore................................................................ 215 73
East Texas........................................................................... 46 12
West Texas........................................................................... 690 238
---------- -------
Total fee acreage.................................................................. 9,551 8,508
---------- -------
---------- -------
- ------------------------
1 The fee mineral acreage associated with the Land Grant is included in Rockies and
South Texas/Plains/Canada business units........................................... 7,912 7,722
</TABLE>
10
<PAGE>
The Company holds royalty interests of varying percentages in the
approximately one million gross acres of the Land Grant that are subject to
exploration and production agreements with third parties.
The Company's fee mineral acreage, including the Land Grant, is primarily
undeveloped.
Leasehold. The Company's leasehold acreage by business unit as of December
31, 1997 is set forth below.
<TABLE>
<CAPTION>
ACRES
--------------------------------------------------
DEVELOPED UNDEVELOPED TOTAL
-------------- -------------- --------------
BUSINESS UNIT GROSS NET GROSS NET GROSS NET
- --------------------------------------------------------- ----- ----- ----- ----- ----- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Austin Chalk............................................. 959 732 1,667 1,396 2,626 2,128
Rockies.................................................. 117 69 215 154 332 223
South Texas/Plains/Canada................................ 429 205 1,010 639 1,439 844
Gulf Onshore/Offshore.................................... 314 285 461 261 775 546
East Texas............................................... 266 137 561 327 827 464
West Texas............................................... 232 141 162 132 394 273
----- ----- ----- ----- ----- -----
Total leasehold acreage................................ 2,317 1,569 4,076 2,909 6,393 4,478
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
</TABLE>
Total Leasehold and Fee Mineral. The total leasehold and fee mineral
acreage by business unit as of December 31, 1997 is set forth below.
<TABLE>
<CAPTION>
TOTAL ACRES
----------------
BUSINESS UNIT GROSS NET
- ----------------------------------------------------------------------------------------- ------ ------
(IN THOUSANDS)
<S> <C> <C>
Austin Chalk............................................................................. 2,657 2,139
Rockies.................................................................................. 3,585 3,475
South Texas/Plains/Canada................................................................ 6,755 5,766
Gulf Onshore/Offshore.................................................................... 990 619
East Texas............................................................................... 873 476
West Texas............................................................................... 1,084 511
------ ------
Total leasehold and fee acreage........................................................ 15,944 12,986
------ ------
------ ------
</TABLE>
DRILLING ACTIVITY AND PRODUCING WELL SUMMARY
The table below summarizes the Company's drilling activity over the last
three years.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------
1997 1996 1995
-------------- -------------- --------------
GROSS NET GROSS NET GROSS NET
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Development wells:
Productive............................................. 685 478.6 575 413.4 679 505.7
Dry.................................................... 59 46.2 35 25.7 18 7.7
Exploration wells:
Productive............................................. 35 19.1 16 8.5 6 2.8
Dry.................................................... 38 22.1 29 18.2 22 10.7
----- ----- ----- ----- ----- -----
Total wells............................................ 817 566.0 655 465.8 725 526.9
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
</TABLE>
The number of wells drilled is not a valid measure or indicator of the
relative success or value of a drilling program because the significance of the
reserves and their economic potential may vary widely for each project. As of
December 31, 1997, the Company owned a working interest in 6,043 gross gas wells
(3,574 net) and 2,763 gross oil wells (1,636 net). Gross wells include 611 wells
with multiple completions. The Company operated 61% of the gross wells in which
it owned an interest.
11
<PAGE>
GAS PROCESSING ASSETS
A listing of the Company's processing plants and their gross design
capacity is provided below. Generally, each of the processing plants has an
extensive gathering system. Average throughput in such processing plants for
1997 was approximately 83% of such processing plants' design capacity.
<TABLE>
<CAPTION>
AVERAGE GROSS VOLUMES
YEAR ENDED
DECEMBER 31, 1997
--------------------------
AS OF DECEMBER 31, 1997 NATURAL GAS
------------------------------ NATURAL GAS LIQUIDS
WORKING INTEREST THROUGHPUT PRODUCED
GAS PLANTS PERCENT DESIGN CAPACITY (MMCFD) (MMCFD) (MBBLD)
- ----------------------------------- ----------------------- ----------------------- ----------- -----------
<S> <C> <C> <C> <C>
Rockies
*Anschutz Ranch East............. 12 650 370 17.3
Brady 1.......................... 50 0 63 2.4
*Painter......................... 19 260 248 13.2
Pineview......................... 49 15 2 0.2
*Whitney Canyon.................. 19 235 176 7.2
South Texas/Plains/Canada
Bledsoe.......................... 100 2 1 --
*Caroline........................ 7 300 340 31.0
Mt. Pearl........................ 52 11 11 0.4
Silo............................. 100 5 2 0.3
GPM
A&M 2............................ 55 50 49 4.6
Brookeland....................... 80 100 80 6.4
Bryan............................ 55 60 58 10.2
Conroe........................... 100 65 33 0.8
East Carlsbad 3.................. 100 23 24 2.3
East Texas Plant Complex 4,5..... 90 660 653 39.6
*Echo Springs.................... 34 240 233 16.3
Emigrant Trail................... 100 60 37 1.9
Gulf Plains 4,6.................. 100 110 82 5.3
Hulldale 3....................... 100 18 11 1.6
Masters Creek 7.................. 62 100 47 4.3
Ozona 4.......................... 63 120 113 11.8
Patrick Draw 4,8................. 100 120 25 1.7
Sonora 4,3....................... 100 68 62 5.6
S.W. Ozona....................... 100 90 68 7.5
Yellow Creek 4................... 100 80 30 0.2
------ ----------- -----------
Total......................... 3,442 2,818 192.1
------ ----------- -----------
------ ----------- -----------
</TABLE>
<TABLE>
------------------------
<S> <C>
* Nonoperated
1 This plant ceased processing gas in August 1997; however, this plant continues to treat sour gas. This
plant's average natural gas throughput and natural gas liquids produced are set forth for the period
January through August 1997.
2 This plant was shut down February 1998.
3 This plant is one of several plants acquired in the purchase of Highlands effective as of August 1997.
4 Includes fractionation facilities.
5 This plant's design capacity during 1997 was 660 MMcfd. This plant's design capacity is expected to
increase by an additional 120 MMcfd to 780 MMcfd beginning in March 1998.
6 This plant's design capacity is expected to increase by 50 MMcfd in mid-year 1998.
7 This plant became operational in August 1997 with 100 MMcfd; this plant's design capacity is expected to
increase to 200 MMcfd in February 1998. Natural gas throughput and natural gas liquids produced represent
averages for the period August through December 1997.
8 This plant's design capacity was expanded from 30 MMcfd to 120 MMcfd during December 1997.
</TABLE>
12
<PAGE>
PIPELINE ASSETS
A listing of the Company's pipeline assets is provided below.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
--------------------------------------------------------
WORKING PRODUCTS LINE SIZE NUMBER OF
PIPELINE SYSTEM BY GEOGRAPHIC AREA INTEREST % SHIPPED (IN INCHES) MILES
- ------------------------------------------------------ ---------- ------------- ------------ ---------
<S> <C> <C> <C> <C>
Eastern Texas and Louisiana
Jasper Pipeline..................................... 100 NGL 6 19
*Ferguson-Burleson gathering........................ 55 Gas 2 - 18 1,509
*Black Lake Pipeline................................ 50 NGL 6 - 8 317
Eastern Texas--Carthage
East Texas Gas Systems.............................. 90 Gas 10 - 12 121
San Jacinto Pipeline................................ 90 NGL 4 - 8 35
Panola Products Pipeline............................ 90 NGL 8 - 10 195
Eastrans Ltd. Pipeline.............................. 90 Gas 8 - 12 33
Southern Texas
Stratton Crude/Condensate Pipeline.................. 100 Crude/ 3 - 4 32
Condensate
Stratton Butane/Natural Gasoline.................... 100 Butane/ 2 - 6 38
Nat. Gasoline
Stratton Propane.................................... 100 Propane 3 10
Wyoming
Emigrant Trail...................................... 100 NGL 4 8
Overland Trail...................................... 99 Gas 4 - 16 305
Wahsatch Pipeline................................... 100 Gas 4 - 10 40
Western Texas
Transwestern Pipeline System........................ 100 Gas 2 - 8 52
Sonora/Fin Tex Pipeline............................. 100 NGL 8 - 10 384
Crockett Pipeline................................... 90 NGL 8 25
Ozona Pipeline...................................... 100 NGL 6 23
</TABLE>
- ------------------
* Nonoperated
ITEM 3. LEGAL PROCEEDINGS
MINERAL RESERVATION LITIGATION
In August 1994, the surface owners (McCormick, et al.) of portions of five
sections of Colorado land that are subject to mineral reservations made by the
Company's predecessor in title brought suit against the Company in State
District Court, Weld County, Colorado, to quiet title to minerals, including
crude oil (in some of the lands) and natural gas. The State District Court heard
arguments on the Company's motion for summary judgment on May 23, 1997. On June
23, 1997, the District Court granted the Company's motion holding as a matter of
law that the mineral reservations at issue were unambiguous and included all
valuable nonsurface substances, including oil and gas. A final judgment was
entered on August 5, 1997. Thereafter, such surface owners filed a notice of
appeal to the Colorado Court of Appeals on September 17, 1997.
13
<PAGE>
ROYALTY LITIGATION
The Company is a defendant in a number of lawsuits in which plaintiffs
allege that the Company underpaid their royalties on crude oil and natural gas
production. In addition, certain of such suits allege that the Company has
violated antitrust laws and other similar laws. None of this litigation
articulates a theory of recovery or specific amounts of damages. This litigation
against the Company and others in the oil and gas industry suggests that more
suits of this type will be filed against the Company, including perhaps, suits
by other types of interest owners and suits in other jurisdictions. The Company
intends to defend vigorously against such litigation, as well as any similar
lawsuits subsequently brought against the Company. In the opinion of management
of the Company, the outcome of these matters should not have a materially
adverse effect on the consolidated financial condition, cash flows or results of
operations of the Company.
GENERAL
The Company is a defendant in a number of lawsuits and is involved in
governmental proceedings arising in the ordinary course of business in addition
to those described above, including contract claims, personal injury claims and
environmental claims. While management of the Company cannot predict the outcome
of such litigation and other proceedings, management does not expect these
matters to have a materially adverse effect on the consolidated financial
condition, cash flows or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter ended December 31, 1997.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, positions and ages of executive officers of the Company are set
forth below:
<TABLE>
<CAPTION>
NAME POSITION AGE
- --------------------------------------- -------------------------------------------------------- ----
<S> <C> <C>
Jack L. Messman 1...................... Chairman and Chief Executive Officer 58
George Lindahl III 2................... President and Chief Operating Officer 51
V. Richard Eales 3..................... Executive Vice President 62
Thomas R. Blank 4...................... Vice President--State, Regulatory and Public Affairs 45
Anne M. Franklin 5..................... Vice President--People 41
Joseph A. LaSala, Jr. 6................ Vice President, General Counsel and Secretary 43
Donald W. Niemiec 7.................... Vice President--Marketing 51
Morris B. Smith 8...................... Vice President and Chief Financial Officer 53
John B. Vering 9....................... Vice President--Canada 48
</TABLE>
----------------------------
1 Mr. Messman has been Chairman and Chief Executive Officer of the Company
since October 1996. He was President and Chief Executive Officer of the
Company from August 1995 to October 1996, and has been a Director of the
Company since September 1991. He has been President, Chief Executive
Officer and a Director of Union Pacific Resources Company ('UPRC') from
May 1991 through October 1995.
2 Mr. Lindahl has held his current position with the Company since October
1996. He was Executive Vice President--Operations of the Company from
August 1995 to October 1996. From 1992 to August 1995, he was Vice
President--Operations for UPRC.
3 Mr. Eales has held his current position with the Company since June 1996.
From August 1995 to June 1996, he was Executive Vice President and Chief
Financial Officer of the Company. Prior thereto, he was Vice
President--Corporate Development of UPRC.
4 Mr. Blank has held his current position with the Company since August
1997. He was Communications Director for the Speaker of the House of
Representatives for the United States from February 1997 to August 1997.
From January 1994 to February of 1997, he was President of Hager Sharp,
Inc. Prior thereto, he was the Senior Vice President of Hager Sharp, Inc.
5 Ms. Franklin has held her current position with the Company since August
1995. She joined UPRC as Vice President--People in June 1995. From 1993 to
June 1995, she was Director of Executive Leadership and Development for
Ameritech, Inc.
14
<PAGE>
(Footnotes continued from previous page)
6 Mr. LaSala has held his current position with the Company since January
1996 and assumed the role of Secretary in June 1997. Mr. LaSala joined
UPRC as Assistant General Counsel in 1995. Prior to joining UPRC, he was
Vice President--Government and Regulatory Affairs of USPCI, Inc., a former
subsidiary of Union Pacific Corporation ('UPC'), from May 1993 until
December 1994 and, prior thereto, Vice President--External Relations of
USPCI, Inc.
7 Mr. Niemiec has held his current position with the Company since August
1995. He has been Vice President--Marketing of UPRC since 1993 and
President of UP Fuels since 1990.
8 Mr. Smith has held his current position with the Company since June 1996.
From September 1995 until June 1996, he was Vice President and Controller
of UPC. From January through August 1995, he served as Vice
President--Finance of Union Pacific Railroad Company. From June 1993
through December 1994, he served as Vice President--Finance of USPCI, Inc.
Prior thereto, he was Assistant Controller--Planning and Analysis of UPC.
9 Mr. Vering has held his current position with the Company since March
1998. From October 1996 until March 1998 he was Vice
President--Exploration and Production Services of the Company. Prior
thereto, he was General Manager--Austin Chalk of the Company and UPRC.
15
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company completed an initial public offering of its common stock
('Common Stock') in October 1995. The common stock of the Company is traded on
the New York Stock Exchange under the symbol 'UPR.' Information with respect to
the quarterly high and low sales prices per share of Common Stock, as reported
on the New York Stock Exchange Composite Tape, as well as the dividends declared
on the Common Stock, is set forth under Selected Quarterly Data on page 63.
As of February 27, 1998, there were 251,043,100 shares of Common Stock
outstanding and approximately 50,400 shareholders of record. The closing price
of the Common Stock on the New York Stock Exchange on February 27, 1998 was
$22 3/8.
The Company has paid quarterly cash dividends of $0.05 per share of Common
Stock since its initial public offering in October, 1995. The Company currently
intends to continue to pay quarterly cash dividends on its outstanding shares of
Common Stock. The determination of the amount of future cash dividends, if any,
to be declared and paid by the Company will depend upon, among other things, the
Company's financial condition, funds from operations, the level of its capital
and exploratory expenditures, future business prospects and other factors deemed
relevant by the Board of Directors. Accordingly, there can be no assurance that
dividends will be paid.
In February 1997, the Board of Directors adopted a stock purchase program
which authorizes the Company to purchase up to $50 million of its Common Stock
outstanding in any given fiscal year. In December 1997, the Board of Directors
approved a resolution to allow the Company to purchase an additional $50 million
of its Common Stock outstanding in 1998. As of December 31, 1997, the Company
had purchased 2,013,400 shares of its Common Stock under this program for
approximately $49.9 million.
ITEM 6. SELECTED FINANCIAL DATA
The following table contains selected historical financial data for each of
last five fiscal years.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(MILLIONS OF DOLLARS,EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues.............................. $1,924.7 $1,831.0 $1,476.7(a) $1,332.9 $1,277.1
Operating income................................ 495.2 526.6 470.1(a) 351.3 382.9
Net income...................................... 333.0 320.8 350.7(a) 390.0(b) 243.8(c)
Per share:
Net income--basic (d)......................... 1.33 1.29 n/a n/a n/a
Net income--diluted (d)....................... 1.33 1.28 n/a n/a n/a
Dividends..................................... 0.20 0.20 0.05(e) n/a n/a
CASH FLOW DATA:
Capital and exploratory expenditures............ $1,531.7(f) $ 880.3 $ 686.4 $1,389.3(g) $ 560.4
Cash provided by operations..................... 968.8 990.4 829.4 821.0 567.5
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
FINANCIAL POSITION DATA:
Properties--net................................. $3,665.4(f) $2,972.4 $2,764.3 $2,600.1(g) $1,780.2
Total assets.................................... 4,472.2 3,648.9 3,308.9 3,247.0 2,714.1
Long-term debt.................................. 1,230.6(f) 670.9(h) 101.5 37.7 45.6
Shareholders' equity............................ 1,760.7 1,514.3 1,312.4 1,834.9 1,596.1
</TABLE>
(Footnotes continued on next page)
16
<PAGE>
(Footnotes continued from previous page)
- ------------------
(a) In November 1995, the Company recorded a $122.5 million pre-tax ($78.5
million after-tax) gain resulting from the Columbia Gas Transmission
Company bankruptcy settlement ('Columbia settlement') (see Note 4 to
the Consolidated Financial Statements).
(b) In March 1994, the Company sold its interest in the Wilmington field
and Harbor Cogeneration Plant to the Port of Long Beach, California.
Such sale resulted in a $159.2 million pre-tax ($100 million after-tax)
gain.
(c) In January 1993, the Company adopted Statement of Financial Accounting
Standards ('SFAS') No. 106, 'Employers' Accounting for Postretirement
Benefits Other Than Pensions,' and SFAS No. 109, 'Accounting for Income
Taxes,' with a cumulative after-tax charge to 1993 earnings of $59
million.
(d) Earnings per share prior to 1996 have been omitted as the Company was a
wholly owned subsidiary of UPC until the Company's initial public
offering ('Offering') in October 1995; therefore, net income per share
is not applicable for periods prior to the fourth quarter of 1995.
(e) Represents the dividend declared with respect to the fourth quarter of
1995. Prior to October 1995, the Company was wholly owned by UPC;
therefore, dividends per share is not applicable for periods prior to
the fourth quarter of 1995.
(f) In March 1994, the Company acquired Amax Oil & Gas, Inc., for a net
purchase price of $725 million.
(g) During 1997, the Company increased debt by issuing commercial paper to
fund its capital spending, including the acquisition of producing
properties and Highlands.
(h) During 1996, the Company repaid its $650 million note payable to UPC
(incurred at the time of the Offering) using cash from operations and
proceeds from the issuance of long-term debt and commercial paper (see
Note 2 to the Consolidated Financial Statements).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following information should be read in conjunction with the
information contained in the Consolidated Financial Statements and the notes
thereto included in Item 8 of this Annual Report on Form 10-K. The consolidated
statements of income for previous periods include certain reclassifications that
were made to conform to the current presentation. Such reclassifications affect
previously reported operating revenues and expenses but have no effect on
previously reported operating income or net income.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
--------------------
1997 1996
-------- --------
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Operating revenues.................................................................... $1,924.7 $1,831.0
Operating expenses.................................................................... 1,429.5 1,304.4
Operating income...................................................................... 495.2 526.6
Net income............................................................................ 333.0 320.8
</TABLE>
The Company reported net income of $333 million for the year ended December
31, 1997 compared to $320.8 million in 1996. Earnings per share on a diluted
basis increased by 4% to $1.33 from $1.28 in 1996. Improvements were achieved
from increased producing property volumes and prices and royalty income from
mineral operations. In addition, the Company experienced higher other income and
one-time tax benefits. These improvements were offset by a $60.1 million
increase in exploration expenses, reduced margins for gathering, processing and
marketing ('GPM') operations, one-time costs of $17.8 million relating to the
Company's unsuccessful attempt to acquire Pennzoil Company and higher operating
costs.
17
<PAGE>
Operating income declined $31.4 million (6%) from 1996 due to reduced
margins for GPM operations, a $60.1 million increase in exploration expenses and
higher general and administrative costs, which more than offset improvements
from producing properties and minerals operations.
SUMMARY OF SEGMENT FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------
1997 1996
------ ------
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Segment operating income:
Producing properties................................................................. $344.4 $328.7
Gathering, processing and marketing.................................................. 94.6 150.1
Minerals............................................................................. 135.5 120.0
Corporate/general and administrative................................................. (79.3) (72.2)
------ ------
Total operating income............................................................ $495.2 $526.6
------ ------
------ ------
</TABLE>
PRODUCING PROPERTY OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
--------------------
1997 1996
-------- --------
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Operating revenues................................................................... $1,281.2 $1,133.3
Other oil and gas revenues........................................................... 53.5 65.0
-------- --------
Total operating revenues........................................................... 1,334.7 1,198.3
Operating expenses:
Production......................................................................... 292.6 259.5
Exploration........................................................................ 204.7 144.6
Depreciation, depletion and amortization........................................... 493.0 465.5
-------- --------
Total operating expenses........................................................... 990.3 869.6
-------- --------
Operating income..................................................................... $ 344.4 $ 328.7
-------- --------
-------- --------
</TABLE>
Total operating revenues for producing property operations increased by
$136.4 million during 1997. The improvement in operating revenues was primarily
due to prices, which were higher by $0.07 per Mcfe from 1996 to $2.20 per Mcfe
in 1997. The higher prices provided an incremental $104.5 million to operating
revenues. Additional sales volume growth of 10% provided an incremental $43.4
million to operating revenue.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1997 1996 1997 1996
------ ------ ------ ------
(WITHOUT (WITH HEDGING)
HEDGING)
<S> <C> <C> <C> <C>
Average price realizations--producing properties:
Natural gas (per Mcf)........................................ $ 2.19 $ 1.94 $ 2.00 $ 1.86
Natural gas liquids (per Bbl)................................ 11.20 11.39 11.20 11.39
Crude oil (per Bbl).......................................... 18.80 20.09 18.36 18.84
Average (per Mcfe)........................................... 2.34 2.23 2.20 2.13
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1997 1996
------- -------
<S> <C> <C>
Production volumes--producing properties:
Natural gas (MMcfd)............................................................... 1,102.3 980.3
Natural gas liquids (MBbld)....................................................... 29.9 28.5
Crude oil (MBbld)................................................................. 52.9 50.6
Total (MMcfed).................................................................... 1,598.8 1,454.9
</TABLE>
18
<PAGE>
Natural gas volumes increased 122 MMcfd (12%) over 1996 primarily due to
the extensive drilling programs in several business units and a lower
distribution of preferential volumes related to the Company's Section 29 Limited
Partnership (57.1 MMcfd). Gas volumes from the South Texas/Plains/Canada
business unit were up 22.6 MMcfd primarily due to the drilling program in
southern Texas. The East Texas business unit's volumes increased by 19.9 MMcfd
primarily due to the acquisition and development of properties acquired from
Castle Energy. The West Texas business unit's gas volumes improved 15.1 MMcfd
due to continued success with its horizontal drilling program. In addition, the
Gulf Onshore/Offshore business unit gas volumes rose 14 MMcfd primarily due to
its drilling program in the southern Louisiana area. The Austin Chalk business
unit's gas volumes increased 10.8 MMcfd due to its success in the deep Giddings
field. These improvements were partially offset by a 17.1 MMcfd reduction in
Rockies business unit's gas volumes caused by production declines. Crude oil
volumes increased by 2.3 MBbld (5%) primarily due to drilling successes in the
Masters Creek field in Louisiana. Natural gas liquids volumes rose 1.4 MBbld
(5%) with most of the improvement attributable to the East Texas business unit.
Production costs increased $33.1 million to $292.6 million for 1997,
primarily due to a $30.6 million increase in lease operating expenses. Such
increase reflects the impact of higher volumes, as well as increased costs for
workovers, maintenance and salt water disposal, primarily in the Austin Chalk
business unit. Total production expenses per Mcfe increased to $0.50 in 1997
from $0.49 in 1996.
Exploration expenses were up $60.1 million to $204.7 million compared to
1996 reflecting the Company's expanded exploration programs. Surrendered lease
costs were higher by $24.1 million as a result of more leasing activity in the
East Texas and the Austin Chalk business units. Delay rentals rose $10.4
million, primarily in Austin Chalk and the Gulf Onshore/Offshore business units.
In addition, geological and geophysical costs were higher by $16.2 million,
primarily in the Gulf Onshore/Offshore business unit, while dry hole costs were
up by $8.4 million, primarily in the East Texas and Gulf Onshore/Offshore
business units.
Producing property depreciation, depletion and amortization expense
increased $27.5 million due to higher production volumes. This increased
expense, was partially offset by a lower unit of production rate. There were
write-downs of assets of $24.4 million in the South Texas/Plains/Canada business
unit relating to Moca Dome in 1997 and $26.4 million in the Rockies and Gulf
Onshore/Offshore business units in 1996.
GATHERING, PROCESSING AND MARKETING OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------
1997 1996
------ ------
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Operating revenues....................................................................... $443.3 $503.8
Gas purchases............................................................................ 161.3 167.0
------ ------
Operating margin.................................................................... 282.0 336.8
Other oil and gas revenues............................................................... 6.9 --
Operating expenses:
Operating costs..................................................................... 123.9 123.0
Depreciation, depletion and amortization............................................ 70.4 63.7
------ ------
Total operating expenses.......................................................... 194.3 186.7
------ ------
Operating income......................................................................... $ 94.6 $150.1
------ ------
------ ------
</TABLE>
Margins for the GPM operations declined $54.8 million to $282 million in
1997. Plant margins were down $26.2 million resulting from lower sales prices
($15.2 million), higher gas purchase costs and lower gas plant fees despite a 6%
improvement in volumes ($11.9 million). Pipeline margins declined $3.7 million
from 1996 reflecting lower throughput at Ferguson-Burleson and Wahsatch
pipelines. This lower throughput was partially offset by higher volumes provided
by the acquisition of Highlands. Marketing margins declined by $24.9 million as
a result of higher crude oil purchase costs and reduced margins for natural gas
and natural gas liquids. Such higher costs and reduced margins were partially
offset by additional margins on volumes from the acquisition of Highlands.
19
<PAGE>
Other oil and gas revenues in 1997 primarily reflect a $6.4 million gain on
the sale of the Company's investment in the Frontier Pipeline.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1997 1996
---------- ----------
<S> <C> <C>
Average price realizations--plants:
Natural gas (per Mcf).............. $ 2.40 $ 2.01
Natural gas liquids (per Bbl)...... 11.91 13.16
Average (per Mcfe)................. 2.03 2.18
Sales Volumes--plants:
Natural gas (MMcfd)................ 30.5 26.7
Natural gas liquids (MBbld)........ 41.7 39.8
Total (MMcfed)..................... 280.5 265.4
</TABLE>
Plant gas volumes increased by 3.8 MMcfd over the volumes in 1996, due to
the Highlands acquisition (8.3 MMcfd) and the Masters Creek plant start-up.
These volume increases were partially offset by lower inlet volumes at the
Brookeland plant (5.1 MMcfd). Plant natural gas liquids volumes increased by 1.9
MBbld primarily due to the Highlands acquisition (2.2 MBbld) and the Masters
Creek start-up.
GPM operating costs increased by $0.9 million to $123.9 million for 1997.
Higher costs relating to the assets acquired from Highlands, plant start-ups and
the addition of support staff, more than offset the absence of the $17 million
1996 asset impairment adjustment for the Wahsatch pipeline.
Depreciation, depletion and amortization for the GPM operations increased
$6.7 million, primarily due to the higher asset base resulting from plant
expansions and the acquisition of Highlands.
MINERALS OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1997 1996
---------- ----------
(MILLIONS OF DOLLARS)
<S> <C> <C>
Operating revenues...................... $ 139.8 $ 128.9
Operating expenses...................... 3.4 8.0
Depreciation, depletion and
amortization.......................... 0.9 0.9
------- -------
Operating income................... $ 135.5 $ 120.0
------- -------
------- -------
</TABLE>
Minerals operating income increased by $15.5 million over the income in
1996, primarily due to higher lease bonus and royalty income ($15.4 million) as
a result of higher soda ash volumes and prices. Operating expenses for the
minerals operations declined compared to 1996, primarily due to the shutdown of
the Company's ballast operations.
GENERAL AND ADMINISTRATIVE EXPENSES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1997 1996
---------- ----------
(MILLIONS OF DOLLARS)
<S> <C> <C>
General and administrative expenses..... $ (75.5) $ (68.4)
Depreciation, depletion and
amortization.......................... (3.8) (3.8)
------- -------
Corporate/general and
administrative.................... $ (79.3) $ (72.2)
------- -------
------- -------
</TABLE>
General and administrative expenses were $7.1 million higher than 1996, due
to costs associated with the implementation of employee ownership and culture
change programs, increased costs for upgrades and maintenance of the Company's
computer systems and higher personnel costs related to additional hiring.
General and administrative expenses per Mcfe remained flat at $0.11 per Mcfe
from 1996 to 1997.
20
<PAGE>
OTHER INCOME
Other income of $24.3 million was $27.7 million higher than 1996, due to a
$23 million reserve reduction relating to oil and gas properties in Wilmington,
California which were sold in 1994. Such reserves were reduced due to the
expiration of certain indemnification obligations and a reduction of other
exposure. Other income also includes a $7.2 million gain on the sale of
securities held for investment and $10 million in environmental insurance
settlements. These items were partially offset by $17.8 million in costs
relating to the unsuccessful bid to acquire Pennzoil Company.
INCOME TAXES
Income taxes of $133.4 million were $18.4 million lower than 1996,
reflecting lower income before taxes, $9.9 million in prior period state and
federal tax adjustments and an increase in Section 29 tax credits. In contrast,
1996 included a $3 million unfavorable state tax adjustment. Excluding these
adjustments, the effective tax rate for 1997 would have been 30.7% (including
$18.8 million of Section 29 tax credits), compared to 31.5% for 1996 (including
$15.6 million of Section 29 tax credits).
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
--------------------
1996 1995
-------- --------
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Operating revenues................................................................... $1,831.0 $1,476.7
Operating expenses................................................................... 1,304.4 1,006.6
Operating income..................................................................... 526.6 470.1
Net income........................................................................... 320.8 350.7
</TABLE>
The Company reported net income of $320.8 million for the year ended
December 31, 1996, compared to $350.7 million in 1995. Improved operating
results were more than offset by the absence of a $78.5 million after-tax gain
in 1995 from the Columbia settlement; the absence of favorable 1995 tax
adjustments; reduced Section 29 tax credits; and increased interest expense and,
to a lesser extent, increased general and administrative costs incurred as a
result of being a public company following the Offering and related debt
restructuring in October 1995. On a pro forma basis, after giving effect to
transactions occurring at the time of the Offering (as if such transactions had
occurred at the beginning of 1995), net income for 1996 would have been $4.6
million above pro forma net income for 1995 (see Note 2 to the Consolidated
Financial Statements).
Operating income increased by $56.5 million (12%) over 1995 levels as a
result of higher product price realizations (27%) and volume growth (8%),
partially offset by the absence of a $122.5 million pre-tax gain in 1995 from
the Columbia settlement. These gains were offset partially by property
write-downs, cost increases associated with expanded exploration activity and
increased administrative expenses associated with being an independent public
company.
SUMMARY OF SEGMENT FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------
1996 1995
---------- ----------
(MILLIONS OF DOLLARS)
<S> <C> <C>
Segment operating income:
Producing properties.................. $ 328.7 $ 307.7
Gathering, processing and marketing... 150.1 107.8
Minerals.............................. 120.0 107.1
Corporate/general and
administrative..................... (72.2) (52.5)
------- -------
Total operating income............. $ 526.6 $ 470.1
------- -------
------- -------
</TABLE>
21
<PAGE>
PRODUCING PROPERTY OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
--------------------
1996 1995
-------- --------
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Operating revenues................................................................... $1,133.3 $ 853.6
Other oil and gas revenues........................................................... 65.0 157.1
-------- --------
Total operating revenues........................................................... 1,198.3 1,010.7
Operating expenses:
Production......................................................................... 259.5 210.5
Exploration........................................................................ 144.6 89.4
Depreciation, depletion and amortization........................................... 465.5 403.1
-------- --------
Total operating expenses........................................................ 869.6 703.0
-------- --------
Operating income..................................................................... $ 328.7 $ 307.7
-------- --------
-------- --------
</TABLE>
Total operating revenues for producing property operations increased by
$187.6 million to $1,198.3 million in 1996. Production volume increases of 83.9
MMcfed added $39.6 million in revenues while higher prices of $0.42 per Mcfe
added $240.1 million in revenues.
Other oil and gas revenues declined by $92.1 million in 1996 reflecting the
absence of the Columbia settlement ($122.5 million), lower preferential volumes
distributed to an investor in a Section 29 Limited Partnership ($10.1 million)
and lower net gains on property sales. Such decline was partially offset by the
reduction of reserves for the Columbia settlement in 1996 and the absence of a
hedging loss in 1995 of $8.1 million.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1996 1995 1996 1995
------ ------ ------ ------
(WITHOUT (WITH HEDGING)
HEDGING)
<S> <C> <C> <C> <C>
Average price realizations--producing properties:
Natural gas (per Mcf)........................................... $ 1.94 $ 1.30 $ 1.86 $ 1.42
Natural gas liquids (per Bbl)................................... 11.39 8.14 11.39 8.14
Crude oil (per Bbl)............................................. 20.09 16.35 18.84 16.08
Average (per Mcfe).............................................. 2.23 1.64 2.13 1.71
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
--------------------
1996 1995
-------- --------
<S> <C> <C>
Production volumes--producing properties:
Natural gas (MMcfd)................................................................ 980.3 915.6
Natural gas liquids (MBbld)........................................................ 28.5 23.1
Crude oil (MBbld).................................................................. 50.6 52.8
Total (MMcfed)..................................................................... 1,454.9 1,371.0
</TABLE>
Natural gas volumes increased by 64.7 MMcfd to 980.3 MMcfd with increases
from development drilling programs in the Austin Chalk (79.6 MMcfd) and West
Texas (17.6 MMcfd) business units and a lower distribution of preferential
volumes related to the Section 29 Limited Partnership (22.4 MMcfd). Offsetting
these increases were declines in Gulf Onshore/Offshore business unit (31.6
MMcfd) resulting largely from the depletion of several offshore wells, and
declines in the Rockies business unit (13.2 MMcfd) resulting from production
problems. Natural gas liquids volumes from producing properties increased by 5.4
MBbld to 28.5 MBbld primarily due to ethane recovery in the Rockies and South
Texas/Plains/Canada business units and additional lease gas being processed in
the Austin Chalk business unit by the expanded Brookeland plant. Crude oil
volumes were 2.2 MBbld lower at 50.6 MBbld as a result of production declines in
South Texas/Plains/Canada and Rockies business units and the sale of certain
non-core properties, partially offset by property acquisitions and drilling in
the Austin Chalk business unit.
22
<PAGE>
Production expenses increased by $49 million (23%) to $259.5 million,
largely attributable to higher production taxes and higher lease operating
costs. The increase in production taxes of $29.2 million (57%) reflects
increased producing property revenues, the absence of a favorable 1995 Wyoming
production tax settlement ($12 million) and an unfavorable 1996 ad valorem tax
adjustment ($4.5 million). Lease operating costs were higher by $16.1 million
primarily in the Austin Chalk, East Texas and West Texas business units as a
result of increased production volumes and greater workover costs. Production
overhead was higher by $4 million in 1996. Production expenses on a per Mcfe
basis of $0.49 were $0.07 per Mcfe higher than 1995, principally reflecting the
increase in production taxes.
Exploration expenses increased by $55.2 million (62%) primarily due to
higher dry hole and surrendered lease provisions. The dry hole provision was up
$23.3 million due to an increase in exploratory drilling in southern Louisiana,
offshore, and North and South Dakota. The surrendered lease costs provision was
$29.1 million higher in 1996 than surrendered lease costs in 1995 reflecting a
write-down of North and South Dakota leasehold ($9.1 million) as well as
increases in Austin Chalk and Gulf Onshore/Offshore business units leasing
activity. Exploration overhead was $5.4 million higher in 1996 than exploration
overhead in 1995.
Depreciation, depletion and amortization expense increased by $62.4 million
to $465.5 million in 1996 as a result of asset impairment adjustments related to
certain properties in the Rockies and Gulf Onshore/Offshore business units
($17.4 million), several offshore property write-downs ($9 million), higher
producing property volumes ($25.8 million), and an unfavorable unit of
production rate ($11 million). On a per Mcfe basis, depreciation, depletion and
amortization, excluding write-downs, increased $0.02 per Mcfe to $0.83 per Mcfe
in 1996.
GATHERING, PROCESSING AND MARKETING OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1996 1995
---------- ----------
(MILLIONS OF DOLLARS)
<S> <C> <C>
Operating revenues...................... $ 503.8 $ 339.9
Gas purchases........................... 167.0 94.2
------- -------
Operating margin...................... 336.8 245.7
Other oil and gas revenues.............. -- 9.8
Operating expenses:
Operating costs....................... 123.0 94.8
Depreciation, depletion and
amortization....................... 63.7 52.9
------- -------
Total operating expenses........... 186.7 147.7
------- -------
Operating income........................ $ 150.1 $ 107.8
------- -------
------- -------
</TABLE>
Gathering, processing and marketing margins increased by $91.1 million
(37%) to $336.8 million in 1996. Increased plant volumes of 36.3 MMcfed (16%)
added $21.2 million in plant revenues while higher prices of $0.62 per Mcfe
(40%) added $59.8 million in plant revenues. Pipeline revenue increases of $63.9
million in 1996 were primarily attributable to increased throughput and higher
prices at the Ferguson-Burleson pipeline in the Austin Chalk area and the Ozona
pipeline in western Texas. Revenues from the Wahsatch pipeline in the Rockies
area were down due to lower throughput and tariff rates. Gas purchase costs were
higher by $72.8 million as a result of increased throughput and higher prices
paid by the Ozona, Peachridge and Ferguson-Burleson pipelines and certain plants
in the Austin Chalk area.
Marketing margins increased by $24.6 million in 1996 primarily as a result
of improved natural gas and natural gas liquids margins, additional marketed
volumes and increased natural gas storage activity.
23
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------
1996 1995
------ ------
<S> <C> <C>
Average price realizations--plants:
Natural gas (per Mcf).................................................................. $ 2.01 $ 1.51
Natural gas liquids (per Bbl).......................................................... 13.16 9.38
Average (per Mcfe)..................................................................... 2.18 1.56
Sales volumes--plants:
Natural gas (MMcfd).................................................................... 26.7 23.9
Natural gas liquids (MBbld)............................................................ 39.8 34.2
Total (MMcfed)......................................................................... 265.4 229.1
</TABLE>
Natural gas liquids volumes increased by 5.6 MBbld (16%) to 39.8 MBbld
primarily due to the expansion of the Ozona, Brookeland and Echo Springs plants,
greater retention percentages at the Brookeland plant reflecting third parties'
elections to reject liquids, as well as ethane recovery in other Rockies area
plants. Volume decreases occurred with a contract revision at Gulf Plains plant,
leaner gas streams and lower inlets at certain plants in the Austin Chalk area
and the disposition of certain plants in western Texas and the Rockies. Natural
gas volumes were up 2.8 MMcfd (12%) to 26.7 MMcfd resulting from the Brookeland
plant expansion and increased throughput at Gulf Plains plant.
Gathering, processing and marketing expenses increased by $28.2 million
(30%) in 1996 due to an asset impairment adjustment related to the Wahsatch
pipeline ($17 million) and higher marketing expenses ($9.6 million) associated
with system development, legal and other operating costs. GPM depreciation,
depletion and amortization costs increased $10.8 million in 1996, primarily due
to a higher asset base of plants and pipelines.
MINERALS OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1996 1995
---------- ----------
(MILLIONS OF DOLLARS)
<S> <C> <C>
Operating revenues...................... $ 128.9 $ 116.3
Operating expenses...................... 8.0 8.8
Depreciation, depletion and
amortization.......................... 0.9 0.4
------- -------
Operating income................... $ 120.0 $ 107.1
------- -------
------- -------
</TABLE>
Minerals operating income increased by $12.9 million (12%) to $120 million
in 1996, as a result of $6.7 million in higher soda ash joint venture income, an
increase in ballast income, higher coal royalty income associated with more tons
mined on the Company's leases and decreased operating expenses.
GENERAL AND ADMINISTRATIVE EXPENSES
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------------
1996 1995
---------- ----------
(MILLIONS OF DOLLARS)
<S> <C> <C>
General and administrative expenses..... $ (68.4) $ (50.3)
Depreciation, depletion and
amortization.......................... (3.8) (2.2)
------- -------
Corporate/general and
administrative.................... $ (72.2) $ (52.5)
------- -------
------- -------
</TABLE>
General and administrative expenses increased by $19.7 million (38%) in
1996 as a result of increased costs associated with being a stand-alone public
company and costs of completing information and accounting system conversions.
On a pro forma basis, general and administrative expenses increased by $0.01 per
Mcfe to $0.11 per Mcfe. (See Note 2 to the Consolidated Financial Statements for
pro forma income information).
24
<PAGE>
INTEREST EXPENSE AND OTHER INCOME
Interest expense increased by $31.5 million to $50.6 million in 1996, while
other income-net declined by $10.4 million. These changes principally reflect
the effects of the debt restructuring (higher debt balances and lower
interest-earning advances to UPC) that occurred at the time of the Offering.
INCOME TAXES
Income taxes increased by $44.5 million to $151.8 million in 1996 due to
higher income before taxes, a $22.3 million decrease in Section 29 tax credits,
a $3 million unfavorable state tax adjustment relating to prior years' federal
income tax audits and the absence of favorable 1995 tax adjustments totaling
$22.2 million. Excluding such adjustments, the effective tax rate for 1996 would
have been 31.5% (including Section 29 tax credits of $15.6 million) compared
with 28.3% in 1995 (including Section 29 tax credits of $37.9 million).
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations for 1997 was $968.8 million, down by $21.6
million from 1996. The decrease principally relates to unfavorable working
capital changes due primarily to a reduction in accrued taxes payable, partially
offset by favorable changes in deferred income taxes.
The Company expects to increase its oil and gas volumes in 1998 while
growing its reserves. Sales volume growth is anticipated primarily in the Gulf
Onshore/Offshore, South Texas/Plains/Canada and Austin Chalk business units. The
Company expects to remain one of the most active drillers in the United States
in 1998 based on the number of active drilling rigs, and will continue to search
for properties and reserves which will supplement its drill site inventory. In
addition, volumes in the GPM business unit are anticipated to increase 15% as a
result of the Company's acquisition of Highlands and recent expansions of
Patrick Draw and Masters Creek plants.
Prices for oil, gas and natural gas liquids for 1998 are expected to be
lower than the average for the previous years. Increased production from OPEC
countries, including sales by Iraq, along with the decline in several Asian
countries' economies has altered the balance between supply and demand for oil,
sending recent oil prices 20% lower than in previous years. The recent mild
weather in the United States resulting from the El Nino effect has also resulted
in a downward trend in gas prices. The Company expects to experience price
fluctuations and manages some price risk with hedging activities. Lower prices
could materially affect expected future net income, cash flows and capital
spending.
The Company owns a nonoperating 50% interest in Black Butte, a partnership
which operates a surface coal mine complex in southwestern Wyoming ('Black
Butte'). During 1997, Black Butte's sales to its largest customer under an
amended coal supply contract accounted for $59.3 million, or 12%, of the
Company's consolidated operating income. This contract was amended in 1997 to
accelerate the shipments from the year 2001 into the years 1998, 1999 and 2000,
at which time the financially beneficial terms of this contract will terminate.
Although Black Butte continues to seek new buyers for its low-sulfur coal, its
mining costs are considerably higher than the mining costs of its competition.
The Company does not expect to be able to replace the operating income it
currently receives under the contract with incremental coal sales after the year
2000.
Capital spending increased by $651.4 million (74%) to $1,531.7 million in
1997, compared to $880.3 million for 1996. The Company's ability to maintain and
improve its operating income and cash flow is dependent upon continued capital
spending, among other things. The following table summarizes capital
expenditures for 1997 and 1996.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1997 1996
------------- -------------
(MILLIONS OF DOLLARS)
<S> <C> <C>
Producing properties:
Production............................ $ 621.8 $429.5
Exploration........................... 399.3 237.5
Property acquisitions................. 130.6 85.7
---------- -------
Total producing properties....... 1,151.7 752.7
---------- -------
Gathering, processing and marketing... 364.2 118.1
Minerals and other.................... 15.8 9.5
---------- -------
Total capital expenditures....... $1,531.7 $880.3
---------- -------
---------- -------
</TABLE>
25
<PAGE>
Producing property capital spending was up by $399 million (53%) in 1997 as
a result of higher lease acquisition costs of $95.8 million, primarily in the
Austin Chalk and East Texas business units and increased exploratory and
development drilling ($222.3 million). Drilling accounted for $682.9 million
(45%) of capital expenditures in 1997, with $207.8 million in the Austin Chalk
business unit. Property acquisitions totaling $130.6 million were completed in
1997 compared to $85.7 million in 1996. The Company expanded its GPM operations
and increased its capital spending by $246.1 million in 1997. The increase in
GPM capital spending was related to the completion of the Masters Creek plant in
Louisiana, expansion of the East Texas plant and the acquisition of Highlands.
The Company expects its capital spending in 1998 to be in the range of $1.5
to $1.8 billion, including projected spending associated with the Norcen
acquisition. The Company plans to focus such spending primarily on exploration
and development activities in the Austin Chalk, Gulf Onshore/Offshore, western
Canada and Guatemala business units or areas. Such spending in the Gulf
Onshore/Offshore business unit includes capital to drill two or three additional
wells in the Gulf of Mexico in 1998 to further delineate the extent of the
discovery in the Mississippi Canyon Block 755 deepwater prospect. In addition,
the Company plans to acquire producing properties and expand its GPM operations.
As a result of continued increase in the worldwide demand for soda ash, the
Company, along with its partner Oriental Chemical Industries, Inc. ('OCI') plans
to expand the OCI Wyoming LP's soda ash facility by 950,000 tons per year, from
the plant's current nameplate capacity of 2.3 million tons per year, by 1999.
The Company has made an additional investment and expects expansion costs to be
primarily funded by a $100 million credit facility of OCI Wyoming LP guaranteed
by OCI 51% and the Company 49%.
As of December 31, 1997 and 1996, the total capitalization of the Company
was as follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------
1997 1996
-------- --------
(MILLIONS OF DOLLARS)
<S> <C> <C>
Commercial paper, net.......................................................... $ 663.1 $ 99.6
7% Notes due 2006.............................................................. 200.0 200.0
7.5% Debentures due 2026....................................................... 200.0 200.0
7.5% Debentures due 2096....................................................... 150.0 150.0
Tax exempt revenue bonds....................................................... 20.1 24.0
Discount on notes and debentures............................................... (2.6) (2.7)
-------- --------
Total long-term debt.................................................... 1,230.6 670.9
-------- --------
Shareholders' equity........................................................... 1,760.7 1,514.3
-------- --------
Total capitalization.................................................... $2,991.3 $2,185.2
-------- --------
-------- --------
Debt to total capitalization................................................... 41.1% 30.7%
-------- --------
-------- --------
</TABLE>
None of the Company's Notes and Debentures are redeemable prior to maturity
or subject to any sinking fund requirements. In addition, the Company has an
effective Shelf Registration Statement on file with the Securities and Exchange
Commission ('SEC'), which would permit the Company to offer up to $900 million
in debt and equity securities.
The Company has a $600 million revolving credit agreement that expires in
August 2001 and a $300 million revolving credit agreement which expires in
November 1998. Borrowings under these agreements, at the Company's election,
bear interest either at a spread over London Interbank Offered Rate ('LIBOR') or
at a spread over domestic certificate of deposit rates, in each case depending
on the Company's senior debt rating. The Company is required to pay facility
fees on the aggregate amount of the commitment ranging from 0.06% to 0.15% also
depending on the Company's senior debt rating. As a result of the Norcen
acquisition, the covenants for these agreements have been modified. Under these
agreements debt can not exceed 75% of the total of the Company's debt and
shareholders' equity (and 65% after 18 months) and requires the combined EBITDAX
(the sum of operating income; depreciation, depletion and amortization; and
exploration expenses) of the Company's Principal Subsidiaries (as defined in the
agreements) to be at least 80% of the Company's consolidated EBITDAX. These
agreements also impose certain restrictions on the Company regarding the
creation of liens, incurrence of indebtedness, transactions with affiliates,
sales of the stock of UPRC and certain mergers, consolidations and asset sales.
As of December 31, 1997, there were no borrowings outstanding under these credit
facilities although borrowing capacity is reduced by outstanding commercial
paper. The Company had the
26
<PAGE>
capacity to borrow $900 million, less commercial paper outstanding, under these
agreements as of December 31, 1997.
Excluding commercial paper, the Company has no debt maturing in the next
five years. Outstanding commercial paper has been classified as long-term debt
reflecting the Company's intent to maintain these short-term borrowings on a
long-term basis either through the issuance of commercial paper and term
financings. In addition, the Company could borrow under the credit agreements.
As a result of the Norcen acquisition, the Company will increase its debt
by $3.6 billion, including $2.7 billion acquisition debt and approximately $900
million of existing commercial paper and debentures of Norcen. In addition to
the covenants described above, the $2.7 billion acquisition facility entered
into by the Company includes a mandatory prepayment provision and a series of
'prepayment events.' The mandatory prepayment provision requires that $1.35
billion be repaid prior to March, 1999. In addition, 75% of the net proceeds
resulting from any prepayment events should be applied to reduce the
indebtedness under the acquisition facility. Prepayment events include sales of
assets in excess of $10 million and debt and equity issuances. This increased
debt is expected to raise the Company's debt to total capitalization ratio from
41% at December 31, 1997 to approximately 72% as of March 1998. The Company
plans to pursue an aggressive deleveraging program, which may include asset and
financial divestitures and the issuance of equity securities.
The Company paid cash dividends of $50 million in 1997, which represents a
$0.05 per share quarterly cash dividend on its outstanding shares of Common
Stock. On January 26, 1998, the Board of Directors declared a $0.05 per share
quarterly cash dividend for shareholders of record on March 11, 1998, payable
April 1, 1998. The determination of the amount of future cash dividends, if any,
to be declared and paid by the Company will depend upon, among other things, the
Company's financial condition, funds from operations, the level of its capital
and exploratory expenditures, future business prospects and other facts deemed
relevant by the Board of Directors. Accordingly, there can be no assurance that
dividends will be paid. The Company has no current plans to increase its
dividend rate.
The Company purchased $52.3 million of its Common Stock during 1997. In
November 1997, the Board of Directors authorized the purchase of an additional
$50 million of Common Stock during 1998.
The Company believes that cash from operations, additional available
financing and proceeds from asset and financial divestitures will enable it to
fund its ongoing capital expenditures, dividends and working capital
requirements for the foreseeable future.
ITEM 7A. RISK MANAGEMENT
The Company has established policies and procedures for managing risk
within its organization. These policies and procedures incorporate internal
controls and are governed by a risk management committee. The level of risk
assumed by the Company is based on its objectives and earnings, and its capacity
to manage risk. Limits are established for each major category of risk, with
exposures monitored and managed by Company management and reviewed by the risk
management committee.
COMMODITY PRICE RISK--NON-TRADING ACTIVITIES
The Company uses derivative financial instruments for non-trading purposes
in the normal course of business to manage and reduce risks associated with
contractual commitments, price volatility, and other market variables. These
instruments are generally put in place to limit risk of adverse price movements,
however, these instruments usually limit future gains from favorable price
movements. Such risk management activities are generally accomplished pursuant
to exchange-traded contracts or over-the-counter options.
Recognition of realized gains/losses in the Consolidated Statement of
Income and option premium payments/receipts are deferred until the underlying
physical product is purchased or sold. Unrealized gains/losses on derivative
financial instruments are not recorded. Margin deposits, deferred gains/losses
on derivative financial instruments and net premiums are included in other
current assets or liabilities in the Consolidated Statement of Financial
Position. The cash flow impact of derivative and other financial instruments is
reflected as cash flows from operating activities in the Consolidated Statement
of Cash Flows.
27
<PAGE>
As a result of the various hedging transactions for natural gas, natural
gas liquids and crude oil, the Company realized $28.1 million and $45.5 million
of pre-tax losses in 1997 and 1996, respectively. Since these transactions were
hedges on production, these losses were included in sales and other operating
revenues and were reflected in the average sales price of the associated
products.
The following table summarizes the Company's open positions as of December
31, 1997.
<TABLE>
<CAPTION>
WEIGHTED FAIR UNRECOGNIZED
CONTRACT CONTRACT AVG. PRICES VALUE GAIN (LOSS)
PRODUCT TYPE TIME PERIOD VOLUME PER MCF (MILLIONS OF DOLLARS) (MILLIONS OF DOLLARS)
- ------ --------------- ------------------ ---------- ----------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Gas Future/swaps Feb-Mar 1998 449 MMcfd $2.33 $ 3.7 $ 3.7
Gas Future/swaps Apr-Oct 1998 369 MMcfd $2.08 (4.3) (4.3)
Gas Future/swaps Nov-Dec 1998 100 MMcfd $2.17 (1.5) (1.5)
Gas Calls sold Feb-Mar 1998 405 MMcfd $3.20 0.1 3.8
Gas Net calls sold Apr-Oct 1998 96 MMcfd $2.58 1.1 0.8
Gas Puts purchased Feb-Mar 1998 450 MMcfd $2.21 5.5 1.0
Gas Puts purchased Apr-Oct 1998 166 MMcfd $2.04 5.0 (0.2)
Gas Fixed price Feb 1998-Jun 2008 62.6 Bcf $2.98 28.1 28.1
------
$31.4
------
------
</TABLE>
Additionally, the Company had previously sold near-term futures contacts
and swaps for February through December 1998 with respect to notional natural
gas volumes of 47 MMcfd, then subsequently offset these positions by purchasing
corresponding volumes through futures contracts and swaps for the same delivery
periods. The unrealized gain at December 31, 1997 relating to these transactions
was $0.6 million. UP Fuels periodically enters into financial contracts in
conjunction with transportation, storage, and customer service programs. The
unrecognized mark-to-market loss associated with such contracts as of December
31, 1997 is $0.5 million.
The Company had a total unrecognized mark-to-market present value gain of
$31.5 million related to the financial and fixed price sales contracts described
above. This gain consists of $28.1 million net gain on long-term fixed price
sales contracts and $3.4 million net gain on financial derivative instruments.
Unrecognized mark-to-market gains and losses were determined based on current
market prices, as quoted by recognized dealers, assuming round lot transactions
and using a mid-market convention without regard to market liquidity. The actual
gains or losses ultimately realized by the Company from such hedges may vary
significantly from the foregoing amounts due to the volatility of the commodity
markets.
COMMODITY PRICE RISK-TRADING ACTIVITIES
Periodically, the Company may enter into transactions involving a wide
range of energy related derivative financial transactions that are not the
result of hedging activities. These instruments are generally put into place
based on the Company's analysis and expectations with respect to price movement
or changes in other market variables. As of December 31, 1997 and 1996, there
were no commodity price risk-trading activity contracts outstanding.
INTEREST RATE SWAPS
The Company periodically enters into rate swaps and contracts to hedge
certain interest rate transactions. As of December 31, 1997 and 1996, there were
no interest rate contracts outstanding which materially affect the results of
operations or financial condition of the Company.
FOREIGN CURRENCY CONTRACTS
The Company periodically enters into foreign currency contracts to hedge
specific currency exposures from commercial transactions. As of December 31,
1997 and 1996, there were no foreign currency contracts outstanding.
28
<PAGE>
CREDIT RISK
Credit risk is the risk of loss as a result of nonperformance by
counterparties pursuant to the terms of their contractual obligations. Because
the loss can occur at some point in the future, a potential exposure is added to
the current replacement value, to arrive at a total expected credit exposure.
The Company has established methodologies to establish limits, monitor and
report creditworthiness and concentrations of credit to reduce such credit risk.
At December 31, 1997, the Company's largest credit risk associated with any
single counterparty, represented by the net fair value of open contracts with
such counterparty was less than $1 million.
PERFORMANCE RISK
Performance risk results when a counterparty fails to fulfill its
contractual obligations such as commodity pricing or volume commitments.
Typically, such risk obligations are defined within the trading agreements. The
Company utilizes its credit risk methodology to manage performance risk.
OTHER MATTERS
ENVIRONMENTAL COSTS
The Company generates and disposes of hazardous and nonhazardous waste in
its current and former operations, and is subject to increasingly stringent
federal, state and local environmental regulations. The Company has identified
seven sites currently subject to environmental response actions or on the
Superfund National Priorities List or state superfund lists, at which it is or
may be liable for remediation costs associated with alleged contamination or for
violations of environmental requirements. Certain federal legislation imposes
joint and several liability for the remediation of various sites; consequently,
the Company's ultimate environmental liability may include costs relating to
other parties in addition to costs relating to its own activities at each site.
In addition, the Company is or may be liable for certain environmental
remediation matters involving existing or former facilities.
As of December 31, 1997, long and short-term liabilities totaling $75.7
million had been accrued for future costs of all sites where the Company's
obligation is probable and where such costs reasonably can be estimated;
however, the ultimate cost could be lower or as much as 10% higher. This accrual
includes future costs for remediation and restoration of sites, as well as for
ongoing monitoring costs, but excludes any anticipated recoveries from third
parties. The accrual also includes $37.8 million for the obligation to
participate in the remediation of the Wilmington, California field properties.
Cost estimates were based on information available for each site, financial
viability of other Potentially Responsible Parties ('PRPs') and existing
technology, laws and regulations. The Company believes that it has accrued
adequately for its share of costs at sites subject to joint and several
liability. The ultimate liability for remediation is difficult to determine with
certainty because of the number of PRPs involved, site-specific cost sharing
arrangements with other PRPs, the degree of contamination by various wastes, the
scarcity and quality of volumetric data related to many of the sites and the
speculative nature of remediation costs.
The Company also is involved in reducing emissions, spills and migration of
hazardous materials. Remediation of identified sites and control and prevention
of environmental exposures required spending of $14.7 million in 1997 and $11.4
million in 1996. In 1998, the Company anticipates spending a total of $20
million for remediation and control, including $9 million relating to the
Wilmington, California properties. The majority of accrued environmental
liability as of December 31,1997 is expected to be paid out over the next five
years, funded by cash generated from operations. Based on current rules and
regulations, management does not expect future environmental obligations to have
a material impact on the results of operations or financial condition of the
Company.
YEAR 2000 ISSUE
The Company has adopted a Year 2000 Readiness Program and an implementation
plan. The Company is in the process of conducting a comprehensive evaluation and
assessment of the business risks and exposures related to the coming change in
the century. These business risks and exposures relate to the problem present in
certain
29
<PAGE>
software and embedded logic control devices to recognize the change in the
century. If not corrected, such software and devices could fail or create
erroneous results by or at the year 2000.
Since 1993, the Company has replaced all major information systems with
Year 2000 compliance as a criterion; therefore, the Company does not currently
expect to incur any material amount of expense associated with its remediation
of its major information systems. With respect to the risks and exposures
related to the Company's customers, partners, suppliers, financial institutions
and other constituencies and the resulting potential impact on the Company's
business operations and financial condition, the Company has initiated formal
communications with its customers, partners, suppliers, financial institutions
and other constituencies to mitigate or prevent such risks and exposures. The
extent of such risks and exposures will be assessed and evaluated.
The evaluation and assessment of the extent of the risks and exposures
related to the Company's information systems, including embedded logic devices,
and the Company's customers, partners, suppliers, financial institutions, and
other constituencies, should be substantially completed during 1998. The Company
has retained a consultant to advise the Company in the evaluation and assessment
phase of the implementation plan. The costs associated with the Year 2000
Readiness Program and its implementation are not currently expected to be
material. Until the evaluation and assessment is completed, the Company can not
have a reasonable basis to conclude that the risks and exposures related to the
Year 2000 will not materially: affect future financial results, or cause
reported financial information not to reflect fairly the future operating
results, cash flows or financial condition of the Company.
FORWARD LOOKING INFORMATION
Certain information included in this report contains, and other materials
filed or to be filed by the Company with the SEC (as well as information
included in oral statements or other written statements made or to be made by
the Company) contain, or will contain or include, forward looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and Section 27A of the Securities Act of 1933, as amended. Such forward
looking statements may be or may concern, among other things, capital
expenditures, drilling activity, acquisitions and dispositions, development
activities, cost savings efforts, production efforts and volumes, hydrocarbon
reserves, hydrocarbon prices, hedging activities and the results thereof,
liquidity, regulatory matters, competition and the Company's ability to realize
significant improvements with the change to a more adaptive corporate culture.
Such forward looking statements generally are accompanied by words such as
'estimate,' 'expect,' 'predict,' 'anticipate,' 'goal,' 'should,' 'assume,'
'believe' or other words that convey the uncertainty of future events or
outcomes.
Such forward looking information is based upon management's current plans,
expectations, estimates and assumptions and is subject to a number of risks and
uncertainties that could significantly affect current plans, anticipated
actions, the timing of such actions and the Company's financial condition and
results of operations. As a consequence, actual results may differ materially
from expectations, estimates or assumptions expressed in or implied by any
forward looking statements made by or on behalf of the Company. The risks and
uncertainties include generally the volatility of oil, gas and hydrocarbon-based
financial derivative prices; basis risk and counterparty credit risk in
executing hydrocarbon price risk management activities; economic, political,
judicial and regulatory developments; competition in the oil and gas industry as
well as competition from other sources of energy; the economics of producing
certain reserves; demand and supply of oil and gas; the ability to find or
acquire and develop reserves of natural gas and crude oil; and the actions of
customers and competitors. Additionally, unpredictable or unknown factors not
discussed herein could have material adverse effects on actual results related
to matters which are the subject of forward looking information. The Company
does not intend to update these cautionary statements.
With respect to expected capital expenditures and drilling activity,
additional factors such as the extent of the Company's success in acquiring oil
and gas properties and in identifying prospects for drilling, the availability
of acquisition opportunities which meet the Company's objectives as well as
competition for such opportunities, exploration and operating risks, the success
of management's cost reduction efforts and the availability of technology may
affect the amount and timing of such capital expenditures and drilling activity.
With respect to expected growth in production and sales volumes and estimated
reserve quantities, factors such as
30
<PAGE>
the extent of the Company's success in finding, developing and producing
reserves, the timing of capital spending and acquisition programs, uncertainties
inherent in estimating reserve quantities and the availability of technology may
affect such production volumes and reserve estimates. With respect to liquidity,
factors such as the state of domestic capital markets, credit availability from
banks or other lenders and the Company's results of operations may affect
management's plans or ability to incur additional indebtedness. With respect to
cash flow, factors such as changes in oil and gas prices, the Company's success
in acquiring producing properties, environmental matters and other
contingencies, hedging activities, the Company's credit rating and debt levels,
and the state of domestic capital markets may affect the Company's ability to
generate expected cash flows. With respect to contingencies, factors such as
changes in environmental and other governmental regulation, and uncertainties
with respect to legal matters may affect the Company's expectations regarding
the potential impact of contingencies on the operating results or financial
condition of the Company. Certain factors, such as changes in oil and gas prices
and underlying demand and the extent of the Company's success in exploiting its
current reserves and acquiring or finding additional reserves may have pervasive
effects on many aspects of the Company's business in addition to those outlined
above.
31
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Responsibilities for Financial Statements................................................................ 33
Independent Auditors' Report............................................................................. 34
Consolidated Statements of Income for the Years Ended December 31, 1997, 1996 and 1995................... 35
Consolidated Statements of Financial Position as of December 31, 1997 and 1996........................... 36
Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995............... 37
Consolidated Statements of Changes in Shareholders' Equity for the Years Ended December 31, 1997, 1996
and 1995.............................................................................................. 38
Business Segment Information............................................................................. 39
Notes to Consolidated Financial Statements............................................................... 40
Supplementary Information (Unaudited).................................................................... 59
</TABLE>
32
<PAGE>
RESPONSIBILITIES FOR FINANCIAL STATEMENTS
The accompanying financial statements, which consolidate the accounts of
Union Pacific Resources Group Inc. and its subsidiaries, have been prepared in
conformity with generally accepted accounting principles.
The integrity and objectivity of data in these financial statements and
accompanying notes, including estimates and judgments related to matters not
concluded by year-end, are the responsibility of management, as is all other
information in this report. Management devotes ongoing attention to review and
appraisal of its system of internal controls. This system is designed to provide
reasonable assurance, at an appropriate cost, that the Company's assets are
protected, that transactions and events are recorded properly and that financial
reports are reliable. The system is augmented by a staff of internal auditors;
careful attention to selection and development of qualified financial personnel;
programs to further timely communication and monitoring of policies, standards
and delegated authorities; and evaluation by independent auditors during their
examinations of the annual financial statements.
The Audit Committee of the Board of Directors, composed of six non-employee
directors, meets regularly with financial management, the internal auditors and
the independent auditors to review financial reporting and accounting and
financial controls of the Company. Both the independent auditors and the
internal auditors have unrestricted access to the Audit Committee and meet
regularly with the Audit Committee, without financial management representatives
present, to discuss the results of their examinations and their opinions on the
adequacy of internal controls and quality of financial reporting.
Jack L. Messman
Chairman and Chief Executive Officer
Morris B. Smith
Vice President and Chief Financial Officer
33
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Union Pacific Resources Group Inc.
Fort Worth, Texas
We have audited the accompanying consolidated statements of financial
position of Union Pacific Resources Group Inc. (the 'Company') as of December
31, 1997 and 1996, and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. 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 in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of the Company as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997 in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Fort Worth, Texas
January 26, 1998
34
<PAGE>
UNION PACIFIC RESOURCES GROUP INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(MILLIONS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Operating revenues: (Note 5)
Oil and gas operations:
Producing properties...................................................... $1,281.2 $1,133.3 $ 853.6
Gathering, processing and marketing....................................... 443.3 503.8 339.9
Other oil and gas revenues (Note 4)....................................... 60.4 65.0 166.9
-------- -------- --------
Total oil and gas operations............................................ 1,784.9 1,702.1 1,360.4
Minerals (Note 12)........................................................... 139.8 128.9 116.3
-------- -------- --------
Total operating revenues................................................ 1,924.7 1,831.0 1,476.7
-------- -------- --------
Operating expenses:
Production................................................................... 292.6 259.5 210.5
Exploration.................................................................. 204.7 144.6 89.4
Gathering, processing and marketing.......................................... 285.2 290.0 189.0
Minerals (Note 12)........................................................... 3.4 8.0 8.8
Depreciation, depletion and amortization..................................... 568.1 533.9 458.6
General and administrative................................................... 75.5 68.4 50.3
-------- -------- --------
Total operating expenses................................................ 1,429.5 1,304.4 1,006.6
-------- -------- --------
Operating income............................................................... 495.2 526.6 470.1
Other income (expense)--net (Notes 3 and 4).................................... 24.3 (3.4) 7.0
Interest expense--net (Notes 3 and 8).......................................... (53.1) (50.6) (19.1)
-------- -------- --------
Income before income taxes..................................................... 466.4 472.6 458.0
Income taxes (Note 7).......................................................... (133.4) (151.8) (107.3)
-------- -------- --------
Net income (Note 2)............................................................ $ 333.0 $ 320.8 $ 350.7
-------- -------- --------
-------- -------- --------
Earnings per share--basic (see Significant Accounting Policies--Earnings Per
Share)....................................................................... $ 1.33 $ 1.29
Earnings per share--diluted.................................................... $ 1.33 $ 1.28
Weighted average shares outstanding--diluted................................... 250.9 250.1
Cash dividends per share....................................................... $ 0.20 $ 0.20
</TABLE>
The accompanying accounting policies and notes to the consolidated
financial statements are an integral part of these statements.
35
<PAGE>
UNION PACIFIC RESOURCES GROUP INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS OF DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(MILLIONS OF DOLLARS)
ASSETS
<S> <C> <C>
Current assets:
Cash and temporary investments......................................................... $ 70.6 $ 118.9
Accounts receivable (net of allowance for doubtful accounts of $3.9 million in 1997 and
$4.5 million in 1996)............................................................... 385.4 351.6
Inventories............................................................................ 53.1 29.4
Other current assets................................................................... 67.7 86.4
--------- ---------
Total current assets.............................................................. 576.8 586.3
--------- ---------
Properties: (Notes 6 and 18)
Cost................................................................................... 7,414.4 6,190.0
Accumulated depreciation, depletion and amortization................................... (3,749.0) (3,217.6)
--------- ---------
Total properties.................................................................. 3,665.4 2,972.4
Intangible and other assets (Note 12).................................................... 230.0 90.2
--------- ---------
Total assets...................................................................... $ 4,472.2 $ 3,648.9
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................................................... $ 426.7 $ 407.4
Accrued taxes payable.................................................................. 59.3 134.1
Other current liabilities.............................................................. 71.7 71.3
--------- ---------
Total current liabilities......................................................... 557.7 612.8
Long-term debt (Notes 8 and 18).......................................................... 1,230.6 670.9
Deferred income taxes (Note 7)........................................................... 552.9 434.7
Retiree benefits obligations (Note 10)................................................... 147.7 151.4
Other long-term liabilities (Notes 12, 13, 14 and 15).................................... 222.6 264.8
Shareholders' equity (see page 38)....................................................... 1,760.7 1,514.3
--------- ---------
Total liabilities and shareholders' equity........................................ $ 4,472.2 $ 3,648.9
--------- ---------
--------- ---------
</TABLE>
The accompanying accounting policies and notes to the consolidated
financial statements are an integral part of these statements.
36
<PAGE>
UNION PACIFIC RESOURCES GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------- ------- ---------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Cash provided by operations:
Net income................................................................... $ 333.0 $ 320.8 $ 350.7
Non-cash charges to income:
Depreciation, depletion and amortization.................................. 568.1 533.9 458.6
Deferred income taxes (Note 7)............................................ 119.7 37.0 (18.3)
Other non-cash charges (credits)--net..................................... (35.0) 8.0 (65.8)
Exploratory expenditures..................................................... 76.9 51.6 36.0
Changes in current assets and liabilities.................................... (93.9) 39.1 68.2
--------- ------- ---------
Cash provided by operations............................................. 968.8 990.4 829.4
--------- ------- ---------
Investing activities:
Capital and exploratory expenditures (Note 17)............................... (1,352.3) (880.3) (686.4)
Acquisition of Highlands Gas Corporation (Note 4)............................ (179.4) -- --
Proceeds from sales of assets (Note 4)....................................... 44.6 30.2 111.1
Other investing activities--net.............................................. (17.7) (2.8) (7.5)
--------- ------- ---------
Cash (used) by investing activities..................................... (1,504.8) (852.9) (582.8)
--------- ------- ---------
Financing activities:
Dividends paid (Note 2)...................................................... (50.0) (49.8) (1,713.9)
Debt financings (Note 8)..................................................... 563.5 646.9 68.0
Debt repaid.................................................................. (3.9) (77.5) (47.4)
Repurchase of common stock................................................... (52.3) (3.5) --
Proceeds from initial public offering (Note 2)............................... -- -- 843.9
Advances from (to) Union Pacific Corporation (Notes 2 and 3)................. -- (567.8) 627.1
Other financings--net (Note 8)............................................... 30.4 5.5 (3.4)
--------- ------- ---------
Cash provided (used) by financing activities............................ 487.7 (46.2) (225.7)
--------- ------- ---------
Net change in cash and temporary investments................................... (48.3) 91.3 20.9
Balance at beginning of year................................................... 118.9 27.6 6.7
--------- ------- ---------
Balance at end of year......................................................... $ 70.6 $ 118.9 $ 27.6
--------- ------- ---------
--------- ------- ---------
Changes in current assets and liabilities:
Accounts receivable.......................................................... $ (33.9) $(111.5) $ 4.0
Inventories.................................................................. (23.7) 38.1 (9.2)
Other current assets......................................................... 18.8 (1.6) 79.7
Accounts payable............................................................. 19.2 60.4 10.0
Accrued taxes payable........................................................ (74.7) 46.7 22.4
Short-term debt.............................................................. -- -- (43.2)
Other current liabilities.................................................... 0.4 7.0 4.5
--------- ------- ---------
Total................................................................... $ (93.9) $ 39.1 $ 68.2
--------- ------- ---------
--------- ------- ---------
Supplemental cash flow disclosure:
Interest paid................................................................ $ 56.3 $ 43.4 $ 20.0
Income taxes paid............................................................ 129.7 79.0 29.7
</TABLE>
The accompanying accounting policies and notes to the consolidated
financial statements are an integral part of these statements.
37
<PAGE>
UNION PACIFIC RESOURCES GROUP INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- ---------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Common stock, $1.00 par value; authorized 5,000,000 shares:
4,485,000 shares issued and outstanding at December 31, 1994
Balance at beginning of year................................................... $ -- $ -- $ 4.5
Asset restructuring (Note 2)................................................... -- -- (4.5)
-------- -------- ---------
Balance at end of year......................................................... -- -- --
-------- -------- ---------
Common stock, no par value; authorized 400,000,000 shares:
251,888,575 shares issued and outstanding at December 31, 1997 and 250,058,019
shares issued at December 31, 1996 (Note 2)
Balance at beginning and end of year........................................... -- -- --
-------- -------- ---------
Paid-in surplus:
Balance at beginning of year................................................... 872.9 860.2 421.2
Asset restructuring (Note 2)................................................... -- -- (421.2)
Initial public offering (Note 2)............................................... -- -- 843.9
Conversion, award, forfeiture and appreciation of retention shares (Note 11)... 5.1 15.9 9.9
Issuance of ESOP shares (Note 11).............................................. 107.3 -- --
Exercise of Stock Options...................................................... 5.5 0.5 --
Other.......................................................................... 0.4 (3.7) 6.4
-------- -------- ---------
Balance at end of year......................................................... 991.2 872.9 860.2
-------- -------- ---------
Retained earnings:
Balance at beginning of year................................................... 674.4 472.9 1,422.6
Net income..................................................................... 333.0 320.8 350.7
-------- -------- ---------
Total........................................................................ 1,007.4 793.7 1,773.3
Dividends declared on common stock (Note 2).................................... (50.0) (49.8) (1,726.3)
Pension asset adjustment (Note 10)............................................. -- (69.5) --
Asset restructuring (Note 2)................................................... -- -- 425.9
-------- -------- ---------
Balance at end of year......................................................... 957.4 674.4 472.9
-------- -------- ---------
Unearned compensation:
Balance at beginning of year................................................... (17.5) (9.2) --
Conversion, award, appreciation and amortization of retention shares--net (Note
11) ......................................................................... 5.7 (8.3) (9.2)
-------- -------- ---------
Balance at end of year......................................................... (11.8) (17.5) (9.2)
-------- -------- ---------
Deferred foreign exchange adjustment:
Balance at beginning of year................................................... (12.0) (11.5) (13.4)
Foreign currency translation adjustment........................................ (5.3) (0.5) (1.9)
-------- -------- ---------
Balance at end of year......................................................... (17.3) (12.0) (11.5)
-------- -------- ---------
ESOP (Note 11):
Balance at beginning of year................................................... -- -- --
Issuance of ESOP shares........................................................ (107.3) -- --
Release of ESOP shares......................................................... 5.3 -- --
-------- -------- ---------
Balance at end of year......................................................... (102.0) -- --
Treasury stock:
Balance at beginning of year................................................... (3.5) -- --
Treasury stock, at cost........................................................ (52.3) (3.5) --
-------- -------- ---------
Balance at end of year 2,379,625 shares at December 31, 1997
154,417 shares at December 31, 1996..................... (55.8) (3.5) --
-------- -------- ---------
Minimum pension liability........................................................ (1.0) -- --
-------- -------- ---------
Total shareholders' equity................................................... $1,760.7 $1,514.3 $ 1,312.4
-------- -------- ---------
-------- -------- ---------
</TABLE>
The accompanying accounting policies and notes to the consolidated
financial statements are an integral part of these statements.
38
<PAGE>
UNION PACIFIC RESOURCES GROUP INC.
BUSINESS SEGMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Revenues: 1,2
Exploration and production................................................... $1,334.7 $1,198.3 $1,010.7
Gathering, processing and marketing.......................................... 450.2 503.8 349.7
Minerals..................................................................... 139.8 128.9 116.3
-------- -------- --------
Total revenues............................................................ $1,924.7 $1,831.0 $1,476.7
-------- -------- --------
-------- -------- --------
Depreciation, depletion and amortization:
Exploration and production................................................... $ 493.0 $ 465.5 $ 403.1
Gathering, processing and marketing.......................................... 70.4 63.7 52.9
Minerals..................................................................... 0.9 0.9 0.4
Corporate.................................................................... 3.8 3.8 2.2
-------- -------- --------
Total depreciation, depletion and amortization............................ $ 568.1 $ 533.9 $ 458.6
-------- -------- --------
-------- -------- --------
Operating income: 3
Exploration and production................................................... $ 344.4 $ 328.7 $ 307.7
Gathering, processing and marketing.......................................... 94.6 150.1 107.8
Minerals..................................................................... 135.5 120.0 107.1
Corporate.................................................................... (79.3) (72.2) (52.5)
-------- -------- --------
Total operating income.................................................... $ 495.2 $ 526.6 $ 470.1
-------- -------- --------
-------- -------- --------
Fixed assets--net:
Exploration and production................................................... $2,695.7 $2,227.4 $2,049.9
Gathering, processing and marketing.......................................... 843.4 637.8 610.7
Minerals..................................................................... 23.6 21.9 23.6
Corporate.................................................................... 102.7 85.3 80.1
-------- -------- --------
Total fixed assets--net................................................... $3,665.4 $2,972.4 $2,764.3
-------- -------- --------
-------- -------- --------
Capital and exploratory expenditures:
Exploration and production................................................... $1,151.7 $ 752.7 $ 577.9
Gathering, processing and marketing.......................................... 364.2 118.1 106.5
Minerals..................................................................... 1.4 0.8 0.2
Corporate.................................................................... 14.4 8.7 1.8
-------- -------- --------
Total capital and exploratory expenditures................................ $1,531.7 $ 880.3 $ 686.4
-------- -------- --------
-------- -------- --------
</TABLE>
The Company's reportable segments are strategic business units or an
aggregation of business units with similar operations and management objectives.
The reportable segments are managed separately because each segment requires
different operational assets, technology and management strategies.
- ------------------------
1 The exploration and production segment sells a significant portion of its oil
and gas volumes to the Company's wholly owned marketing subsidiary, Union
Pacific Fuels, Inc. at market prices. See 'Significant Accounting
Policies--Revenue Recognition.'
2 1997, 1996 and 1995 revenues include income from equity affiliates of $0.7
million, $0.8 million and $0.7 million, respectively, for the gathering,
processing and marketing segment and $74.5 million, $74.5 million and $68.2
million, respectively for the minerals segment.
3 Segment operating income for the corporate segment consists primarily of
general and administrative expense.
This information should be read in conjunction with the accompanying
accounting policies and notes to the consolidated financial statements.
39
<PAGE>
UNION PACIFIC RESOURCES GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The Consolidated Financial Statements include
the accounts of Union Pacific Resources Group Inc. and subsidiaries
(collectively, the 'Company'), including its principal operating subsidiary
Union Pacific Resources Company ('UPRC'). The Company accounts for investments
in affiliated companies (20% to 50% owned) on the equity method of accounting
and consolidates the proportionate share of such investments. All significant
intercompany transactions are eliminated. The consolidated statements of income
for previous periods include certain reclassifications that were made to conform
to the current presentation. Such reclassifications have no effect on previously
reported operating income or net income.
Cash and Temporary Investments. Temporary investments are stated at cost
which approximates fair market value, and consist of investments with original
maturities of three months or less.
Inventories. Inventories consist primarily of hydrocarbon volumes and
materials and supplies carried on a first-in first-out basis at the lower of
cost or market.
Oil and Gas Properties. Oil and gas properties are accounted for using the
successful efforts method. Under this method, drilling costs of unsuccessful
exploration wells, geological and geophysical costs, non-producing leasehold
amortization and delay rentals are charged to expense when incurred. Costs to
develop producing properties, including drilling costs and applicable leasehold
acquisition costs, are capitalized.
Depreciation, depletion and amortization of producing properties, including
depreciation of well and support equipment and amortization of related lease
costs, are determined by using a unit of production method based upon estimated
proved reserves. Acquisition costs of unproved properties are amortized from the
date of acquisition on a composite basis, which considers past success
experience and average lease life. Provisions for depreciation of property and
equipment other than producing properties are computed principally on the
straight-line method based on estimated service lives, which range from three to
30 years.
Costs of future site restoration, dismantlement and abandonment for onshore
producing properties are accrued (based on internal engineering estimates) as
part of depreciation, depletion and amortization expense for tangible equipment
by assuming no salvage value in the calculation of the unit of production rate.
Costs of future site restoration, dismantlement and abandonment for offshore
wells and production platforms also are accrued based on internal engineering
estimates using the unit of production method with a charge to depreciation,
depletion and amortization expense. The balance of the offshore abandonment
accrual at December 31, 1997 and 1996 was $7.7 million and $6.2 million,
respectively, and is classified in other long-term liabilities.
Potential impairment of producing properties and significant unproved
properties is assessed annually (unless economic events warrant more frequent
reviews) on a field-by-field basis; all other unproved properties are assessed
annually on an aggregate basis. In addition, a quarterly impairment analysis of
aggregated properties is performed by the Company using undiscounted future net
cash flows determined based upon current prices and costs.
Costs of retired, sold or abandoned properties that constitute part of an
amortization base are charged or credited, net of proceeds, to accumulated
depreciation, depletion and amortization unless such nonrecognition would
significantly affect the unit of production rate. Gains or losses from the
disposition of other properties are recognized currently. Gains and losses from
the sale of operating assets that constitute an entire profit center and
significant nonoperating assets are recorded in other income. Gains and losses
from all other dispositions of operating assets are recognized in other oil and
gas revenues (see Note 16).
Environmental Expenditures. Environmental expenditures related to
treatment or cleanup are expensed when incurred, while environmental
expenditures which extend the life of the property or prevent future
contamination are capitalized in accordance with generally accepted accounting
principles. Liabilities for these expenditures are recorded when it is probable
that obligations have been incurred and the amounts can be reasonably estimated,
based on current law and existing technologies. Environmental accruals are
recorded at undiscounted amounts and exclude claims for recoveries from
insurance or other third parties (see Note 13).
40
<PAGE>
UNION PACIFIC RESOURCES GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Goodwill. Intangible and other assets includes goodwill of $68.6 million
arising from business combinations prior to 1971. Such goodwill is not being
amortized because it is considered to have continuing value over an indefinite
period. Goodwill of $90.7 million, acquired subsequent to 1971, is being
amortized on a straight-line basis over a 20 year period. Amortization of
goodwill was $2 million for 1997. The value of goodwill is periodically
evaluated based on the expected future undiscounted operating cash flows to
determine whether any potential impairment exists (see Note 12).
Revenue Recognition. Sales from producing gas wells are recognized on the
entitlement method of accounting which defers recognition of sales and related
costs when, and to the extent that, deliveries to customers exceed the Company's
net revenue interest in production. Similarly, when deliveries are below the
Company's net revenue interest in production, sales and related costs are
recorded to reflect the full net revenue interest.
Marketing revenue included in gathering, processing and marketing revenues
is recorded net of the cost of hydrocarbons purchased.
Derivative Financial Instruments. Unrealized gains/losses on derivative
financial instruments are not recorded. Recognition of realized gains/losses and
option premium payments/receipts are deferred and recorded in the Consolidated
Statement of Income when the underlying physical product is purchased or sold.
Margin deposits, realized gains/losses on derivative financial instruments and
net premiums are included in other current assets or liabilities in the
Consolidated Statement of Financial Position. The cash flow impact of derivative
and other financial instruments is reflected in cash provided by operations in
the Consolidated Statement of Cash Flows.
Income Taxes. Deferred income taxes are provided for items of income and
expense that are included in income for financial reporting purposes in
different reporting periods than for federal or state income tax purposes.
Until its spinoff from Union Pacific Corporation ('UPC') in October 1996
(see Note 2), the Company was included in UPC's consolidated income tax return.
The consolidated income tax liability of UPC through such date has been
allocated among its affiliated companies on the basis of their separate
contributions to the consolidated income tax liability, with full benefit of tax
losses and credits utilized in consolidation being allocated to the individual
companies generating such losses and credits.
Stock-Based Compensation. Compensation expense is recorded with respect to
stock option grants and retention stock awards to employees using the intrinsic
value method. This method calculates compensation expense on the measurement
date (usually the date of grant) as the excess of the current market price of
the underlying common stock of the Company ('Common Stock') over the amount the
employee is required to pay for the shares, if any. The expense is recognized
over the vesting period of the grant or award.
Earnings Per Share. In 1997, the Financial Accounting Standards Board
('FASB') issued Statement of Financial Accounting Standards ('SFAS') No. 128,
'Earnings Per Share' ('EPS') which established new standards for computing and
presenting EPS. SFAS No. 128 replaced the presentation of primary EPS with a
presentation of basic EPS. Basic EPS excludes dilution and is computed by
dividing income available to common shareholders by the weighted-average number
of common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock. EPS amounts for 1997 and 1996
have been presented and, where appropriate, restated to conform to the SFAS No.
128 requirements (see Note 11).
EPS for the year ended December 31, 1995 has been omitted from the
Consolidated Statements of Income as the Company was a wholly owned subsidiary
of UPC until its initial public offering in October 1995. Pro forma 1995 EPS
(see Note 2) are based upon 249.7 million average common shares outstanding
during the period from completion of the Offering (hereinafter defined) until
December 31, 1995.
41
<PAGE>
UNION PACIFIC RESOURCES GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 certain assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during each reporting period. Management believes its estimates and assumptions
are reasonable; however, such estimates and assumptions are subject to a number
of risks and uncertainties which may cause actual results to differ materially
from the Company's estimates. Significant estimates underlying these financial
statements include the estimated quantities of proved oil and gas reserves and
the related present value of estimated future net cash flows therefrom (see
Supplementary Information beginning on page 59).
Recently Issued Accounting Standards. In June 1997, the FASB issued SFAS
No. 130, 'Reporting Comprehensive Income,' which establishes standards for
reporting comprehensive income and its components (revenues, expenses, gains and
losses) in a full set of general-purpose statements. It requires (a)
classification of items of other comprehensive income by their nature in a
financial statement and (b) display of the accumulated balance of other
comprehensive income separate from retained earnings and additional paid-in
surplus in the equity section of the Statement of Financial Position. The
Company plans to adopt SFAS No. 130 for the quarter ended March 31, 1998.
In June 1997, the FASB issued SFAS No. 131, 'Disclosures about Segments of
an Enterprise and Related Information,' which established standards for
reporting information about operating segments in annual financial statements
and requires selected information about operating segments in interim financial
reports issued to shareholders. SFAS No. 131 also establishes standards for
related disclosures about products and services, geographic areas and major
customers. The Company has adopted SFAS No. 131 for the year ended December 31,
1997 (See Business Segment Information beginning on page 39).
1. NATURE OF OPERATIONS
The Company is an independent energy company engaged primarily in the
exploration for and development and production of natural gas, natural gas
liquids and crude oil in several major basins in the United States and Canada.
The Company owns and operates significant assets, in proximity to its principal
producing properties, dedicated to 'gas value chain' activities, which consist
of gathering, processing, transportation and marketing of natural gas and
natural gas liquids. The Company markets a substantial portion of its own
natural gas, natural gas liquids and crude oil production together with
significant volumes of natural gas, natural gas liquids and crude oil produced
by others. The Company has a diverse customer base for its hydrocarbon products.
In addition, the Company engages in the hard minerals business through
nonoperated joint venture and royalty interests in several coal and trona
(natural soda ash) mines.
The Company's results of operations are largely dependent on the difference
between the prices received for its hydrocarbon products and the cost to find,
develop, produce and market such resources. Hydrocarbon prices are subject to
fluctuations in response to changes in supply, market uncertainty and a variety
of factors beyond the control of the Company. These factors include worldwide
political instability, the foreign supply of oil and natural gas, the price of
foreign imports, the level of consumer demand and the price and availability of
alternative fuels. Historically, the Company has been able to manage a portion
of the operating risk relating to hydrocarbon price volatility through hedging
activities (see Note 5).
2. SPINOFF FROM UNION PACIFIC CORPORATION
In October 1995, the Company sold 42.5 million shares of its Common Stock
in an initial public offering (the 'Offering') at an offering price of $21 per
share. Prior to consummation of the Offering, the Company was wholly owned by
UPC. Following the Offering and until October 15, 1996, UPC owned approximately
83% of the Company's outstanding Common Stock. Concurrent with the Offering, UPC
announced its intention to distribute its remaining ownership interest in the
Company to its shareholders as a dividend by means of a tax-free distribution
(the 'Distribution'). On October 15, 1996, the Distribution was consummated.
42
<PAGE>
UNION PACIFIC RESOURCES GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SPINOFF FROM UNION PACIFIC CORPORATION--(CONTINUED)
Prior to the Offering (1) UPC caused the Company to own all the rights and
assets historically employed by the natural resources business segment of UPC in
connection with the operations presented in the Consolidated Financial
Statements and (2) the Company declared dividends to UPC totaling $1,621 million
consisting of (i) a cash dividend of $912 million payable promptly after the
completion of the Offering, (ii) a $650 million note payable to UPC bearing
interest at 8.5% per annum payable within 90 days of the Distribution and (iii)
a $59 million receivable from UPC. The Company borrowed $68 million which was
used, together with the $843.9 million net proceeds from the Offering, to pay
the cash dividend of $912 million. Such transactions, referred to collectively
as the 'Asset Restructuring,' are reflected in the Consolidated Financial
Statements as of December 31, 1995 and thereafter.
As a result of the Offering and related transactions, historical results of
operations for 1995 are not directly comparable to results for the years ended
December 31, 1996 and 1997. The following pro forma information reflects
adjustments to the historical 1995 Consolidated Statement of Income necessary to
give effect to the Asset Restructuring and the Offering as if such transactions
had occurred at the beginning of 1995.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
--------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(MILLIONS OF DOLLARS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Operating income................................................... $470.1 $ (6.9) (a) $ 463.2
Other income--net.................................................. 7.0 (3.8) (b) 3.2
Interest expense................................................... (19.1) (44.6) (c) (63.7)
---------- ----------- ---------
Income before income taxes......................................... 458.0 (55.3) 402.7
Income taxes....................................................... (107.3) 20.8(d) (86.5)
---------- ----------- ---------
Net income......................................................... $350.7 $ (34.5) $ 316.2
---------- ----------- ---------
---------- ----------- ---------
Earnings per share-diluted......................................... $ 1.27
---------
---------
Weighted average shares outstanding-diluted (e).................... 249.7
---------
---------
</TABLE>
- ------------------
(a) Adjustment to reflect management's estimate of additional
administrative and third party costs that the Company is incurring as a
result of becoming a stand-alone public company. These costs include
(1) additional administrative personnel, (2) additional third party
fees such as audit fees, actuarial fees, legal fees and stock transfer
fees, (3) additional annual stock compensation costs related to
employee retention shares (see Note 11) and (4) fees payable to UPC for
certain financial guarantees provided to the Company.
(b) Adjustment to eliminate intercompany interest income recorded by the
Company during the period, as a result of the dividend to UPC of the
$59 million intercompany receivable.
(c) Adjustment to reflect increased interest expense from the $650 million
note payable to UPC at 8.5% per annum and $68 million in bank debt at
6.1% per annum, which debt was incurred to pay a portion of the $912
million cash dividend to UPC.
(d) Adjustment to reflect decreased federal and state income tax expense
resulting from increased expenses in entries (a) through (c) above,
calculated at an assumed income tax rate of 37.5%.
(e) See 'Significant Accounting Policies--Earnings Per Share.'
In addition, reported 1996 results include approximately $2 million of
pension expense representing one quarter of approximately $8 million additional
annual pension expense associated with the October 1996 allocation of pension
assets between the Company and UPC (see Note 10).
3. RELATED PARTY TRANSACTIONS
At December 31, 1995, the Company had a $567.8 million net payable to UPC
at 8.5%, reflecting the $650 million note payable incurred in connection with
the Asset Restructuring (see Note 2), partially offset by $82.2 million in cash
advances to UPC. Such intercompany debt was repaid in part during 1996 using
cash from operations with the remainder repaid immediately following the
Distribution using proceeds from the issuance of
43
<PAGE>
UNION PACIFIC RESOURCES GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. RELATED PARTY TRANSACTIONS--(CONTINUED)
long-term debt and commercial paper (see Note 8). Intercompany interest income
related to amounts receivable from UPC was $9.6 million in 1995, which is
included in other income in the Company's Consolidated Statements of Income.
Intercompany interest expense related to amounts payable to UPC after the
Offering was $32.6 million in 1996 and $14.5 million in 1995 which is included
in interest expense in the Company's Consolidated Statements of Income.
Services historically performed by UPC on behalf of the Company included
services in the areas of cash management, internal audit and tax and employee
benefits administration. Prior to the Offering, the cost of such services, which
is not significant, was not charged to the Company. As a result of the Asset
Restructuring and the Offering, UPC and the Company entered into a number of
agreements for the purpose of defining the ongoing relationship between them.
Costs incurred by the Company in 1997, 1996 and 1995 related to such agreements
were $2.9 million, $2.7 million and $0.9 million, respectively, principally
reflecting the cost of administrative services and certain financial guarantees.
In connection with the Distribution, most of these agreements with UPC have been
terminated and the terms of any ongoing agreements between the Company and UPC
have been amended as a result of arm's length negotiations. The financial impact
of any ongoing agreements is not expected to be significant.
4. SIGNIFICANT ITEMS
Columbia Gas Transmission Company. In November 1995, the Company received
a cash payment from Columbia Gas Transmission Company ('Columbia') as a part of
Columbia's emergence from Chapter 11 bankruptcy. An issue remains as to whether
the payment received is royalty bearing, other than that portion of the payment
applicable to gas actually produced and sold to Columbia, and the Company
instituted a legal proceeding to obtain a declaration of its rights and
obligations. As a result of the payment from Columbia, after taking into account
possible tax and royalty claims, the Company recorded pre-tax income of $122.5
million in the fourth quarter of 1995 ($78.5 million after tax) which is
included in other oil and gas revenues in the Company's 1995 Consolidated
Statement of Income. During 1997 and 1996, the Company reached settlements or
took default judgment with respect to a number of royalty owners named in the
suit. In 1997 and 1996, the Company recognized $18 million and $31.3 million in
other oil and gas revenues related to a reduction in its litigation and
contingencies accrual pertaining to the Columbia payment (see Note 15).
Highlands Gas Corporation. In August 1997, the Company acquired 100% of
the outstanding stock of Highlands Gas Corporation ('Highlands') for an adjusted
purchase price of approximately $179.4 million, plus the assumption of certain
liabilities. Highlands is in the business of gathering, purchasing, processing
and transporting natural gas and natural gas liquids. The acquisition included
three natural gas processing plants, five gathering systems with over 700 miles
of gas and natural gas liquids gathering pipeline and 400 miles of
transportation pipeline located in western Texas and eastern New Mexico. Results
of operations for Highlands from August through December 1997 are included in
the Consolidated Statement of Income.
5. FINANCIAL INSTRUMENTS
Hedging. The Company has established policies and procedures for managing
risk within its organization. It is balanced by internal controls and governed
by a risk management committee. The level of risk assumed by the Company is
based on its objectives and earnings, and its capacity to manage risk. Limits
are established for each major category of risk, with exposures monitored and
managed by Company management, and reviewed semi-annually by the risk management
committee. Major categories of the Company's risk are defined as follows:
Commodity Price Risk--Non-Trading Activities. The Company uses derivative
financial instruments for non-trading purposes in the normal course of business
to manage and reduce risks associated with contractual commitments, price
volatility, and other market variables. These instruments are generally put in
place to limit
44
<PAGE>
UNION PACIFIC RESOURCES GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. FINANCIAL INSTRUMENTS--(CONTINUED)
risk of adverse price movements, however, these same instruments usually limit
future gains from favorable price movements. Such risk management activities are
generally accomplished pursuant to exchange-traded contracts or over-the-counter
options.
Recognition of realized gains/losses and option premium payments/receipts
are also deferred in the Consolidated Statement of Income until the underlying
physical product is sold. Unrealized gains/losses on derivative financial
instruments are not recorded. Margin deposits, deferred gains/losses on
derivative financial instruments and net premiums are included in other current
assets or liabilities in the Consolidated Statement of Financial Position. The
cash flow impact of derivative and other financial instruments is reflected as
cash flows provided from operations in the Consolidated Statement of Cash Flows.
Commodity Price Risk--Trading Activities. Periodically, the Company may
enter into transactions involving a wide range of energy related derivative
financial transactions that are not the result of hedging activities. These
instruments are generally put into place based on the Company's analysis and
expectations with respect to price movement or changes in other market
variables. As of December 31, 1997 and 1996, there were no commodity trading
activity-based contracts outstanding.
Interest Rate Swaps. The Company periodically enters into rate swaps and
contracts to hedge certain interest rate transactions. As of December 31, 1997
and 1996, there were no material interest rate contracts outstanding which
materially affect the results of operation or financial condition of the
Company.
Foreign Currency Contracts. The Company periodically enters into foreign
currency contracts to hedge specific currency exposures from commercial
transactions. As of December 31, 1997 and 1996, there were no foreign currency
contracts outstanding.
Credit Risk. Credit risk is the risk of loss as a result of nonperformance
by counterparties pursuant to the terms of their contractual obligations.
Because the loss can occur at some point in the future, a potential exposure is
added to the current replacement value to arrive at a total expected credit
exposure. The Company has established methodologies to establish limits, monitor
and report creditworthiness and concentrations of credit to reduce such credit
risk. At December 31, 1997, the Company's largest credit risk associated with
any single counterparty, represented by the net fair value of open contracts
with such counterparty was less than $1 million.
Performance Risk. Performance risk results when a counterparty fails to
fulfill its contractual obligations such as commodity pricing or volume
commitments. Typically, such risk obligations are defined within the trading
agreements. The Company utilizes its credit risk methodology to manage
performance risk.
As a result of its hedging program, the Company's oil and gas revenues can
be higher or lower than revenues that would be reported if hedging did not
occur. During 1997 and 1996, revenues were $86 million and $52 million lower,
respectively, while during 1995, revenues were $27 million higher as a result of
hedging activities.
Fair Value of Financial Instruments. At December 31, 1997, the carrying
value of the Company's long-term debt approximates its fair market value,
estimated using current borrowing rates. The carrying value of all other
financial instruments also approximates fair market value.
Concentrations of Credit Risk. Financial instruments which subject the
Company to concentrations of credit risk consist principally of trade
receivables and short-term cash investments. The Company places its temporary
excess cash investments in high quality short-term instruments through several
high credit quality financial institutions. A significant portion of the
Company's trade receivables relate to customers in the oil and gas industry,
and, as such, the Company is directly affected by the economy of that industry.
However, the credit risk associated with trade receivables is minimized by the
Company's large customer base and ongoing procedures to monitor the
creditworthiness of customers. The Company generally requires no collateral from
its customers. Historically, the Company has not experienced significant losses
on trade receivables.
45
<PAGE>
UNION PACIFIC RESOURCES GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. PROPERTIES
Major property classifications were as follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------
1997 1996
-------- --------
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Producing properties................................................................. $5,155.9 $4,311.3
Non-producing properties............................................................. 449.5 371.3
Gathering, processing and marketing.................................................. 1,240.5 1,010.7
Construction in progress............................................................. 392.6 348.8
Other................................................................................ 175.9 147.9
-------- --------
Total.............................................................................. $7,414.4 $6,190.0
-------- --------
-------- --------
</TABLE>
Accumulated depreciation, depletion and amortization by major property
classifications were as follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------
1997 1996
-------- --------
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Producing properties................................................................. $3,090.9 $2,604.1
Non-producing properties............................................................. 123.6 142.7
Gathering, processing and marketing.................................................. 443.5 396.0
Other................................................................................ 91.0 74.8
-------- --------
Total.............................................................................. $3,749.0 $3,217.6
-------- --------
-------- --------
</TABLE>
Based upon the Company's analysis of expected future net cash flows from
its oil and gas properties, certain properties were deemed to be impaired
following recent downward revisions in reserve estimates. Accordingly, in the
fourth quarter of 1997 and 1996, the Company adjusted the net book value of such
properties to their fair value, determined using a discounted cash flow
approach, with charges to operations of $20.2 million and $34.4 million,
respectively.
Fixed asset additions included capitalized interest of $3.8 million in
1997, $0.2 million in 1996 and $1 million in 1995.
7. INCOME TAXES
Components of income tax expense were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------
1997 1996 1995
------ ------ ------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Current:
Federal...................................................................... $ 8.1 $105.8 $130.2
State........................................................................ 5.6 9.0 (4.6)
------ ------ ------
Total current............................................................. 13.7 114.8 125.6
------ ------ ------
Deferred:
Federal...................................................................... 121.7 33.0 (20.8)
State........................................................................ (2.0) 4.0 2.5
------ ------ ------
Total deferred............................................................ 119.7 37.0 (18.3)
------ ------ ------
Total................................................................ $133.4 $151.8 $107.3
------ ------ ------
------ ------ ------
</TABLE>
46
<PAGE>
UNION PACIFIC RESOURCES GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. INCOME TAXES--(CONTINUED)
Deferred tax liabilities (assets) include the following:
<TABLE>
<CAPTION>
AS OF DECEMBER
31,
-----------------
1997 1996
------ ------
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Excess tax over book items, including depreciation and exploration costs............... $686.0 $561.0
State taxes--net....................................................................... -- 11.4
Long-term liabilities.................................................................. -- (40.7)
Alternative minimum tax................................................................ (73.2) (56.6)
Pension and other retirement benefits.................................................. (57.4) (60.0)
Other.................................................................................. (2.5) 19.6
------ ------
Net deferred tax liability................................................... $552.9 $434.7
------ ------
------ ------
</TABLE>
A reconciliation between statutory and effective tax rates is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
------------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Statutory tax rate....................................................... 35.0% 35.0% 35.0%
State taxes--net......................................................... 1.3 1.8 (0.3)
Section 29 tax credits................................................... (4.3) (3.3) (8.3)
Tax settlements.......................................................... (1.5) -- (2.2)
Other.................................................................... (1.9) (1.4) (0.8)
------ ------ ------
Effective tax rate............................................. 28.6% 32.1% 23.4%
------ ------ ------
------ ------ ------
</TABLE>
The Company generates Section 29 tax credits from the sale of certain fuels
produced from nonconventional sources. Fuels qualifying for the credit must be
produced from a well drilled or a facility placed in service after December 31,
1979 and before January 1, 1993, and sold before January 1, 2003. The Company
generated $18.8 million, $15.6 million and $39.9 million of Section 29 tax
credits in 1997, 1996 and 1995, respectively. The federal tax law provides for
the use of these credits against regular federal income tax liability.
Accordingly, the Company utilized $27.4 million of Section 29 tax credits on its
1996 tax return. Of the $27.4 million utilized on the 1996 tax return, $10.7
million was due to the utilization of prior year alternative minimum tax credit
carry forwards. It is anticipated that all of the 1997 tax credits will increase
the alternative minimum tax credit carry forwards and apply against future tax
years' regular tax liability.
During 1997, the Company recognized a $6 million favorable adjustment to
state income taxes representing the settlement of a California state audit. The
Company also had favorable tax adjustments of $3.3 million resulting from a tax
allocation refund from UPC to settle 1996 federal income taxes and $2.7 million
relating to prior year federal tax returns.
All tax years prior to 1979 have been closed with the Internal Revenue
Service ('IRS'). On behalf of the Company, UPC has reached a partial settlement
with the Appeals Office of the IRS for 1980 through 1985; the remaining issues
will be resolved as part of refund claims filed for those years. Additionally,
UPC is negotiating with the Appeals Office concerning 1986 through 1989. The IRS
is examining the Company's returns for 1990 through 1994 in connection with the
IRS' examination of UPC's returns. The Company believes it has adequately
provided for federal and state income taxes.
47
<PAGE>
UNION PACIFIC RESOURCES GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. DEBT
The total debt of the Company is summarized below:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------
1997 1996
-------- ------
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Commercial paper, net of discount, average of 6% at
December 31, 1997.................................................................... $ 663.1 $ 99.6
Notes, 7%, due 2006.................................................................... 200.0 200.0
Debentures, 7.5%, due 2026............................................................. 200.0 200.0
Debentures, 7.5%, due 2096............................................................. 150.0 150.0
Tax exempt revenue bonds, 4.25%, due 2012.............................................. 20.1 24.0
Discount on notes and debentures....................................................... (2.6) (2.7)
-------- ------
Total debt........................................................................ 1,230.6 670.9
Less current portion.............................................................. -- --
-------- ------
Total long-term debt......................................................... $1,230.6 $670.9
-------- ------
-------- ------
</TABLE>
Excluding commercial paper, the Company has no debt maturing in the next
five years. Outstanding commercial paper has been classified as long-term debt
reflecting the Company's intent to maintain these short-term borrowings on a
long-term basis either through the issuance of commercial paper and through new
term financings.
The Company has a $600 million revolving credit agreement that expires in
August 2001 and a $300 million revolving credit agreement which expires in
November 1998. Borrowings under these agreements, at the Company's election,
bear interest either at a spread over London Interbank Offered Rate ('LIBOR') or
at a spread over domestic certificate of deposit rates, in each case depending
on the Company's senior debt rating. The Company is required to pay facility
fees on the aggregate amount of the commitment ranging from 0.06% to 0.15% also
depending on the Company's senior debt rating. Under these agreements debt can
not exceed 65% of the total of the Company's debt and shareholders' equity and
requires the combined EBITDAX (the sum of operating income, depreciation,
depletion and amortization, and exploration expenses) of the Company's Principal
Subsidiaries (as defined in these agreements) to be at least 80% of the
Company's consolidated EBITDAX. These agreements also impose certain
restrictions on the Company regarding the creation of liens, incurrence of
indebtedness, transactions with affiliates, sales of the stock of UPRC and
certain mergers, consolidations and asset sales. As of December 31, 1997, there
were no borrowings outstanding under these agreements, although borrowing
capacity is reduced by outstanding commercial paper. The Company had the
capacity to borrow $900 million, less commercial paper outstanding, under these
agreements as of December 31, 1997. In addition, the Company could borrow funds
under the credit agreements.
None of the Company's Notes and Debentures are redeemable prior to maturity
and none are subject to any sinking fund requirements. The Company has an
effective shelf registration statement on file with the SEC which permits the
Company to offer up to $900 million in debt and equity securities.
In March 1998, the Company borrowed $2.7 billion to purchase the capital
stock of Norcen Energy Resources Limited ('Norcen') and guaranteed the $900
million outstanding public debt held by Norcen (see Note 18 for additional
information about the transactions).
48
<PAGE>
UNION PACIFIC RESOURCES GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. LEASES
The Company leases its headquarters office building, certain production
platforms and other property. Future minimum lease payments for operating leases
with initial lease terms which are not subject to being cancelled in excess of
one year were as follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
-----------------------
(MILLIONS OF DOLLARS)
<S> <C>
1998................................................................................. $ 59.0
1999................................................................................. 47.5
2000................................................................................. 38.5
2001................................................................................. 31.5
2002................................................................................. 29.5
Later years.......................................................................... 16.4
-------
Total minimum payments.......................................................... $ 222.4
-------
-------
</TABLE>
Rent expense, net of sublease income, for operating leases with terms
exceeding one month was $22.4 million in 1997, $27.2 million in 1996 and $31
million in 1995. Sublease income for the next five years is $28.5 million in
1998, $28.4 million in 1999, $28.1 million in 2000, $28.1 million in 2001, $28.1
million in 2002 and $14.7 million thereafter.
10. RETIREMENT PLANS
The Company provides pension, health care and life insurance benefits to
all eligible retirees.
Pension Benefits. Pension plan benefits are based on years of service and
compensation during the last years of an employee's employment. Contributions to
the plans are calculated based on the projected unit credit actuarial funding
method and are not less than the minimum funding standards set forth in the
Employee Retirement Income Security Act of 1974, as amended. The following
pension credits and funded status are based on historical actuarial valuations.
Pension cost includes the following components:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------
1997 1996 1995
------ ------ ------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Service cost--benefits earned during the period.................................. $ 5.5 $ 4.4 $ 5.3
Interest on projected benefit obligation......................................... 13.4 13.3 14.4
Return on assets:
Actual (gain) loss............................................................. (30.8) (41.7) (49.5)
Deferred gain (loss)........................................................... 13.7 22.1 30.0
Net amortization costs........................................................... (5.7) (3.7) (2.4)
------ ------ ------
Net pension credit............................................................... $ (3.9) $ (5.6) $ (2.2)
------ ------ ------
------ ------ ------
</TABLE>
The projected benefit obligation was determined using a discount rate of
7.25% in 1997 and 7.5% in 1996. The estimated rate of salary increase
approximated 5.25% in 1997 and 5.5% in 1996. The expected long-term rate of
return on plan assets was 9% in 1997 and 8% in 1996. The portion of the funded
plan's assets held in fixed-income and short-term securities was approximately
34% and 29% as of December 31, 1997 and 1996, respectively, with the remainder
primarily in equity securities.
49
<PAGE>
UNION PACIFIC RESOURCES GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. RETIREMENT PLANS--(CONTINUED)
The funded status of the plans was as follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
------------------------------------
UNFUNDED
FUNDED SUPPLEMENTAL
PENSION PLAN PENSION PLAN
------------------ --------------
1997 1996 1997 1996
------- ------- ----- -----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C>
Plan assets at fair value.............................................. $ 240.9 $ 221.3 $ -- $ --
Actuarial present value of benefit obligations:
Vested benefits...................................................... 165.0 152.9 6.1 4.5
Non-vested benefits.................................................. 7.0 6.4 0.4 0.2
------- ------- ----- -----
Accumulated benefit obligation......................................... 172.0 159.3 6.5 4.7
Additional benefits based on estimated future salaries............... 22.8 17.4 1.3 2.5
------- ------- ----- -----
Projected benefit obligation........................................... 194.8 176.7 7.8 7.2
------- ------- ----- -----
Plan assets (over) under projected benefit obligation.................. (46.1) (44.6) 7.8 7.2
Unamortized net transition asset (obligation).......................... 18.4 21.0 (0.5) (1.1)
Unrecognized prior service cost........................................ (4.5) (5.2) (3.3) (3.8)
Unrecognized net gain (loss)........................................... 102.3 105.0 (2.3) (2.2)
Minimum liability...................................................... -- -- 4.8 4.6
------- ------- ----- -----
Pension liability................................................. $ 70.1 $ 76.2 $ 6.5 $ 4.7
------- ------- ----- -----
------- ------- ----- -----
</TABLE>
The Company is in the process of conducting a voluntary compliance review
of its pension plan. The results of the review are not expected to have a
material impact on the funded status of the plans.
Other Postretirement Benefits. Postretirement health and life insurance
benefit costs included the following components:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------
1997 1996 1995
----- ----- -----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Service cost--benefits earned during the period...................................... $ 0.8 $ 1.0 $ 1.2
Interest costs on accumulated benefit obligation..................................... 3.3 3.4 4.3
Net amortization costs............................................................... (2.4) (2.3) (1.5)
----- ----- -----
Charge to operations............................................................ $ 1.7 $ 2.1 $ 4.0
----- ----- -----
----- ----- -----
</TABLE>
The liability for other postretirement benefit plans was as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------
1997 1996
---------- ----------
(MILLIONS OF DOLLARS)
<S> <C> <C>
Accumulated postretirement benefit
obligation ('APBO'):
Retirees......................... $30.8 $35.5
Fully eligible active
employees....................... 2.3 1.9
Other active employees........... 9.8 7.7
------ ------
Total APBO.................... 42.9 45.1
Unrecognized prior service gain.... 3.4 4.4
Unrecognized net gain.............. 27.0 25.1
------ ------
Postretirement benefits
liability.................... $73.3 $74.6
------ ------
------ ------
</TABLE>
50
<PAGE>
UNION PACIFIC RESOURCES GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. RETIREMENT PLANS--(CONTINUED)
The APBO was determined using a discount rate of 7.25% in 1997 and 7.5% in
1996. The health care cost trend rate is assumed to gradually decrease from 8.5%
for 1997 to 5% for 2005 and all future years. If the assumed health care cost
trend rate increases by one percentage point in each subsequent year, the
aggregate of the service and interest cost components of annual postretirement
benefit expense would increase by $0.4 million and the APBO would rise by $3.6
million. The Company does not currently pre-fund health care and life insurance
benefit costs. Cash payments for these benefits were $3 million in 1997 and $3.6
million in 1996.
11. SHAREHOLDERS' EQUITY
Stock Option and Retention Stock Plans. Pursuant to the Company's stock
option and retention stock plans, 8,785,684 and 9,215,933 shares of Common Stock
were available as either options to purchase Common Stock or as awards of
retention stock at December 31, 1997 and 1996, respectively, for grant to
employees and directors. Options to purchase Common Stock under the plans are
granted at 100% of fair market value at the date of grant, become exercisable no
earlier than one year after grant and are exercisable for a period of up to
eleven years from grant date. Option grants have been made to directors,
officers and employees and vest over a period up to ten years from the grant
date.
Retention stock is awarded under the plan to eligible employees, subject to
forfeiture if employment terminates during the prescribed restriction period,
generally one to five years from date of grant. Multi-year retention stock
awards also have been made, with vesting two to five years from date of grant.
Multi-year grants of stock options and retention stock made in 1994 also
required that designated Company stock prices be met to be exercisable. These
performance conditions were achieved during 1995 for the stock options and
during 1996 for the retention stock.
Upon completion of the Offering and Distribution, UPC non-qualified stock
options and certain UPC Incentive Stock Options ('ISOs'), as well as UPC
retention shares held by officers and employees of the Company, were converted
into non-qualified stock options, ISOs and retention stock of the Company,
respectively. The converted options and retention stock retain the same exercise
dates and vesting requirements as the UPC options and retention stock for which
they were exchanged.
The status of the Company's stock-based compensation programs is as
follows:
<TABLE>
<CAPTION>
WEIGHTED
COMPANY AVERAGE
SHARES EXERCISE PRICE
---------- --------------
<S> <C> <C>
Stock options:
Balance at December 31, 1994.................................................... -- $ --
Conversion of UPC stock options............................................... 3,702,443 15.87
Granted....................................................................... 88,695 25.88
Exercised..................................................................... (1,500) 15.18
----------
Balance at December 31, 1995.................................................... 3,789,638 16.11
Conversion of UPC stock options............................................... 681,206 19.49
Granted....................................................................... 1,471,400 27.81
Exercised..................................................................... (437,472) 14.76
Expired/surrendered........................................................... (288,698) 16.02
----------
Balance at December 31, 1996.................................................... 5,216,074 19.97
Granted....................................................................... 1,111,750 25.63
Exercised..................................................................... (351,723) 16.05
Expired/surrendered........................................................... (91,615) 24.75
----------
Balance at December 31, 1997.................................................... 5,884,486 21.20
----------
----------
Exercisable December 31:
1995.......................................................................... 2,235,470 $16.26
1996.......................................................................... 3,035,905 16.81
1997.......................................................................... 3,853,035 18.72
</TABLE>
51
<PAGE>
UNION PACIFIC RESOURCES GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. SHAREHOLDERS' EQUITY--(CONTINUED)
<TABLE>
<CAPTION>
REGULAR PERFORMANCE
---------- ------------
<S> <C> <C>
Retention stock:................................................................
1995
Awarded.................................................................... 33,585 14,143
Conversion of UPC retention stock.......................................... 389,880 310,653
---------- ------------
Unvested at December 31, 1995.............................................. 423,465 324,796
1996
Awarded.................................................................... 604,530 --
Conversion of UPC retention stock.......................................... 2,610 18,698(a)
Achievement of performance conditions...................................... 301,066 (301,066)
Vested..................................................................... (124,733) --
Forfeited, surrendered and other........................................... (2,376) (42,428) (a)
---------- ------------
Unvested at December 31, 1996.............................................. 1,204,562 --
1997
Awarded.................................................................... 209,114 --
Vested..................................................................... (376,295) --
Forfeited, surrendered and other........................................... (34,693) --
---------- ------------
Unvested at December 31, 1997.............................................. 1,002,688 --
---------- ------------
---------- ------------
</TABLE>
Weighted-average grant-date fair value of stock options granted and retention
stock awarded:
<TABLE>
<CAPTION>
RETENTION
OPTIONS(B) SHARES(C)
---------- ---------
<S> <C> <C>
1995................................................................................ $ 8.31 $ 25.88
1996................................................................................ 9.15 27.81
1997................................................................................ 8.74 25.63
</TABLE>
- ------------------
(a) Activity occurred prior to achievement of performance conditions.
(b) Calculated in accordance with the Black-Scholes option pricing model,
using the following weighted average assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Expected volatility............................................................. 28% 26% 28%
Expected dividend yield......................................................... 0.8% 0.7% 0.8%
Expected option term............................................................ 4 years 5 years 5 years
Risk-free rate of return........................................................ 5.7% 6.3% 5.5%
</TABLE>
(c) Represents market value on grant date.
Options to purchase Common Stock outstanding were as follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
-----------------------------------------------------------------------
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------- ------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
RANGE OF NUMBER YEARS TO EXERCISE NUMBER EXERCISE
EXERCISE PRICES OF SHARES EXPIRATION PRICE OF SHARES PRICE
- --------------- --------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
$ 9.49-$15.29 1,913,601 5.89 $14.75 1,913,601 $ 14.60
$17.14-$20.94 1,242,963 5.59 19.01 1,242,963 19.06
$23.78-$29.44 2,727,922 8.34 26.73 696,471 27.06
--------- ---------
$ 9.49-$29.44 5,884,486 6.96 21.20 3,853,035 18.72
--------- ---------
--------- ---------
</TABLE>
52
<PAGE>
UNION PACIFIC RESOURCES GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. SHAREHOLDERS' EQUITY--(CONTINUED)
Since the Company applies the intrinsic value method in accounting for its
stock option and retention stock plans, it generally records no compensation
cost for its stock option plans. Compensation cost recognized relating to
retention stock was $11.6 million, $7.4 million and $0.7 million in 1997, 1996
and 1995, respectively. If compensation cost for the Company's stock option plan
had been determined based on the fair value at the grant dates for awards under
the plan and for options that were converted at the Offering and Distribution,
as described above, the Company's net income would have been reduced by $8
million in 1997, $3 million in 1996 and $3.4 million in 1995, essentially all of
which relates to option conversion at the Offering. Basic and diluted EPS would
have been reduced by $0.03 per share in 1997 and $0.01 per share both in 1996
and 1995.
Earnings Per Share. The reconciliation between basic EPS and diluted EPS
for the years ended December 31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------
AVERAGE PER
INCOME SHARES SHARE
--------------------- ---------- -----
(MILLIONS OF DOLLARS) (MILLIONS)
<S> <C> <C> <C>
1997
Basic EPS
Income available to common shareholders....................... $ 333.0 250.1 $1.33
Effect of Dilutive Options...................................... -- 0.8 --
------- ---------- -----
Diluted EPS
Income available to common shareholders plus assumed
conversion................................................. $ 333.0 250.9 $1.33
------- ---------- -----
------- ---------- -----
1996
Basic EPS
Income available to common shareholders....................... $ 320.8 249.2 $1.29
Effect of Dilutive Options...................................... -- 0.9 (0.01)
------- ---------- -----
Diluted EPS
Income available to common shareholders plus assumed
conversion................................................. $ 320.8 250.1 $1.28
------- ---------- -----
------- ---------- -----
</TABLE>
Employee Stock Ownership Plan. Effective January 2, 1997, the Company
instituted an employee stock ownership plan ('ESOP'). The ESOP purchased 3.7
million shares or $107.3 million of newly issued Common Stock (the 'ESOP
Shares') from the Company, which will be used to fund the Company's matching
obligation under its 401(k) Thrift Plan. All regular employees of the Company
are eligible to participate in the ESOP.
The ESOP Shares, which are held in trust, were purchased with the proceeds
from a 30-year loan from the Company. Such shares initially have been pledged as
collateral for the loan. As loan payments are made, shares will be released from
collateral, based on the proportion of debt service paid. Scheduled principal
and interest requirements are $8.6 million annually, and will be funded with
dividends paid on the unallocated ESOP Shares and with cash contributions from
the Company. Principal or interest prepayments may be made to ensure that the
Company's minimum matching obligation is met.
Shares held by the ESOP will be included in the computation of EPS as such
ESOP Shares are released from collateral. Such releases of ESOP Shares will be
allocated to participants' accounts and will be charged to compensation expense
at the fair market value of the shares on the date of the employer match.
Dividends on allocated ESOP Shares will be recorded as a reduction of retained
earnings; dividends on unallocated ESOP Shares will be recorded as a reduction
of the principal or accrued interest on the loan.
53
<PAGE>
UNION PACIFIC RESOURCES GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. SHAREHOLDERS' EQUITY--(CONTINUED)
As of December 31, 1997, allocated and unallocated shares in the ESOP are
197,395 and 3,502,605, respectively. The fair value of unallocated ESOP shares
is $85.8 million at December 31, 1997. During 1997, compensation cost related to
the allocation of ESOP shares to participants' accounts was $5.3 million.
Preferred Stock and Shareholder Rights. The Company has 100 million shares
of no-par-value preferred stock authorized, none of which are outstanding. On
October 28, 1996, the Company's Board of Directors designated 3,000,000 of the
authorized preferred shares as non-redeemable Series A Junior Participating
Preferred Shares (the 'Series A Preferred Stock'). Upon issuance, each
one-hundredth of a share of the Series A Preferred Stock will have dividend and
voting rights approximately equal to those of one share of the Company's common
stock. In addition, on October 28, 1996, the Board of Directors adopted a
shareholder rights plan with a 'flip-in' threshold of 15% to ensure that all
shareholders of the Company receive fair value for their common stock in the
event of any proposed takeover of the Company and to guard against the use of
coercive tactics to gain control of the Company without offering fair value to
the Company's shareholders. Under the related Rights Agreement, the Company
declared a dividend of one right ('Right') for each outstanding share of common
stock to shareholders of record on November 7, 1996. Under certain limited
conditions as defined in the Rights Agreement, each Right entitles the
registered holder to purchase from the Company one one-hundredth of a share of
Series A Preferred Stock at $135 subject to adjustment. The Rights are not
exercisable until the Distribution Date (as defined in the Rights Agreement)
which will occur upon the earlier of (i) ten days following a public
announcement that an Acquiring Person (as defined in the Rights Agreement) has
acquired beneficial ownership of 15% or more of the Company's outstanding common
stock (the 'Stock Acquisition Date') or (ii) ten business days following the
commencement of a tender offer or exchange offer that would result in a person
or group owning 15% or more of the Company's outstanding Common Stock.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
without conditioning the offer on a substantial number of Rights being redeemed.
In the event that at any time following the Stock Acquisition Date certain
events occur as defined in the Rights Agreement, each holder of a Right, except
the Acquiring Person, will thereafter have the right to receive, upon exercise,
Common Stock or common stock of the acquiring company, as the case may be,
having a value equal to two times the exercise price of the Right.
The Rights should not interfere with any merger or other business
combination approved by the Company since the Board of Directors may, at its
option, at any time prior to the close of business on the earlier of the tenth
day following the Stock Acquisition Date or October 28, 2006, redeem all but not
less than all of the then outstanding Rights at $0.01 per Right. The Rights
expire on October 28, 2006, and do not have voting power or dividend privileges.
In 1997, the Company announced a program to repurchase up to $50 million of
its Common Stock in 1997 and another $50 million of Common Stock in 1998. During
1997, 2,013,400 shares of Common Stock were repurchased at a cost of $49.9
million.
12. INTANGIBLE AND OTHER ASSETS
Goodwill. Goodwill consists of $68.6 million arising from business
combinations prior to 1971. Such goodwill is not being amortized because it is
considered to have continuing value over an indefinite period. During 1997,
goodwill of $90.7 million was recorded as a result of the purchase of Highlands
and is being amortized on a straight-line basis over a 20 year period.
Amortization of goodwill was $2 million for 1997.
54
<PAGE>
UNION PACIFIC RESOURCES GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. INTANGIBLE AND OTHER ASSETS--(CONTINUED)
Investment in Unconsolidated Affiliate. The Company has a 50% ownership
interest in Black Butte Coal Company and R-K Leasing Company ('Black Butte'), a
partnership which operates a surface coal mine complex in southwestern Wyoming.
Summarized financial information for Black Butte is as follows:
<TABLE>
<CAPTION>
AS OF AND FOR THE
YEARS ENDED
DECEMBER 31,
------------------
1997 1996
------ ------
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Current assets........................................................................ $ 27.5 $ 39.8
Non-current assets.................................................................... 37.9 46.4
Current liabilities................................................................... 17.1 20.2
Non-current liabilities and equity (see Note 13)...................................... 48.3 66.0
Sales................................................................................. 159.7 192.4
Operating income...................................................................... 112.4 137.0
Partners' income...................................................................... 113.6 137.0
</TABLE>
During 1997, Black Butte's sales to its largest customer under an amended
coal supply contract accounted for $59.3 million, or 12%, of the Company's
consolidated operating income. This coal supply contract was amended during 1997
to accelerate shipments in the years 1998, 1999 and 2000, at which time the
financially beneficial terms of the contract will terminate. Although Black
Butte continues to seek new buyers for its low-sulfur coal, its mining costs are
considerably higher than the mining costs for competing supply. The Company does
not expect to be able to replace the operating income it currently receives
under the contract with incremental coal sales.
In addition, Black Butte provides an accrual for reclamation of mined
properties, based on the estimated cost of restoration of such properties in
compliance with laws governing strip mining. Accrued reclamation costs for Black
Butte as of December 31, 1997 and 1996 were $50.4 million and $54.3 million, of
which the Company's share is $25.2 million and $27.2 million, respectively. The
majority of cash expenditures for reclamation are expected to be incurred from
five to ten years in the future.
A supplier of coal to Black Butte has been assessed by the Minerals
Management Service of the United States Department of the Interior and the State
of Montana Department of Revenue for underpayment of royalties and production
taxes related to coal previously sold to Black Butte. The supplier is contesting
these claims; however, should the claims be successful, the supplier may make a
claim for reimbursement from Black Butte. Although the management of Black Butte
will vigorously contest these claims, the liability associated with the
underpaid royalty and production taxes, if any, could range from zero to $36
million, of which the Company would recognize its proportionate share, which
could range from zero to $18 million.
13. ENVIRONMENTAL EXPOSURE
The Company generates and disposes of hazardous and nonhazardous waste in
its current and former operations and is subject to increasingly stringent
federal, state and local environmental regulations. The Company has identified
seven sites currently subject to environmental response actions or on the
Superfund National Priorities List or state superfund lists, at which it is or
may be liable for remediation costs associated with alleged contamination or for
violations of environmental requirements. Certain federal legislation imposes
joint and several liability for the remediation of various sites; consequently,
the Company's ultimate environmental liability may include costs relating to
other parties in addition to costs relating to its own activities at each site.
In addition, the Company is or may be liable for certain environmental
remediation matters involving existing or former facilities.
In March 1994, the Company sold its interest in the Wilmington, California,
field and the Harbor Cogeneration Plant to the Port of Long Beach, California.
As part of the Wilmington sales agreement, the
55
<PAGE>
UNION PACIFIC RESOURCES GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. ENVIRONMENTAL EXPOSURE--(CONTINUED)
Company agreed to participate with the Port of Long Beach in funding
environmental remediation and site preparation, as specified by the Port of Long
Beach, up to a maximum of $105.5 million. As a result, a provision of $50.5
million for future environmental costs and $55 million for future site
preparation costs was established ($91.5 million in total remaining at December
31, 1997) and is categorized as other current liabilites and long-term
liabilities (see Note 15). The majority of cash outlays for these liabilities is
expected to occur over the next five years.
As of December 31, 1997 and 1996, long and short-term liabilities totaling
$75.7 million and $94.3 million, respectively had been accrued for future costs
of all sites where the Company's obligation is probable and where such costs
reasonably can be estimated; however, the ultimate cost could be lower or as
much as 10% higher. This accrual includes future costs for remediation and
restoration of sites, as well as for ongoing monitoring costs, but excludes any
anticipated recoveries from third parties. The accrual also includes $37.8
million for the obligation to participate in the remediation of the Wilmington,
California field properties. Cost estimates were based on information available
for each site, financial viability of other Potentially Responsible Parties
('PRPs') and existing technology, laws and regulations. The Company believes
that it has accrued adequately for its share of costs at sites subject to joint
and several liability. The ultimate liability for remediation is difficult to
determine with certainty because of the number of PRPs involved, site-specific
cost sharing arrangements with other PRPs, the degree of contamination by
various wastes, the scarcity and quality of volumetric data related to many of
the sites and the speculative nature of remediation costs.
The Company also is involved in reducing emissions, spills and migration of
hazardous materials. Remediation of identified sites and control of
environmental exposures required spending of $14.7 million in 1997 and $11.4
million in 1996. In 1998, the Company anticipates spending a total of $20
million for remediation, control and prevention, including $9 million relating
to the Wilmington properties. The majority of the December 31, 1997 accrued
environmental liability is expected to be paid out over the next five years,
funded by cash generated from operations. Based on current rules and
regulations, management does not expect future environmental obligations to have
a material impact on the results of operations or financial condition of the
Company.
14. COMMITMENTS AND CONTINGENCIES
UP Fuels is a party to a long-term firm transportation agreement with Kern
River Gas Transmission Company ('Kern River') that expires in 2007. Under the
transportation agreement, UP Fuels has the right to transport 75 MMcfd of gas on
the Kern River Pipeline system which extends from Opal, Wyoming, to an
interconnection with the Southern California Gas Company pipeline system in
southern California. Ten years remain on the primary term of the agreement, and
the current transportation rate is $0.69 Mcf. This rate will be in effect
through at least mid-1998. Thereafter, this rate can change, based on Kern
River's cost of service and upon rate regulation policies of the Federal Energy
Regulatory Commission ('FERC'). Under a 1993 ruling of the FERC, UP Fuels is
obligated to pay all of the fixed costs included in the transportation rate,
whether or not UP Fuels actually uses Kern River's pipeline to transport gas.
Those fixed costs presently amount to $0.6878 per Mcf. The undiscounted amount
of the ten-year fixed cost commitment, assuming no future changes in the rate,
is $177 million. The 1993 FERC ruling was issued notwithstanding a provision in
the transportation agreement between Kern River and UP Fuels in which the
parties agreed that a portion of the fixed costs would be paid by UP Fuels only
if and to the extent that UP Fuels uses the pipeline. In light of recent changes
in the regulatory policies of FERC, UP Fuels is seeking reinstatement of the
contractually agreed rate structure, but there is no assurance that such efforts
will be successful. UP Fuels is a party to an additional agreement under which
it may acquire in 2001, at its option, an additional 25 MMcfd of transportation
rights on the Kern River Pipeline system beginning in 2002.
56
<PAGE>
UNION PACIFIC RESOURCES GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
UP Fuels is a party to a long-term firm transportation agreement with Texas
Gas Transmission Corporation that expires in 2008. Under the transportation
agreement UP Fuels has the rights to transport 90 MMbtu per day of gas from the
Company's East Texas plant. UP Fuels is obligated to pay a fixed transportation
rate of $0.331 per MMbtu regardless of the volumes transported under the
agreement. The undiscounted amount of this commitment is $116 million.
The Company has entered into a letter of intent to enter into a $150
million five year agreement with Noble Drilling (U.S.) Inc. beginning in July
1999, for the services of a semisubmersible drilling rig designed for operations
in water depths up to 5,000 feet. Under this agreement, the Company will share
50% of the total rig commitment with another major oil and gas company.
In the last ten years, the Company has disposed of significant pipeline,
refining and producing property assets, including the sale of its 37.5% interest
in a Corpus Christi, Texas petrochemical complex (July 1987), the Calnev
pipeline (October 1988), the Wilmington, California refinery (December 1988),
the Corpus Christi refinery (half sold in March 1987 and the balance in January
1989), and Wilmington field (March 1994). In connection therewith, the Company
has given certain representations and warranties relating to the assets sold
(covering, among other matters, the condition and capabilities of assets and
compliance with environmental and other laws) and certain indemnities with
respect to liabilities associated with such assets. With respect to the Calnev
pipeline and the Corpus Christi and Wilmington refinery sales, the Company has
been advised of possible claims which may be asserted by the relevant purchasers
for alleged breaches of representations and warranties. Certain claims related
to compliance with environmental laws remain pending. In addition, as some of
the representations, warranties, and indemnities related to some of the disposed
assets have not expired, further claims may be made against the Company. While
no assurance can be given as to the actual outcome of these claims, the Company
does not expect these matters to have a materially adverse effect on its results
of operations, cash flows or financial condition.
There are lawsuits pending against the Company and certain of its
subsidiaries which are described in Part I, Item 3--'Legal Proceedings' in this
Annual Report on Form 10-K. The Company intends to defend vigorously against
these lawsuits as well as any similar lawsuits. In the opinion of management of
the Company, the outcome of these matters should not have a materially adverse
effect on the consolidated financial condition, cash flows or results of
operations of the Company.
The Company is a defendant in a number of lawsuits and is involved in
governmental proceedings arising in the ordinary course of business in addition
to those described above, including contract claims, personal injury claims and
environmental claims. While management of the Company cannot predict the outcome
of such litigation and other proceedings, management does not expect those
matters to have a materially adverse effect on the consolidated financial
condition, cash flows or results of operations of the Company.
15. OTHER LONG-TERM LIABILITIES
Other long-term liabilities include the following:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------
1997 1996
------ ------
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Environmental (Notes 4 and 13)......................................................... $ 58.5 $ 74.5
Wilmington field site preparation (Note 14)............................................ 53.7 53.7
Litigation and contingencies (Notes 4 and 14).......................................... 28.5 73.8
Offshore platform lease accrual........................................................ 3.6 14.3
Other.................................................................................. 78.3 48.5
------ ------
Total other long-term liabilities.................................................... $222.6 $264.8
------ ------
------ ------
</TABLE>
57
<PAGE>
UNION PACIFIC RESOURCES GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
16. OTHER INCOME--NET
Other income (expense)--net consists of the following:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
--------------------------
1997 1996 1995
------ ------ ------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Excess reserve reductions........................................................ $ 23.0 $ 1.8 $ 3.2
Insurance settlement proceeds.................................................... 10.0 -- --
Gain on sales of assets.......................................................... 7.2 4.5 2.2
Pennzoil acquisition costs....................................................... (17.8) -- --
Spinoff charges.................................................................. -- (5.6) --
Intercompany interest (Note 2)................................................... -- -- 9.6
Other--net....................................................................... 1.9 (4.1) (8.0)
------ ------ ------
Total other income--net........................................................ $ 24.3 $ (3.4) $ 7.0
------ ------ ------
------ ------ ------
</TABLE>
17. CAPITAL AND EXPLORATORY EXPENDITURES
Capital and exploratory expenditures include the following:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
----------------------------
1997 1996 1995
-------- ------ ------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Capital expenditures:
Producing properties........................................................ $ 752.4 $515.2 $482.7
Non-producing properties.................................................... 200.7 149.8 35.0
Exploratory drilling........................................................ 121.7 36.1 24.2
Gathering, processing and marketing......................................... 364.2 118.1 106.5
Other....................................................................... 15.8 9.5 2.0
-------- ------ ------
Total capital expenditures............................................... 1,454.8 828.7 650.4
Exploratory expenditures:
Expensed geological and geophysical costs................................... 35.2 19.0 22.4
Expensed dry hole costs..................................................... 41.7 32.6 13.6
-------- ------ ------
Total exploratory expenditures........................................... 76.9 51.6 36.0
-------- ------ ------
Total capital and exploratory expenditures............................. $1,531.7 $880.3 $686.4
-------- ------ ------
-------- ------ ------
</TABLE>
18. SUBSEQUENT EVENTS (UNAUDITED)
Norcen Acquisition. In March 1998, the Company purchased the capital stock
of Norcen for approximately $2.6 billion. As a result of the Norcen acquisition,
the Company will increase its debt by $3.6 billion, including $2.7 billion
acquisition debt and approximately $900 million of existing commercial paper and
debentures of Norcen. The $2.7 billion acquisition debt entered into by the
Company includes a mandatory prepayment program and a series of 'prepayment
events'. The mandatory prepayment provision requires that $1.35 billion be
repaid prior to March, 1999. In addition, 75% of the net proceeds applicable to
any prepayment events should be applied to reduce the indebtedness under the
acquisition facility. Prepayment events include sales of assets in excess of $10
million and debt and equity issuances. This increased debt is expected to raise
the Company's debt to total capitalization ratio from 41% at December 31, 1997
to approximately 72% as of March 1998. The Company plans to pursue an aggressive
deleveraging program, which may include asset and financial divestitures and the
issuance of equity securities.
58
<PAGE>
UNION PACIFIC RESOURCES GROUP INC.
SUPPLEMENTARY INFORMATION
(UNAUDITED)
A. PROVED RESERVES
The following table reflects estimated quantities of proved oil and gas
reserves which have been prepared by the Company's petroleum engineers. The
Company considers such estimates to be reasonable; however, there are numerous
uncertainties inherent in estimating quantities of proved reserves, including
many factors beyond the control of the Company. Reserve engineering is a
subjective process which is dependent on the quality of available data and on
engineering and geological interpretation and judgment. Such reserve estimates
are subject to change over time as additional information becomes available.
Ryder Scott Company Petroleum Engineers reviewed the reserves as of December 31,
1997 and indicated in their letter dated February 27, 1998, that the estimated
quantities of proved oil and gas reserves were reasonable in the aggregate (see
Exhibit 99).
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Natural gas (Bcf): 1
Beginning of year..................... 2,378.4 2,173.5 2,126.0
Revisions of previous estimates....... 9.3 45.7 (122.3)
Extensions, discoveries and other
additions.......................... 588.3 481.3 518.0
Purchases of reserves-in-place........ 54.8 52.0 26.7
Sales of reserves-in-place............ (3.5) (5.5) (32.0)
Production............................ (407.0) (368.6) (342.9)
-------- -------- --------
Total proved, end of year.......... 2,620.3 2,378.4 2,173.5
-------- -------- --------
-------- -------- --------
Proved developed reserves........ 2,217.0 2,125.4 1,957.1
-------- -------- --------
-------- -------- --------
Natural gas liquids (MMBbl): 1
Beginning of year..................... 107.5 100.1 83.8
Revisions of previous estimates....... 1.9 12.0 9.9
Extensions, discoveries and other
additions.......................... 21.6 9.1 18.2
Purchases of reserves-in-place........ 0.9 0.2 0.2
Sales of reserves-in-place............ -- (0.4) (1.0)
Production............................ (14.0) (13.5) (11.0)
-------- -------- --------
Total proved, end of year.......... 117.9 107.5 100.1
-------- -------- --------
-------- -------- --------
Proved developed reserves........ 103.3 97.7 89.8
-------- -------- --------
-------- -------- --------
Crude oil, including condensate (MMBbl):
Beginning of year..................... 80.6 83.8 70.9
Revisions of previous estimates....... 5.1 (0.6) 14.1
Extensions, discoveries and other
additions.......................... 56.7 14.3 19.1
Purchases of reserves-in-place........ 5.8 3.6 1.9
Sales of reserves-in-place............ (0.1) (2.0) (2.9)
Production............................ (19.3) (18.5) (19.3)
-------- -------- --------
Total proved, end of year.......... 128.8 80.6 83.8
-------- -------- --------
-------- -------- --------
Proved developed reserves........ 93.9 74.1 78.2
-------- -------- --------
-------- -------- --------
Proved reserves equivalent, end of year
(Bcfe): 2
Natural gas........................... 2,620.3 2,378.4 2,173.5
Natural gas liquids................... 707.4 645.0 600.6
Crude oil, including condensate....... 772.8 483.6 502.8
-------- -------- --------
Total proved....................... 4,100.5 3,507.0 3,276.9
-------- -------- --------
-------- -------- --------
Proved developed reserves........ 3,400.2 3,155.8 2,965.1
-------- -------- --------
-------- -------- --------
</TABLE>
-----------------------------
1 Includes the plant share of equity gas processed (natural gas and natural
gas liquids, as appropriate, earned by gas processing facilities through
the processing of the Company's equity production).
2 Calculated using the ratio of one Bbl to six Mcf.
59
<PAGE>
B. DRILLING ACTIVITY 1
Drilling activity is summarized as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Gross wells........................ 817 655 725
Gross productive wells............. 720 591 685
Net wells:
Exploration...................... 41 27 14
Development...................... 525 439 513
---------- ---------- ----------
Total net wells............... 566 466 527
---------- ---------- ----------
---------- ---------- ----------
Net productive wells:
Exploration...................... 19 9 3
Development...................... 479 413 506
---------- ---------- ----------
Total net productive wells.... 498 422 509
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
-----------------------------
1 In addition, at December 31, 1997, 138 gross wells (101 net wells) were
in the process of being drilled.
C. AVERAGE SALES PRICE AND COST
The average sales prices and costs are set forth below:
<TABLE>
<CAPTION>
AS OF YEARS ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Producing properties:
Natural gas sales price (per
Mcf).......................... $ 2.00 $ 1.86 $ 1.42
Natural gas liquids sales price
(per Bbl)..................... 11.20 11.39 8.14
Crude oil sales price (per
Bbl).......................... 18.36 18.84 16.08
Production cost (per Mcfe)....... 0.50 0.49 0.42
Gas plants:
Natural gas sales price (per
Mcf).......................... 2.40 2.01 1.51
Natural gas liquids sales price
(per Bbl)..................... 11.91 13.16 9.38
</TABLE>
D. AVERAGE DAILY PRODUCTION AND SALES VOLUME
The average daily production and sales volumes of the Company are set forth
below:
<TABLE>
<CAPTION>
AS OF YEARS ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Producing properties:
Natural gas (MMcfd).............. 1,102.3 980.3 915.6
Natural gas liquids (MBbld)...... 29.9 28.5 23.1
Crude oil (MBbld)................ 52.9 50.6 52.8
Total producing properties
(MMcfed)...................... 1,598.8 1,454.9 1,371.0
Plant share of equity gas
processed:
Natural gas (MMcfd).............. 12.9 26.7 23.9
Natural gas liquids (MBbld)...... 8.5 8.4 7.1
Total plant share of equity gas
(MMcfed)...................... 63.9 77.1 66.5
Total production reflected in
estimates of proved
reserves (MMcfed)........... 1,662.7 1,532.0 1,437.5
Plant share of third party gas
processed (MBbld)..................... 33.2 31.4 27.1
Total sales (MMcfed).......... 1,879.3 1,720.2 1,600.1
Plant share of natural gas liquids
sales (MBbld):
Equity gas processed............. 8.5 8.4 7.1
Third party gas processed........ 33.2 31.4 27.1
---------- ---------- ----------
Total......................... 41.7 39.8 34.2
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
60
<PAGE>
E. ACREAGE AND WELLS
Oil and gas leasehold acreage is as follows: 1
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------
1997 1996
---------- ----------
(THOUSANDS OF ACRES)
<S> <C> <C>
Gross developed................................ 2,317 2,018
Net developed.................................. 1,569 1,179
Gross undeveloped.............................. 4,076 4,272
Net undeveloped................................ 2,909 2,935
</TABLE>
Productive oil and gas wells are as follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------
OIL GAS
---------- ----------
(WELLS)
<S> <C> <C>
Gross 2........................................ 2,763 6,043
Net............................................ 1,636 3,574
</TABLE>
-----------------------------
1 In addition, the Company has fee mineral ownership of approximately 9.6
million gross acres (8.5 million net acres), including 7.9 million gross
acres (7.7 million net acres) acquired through 19th century Congressional
Land Grant Acts. Substantial portions of this acreage are undeveloped and
are considered prospective for oil and gas.
2 Approximately 611 wells are multiple completions, 576 of which are gas
wells.
F. CAPITALIZED EXPLORATION AND PRODUCTION COSTS
Capitalized exploration and production costs are as follows: 1
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------
1997 1996
---------- ------------
(MILLIONS OF DOLLARS)
<S> <C> <C>
Proved properties.............................. $ 993.0 $ 889.5
Unproved properties............................ 449.5 280.9
Wells and related equipment.................... 4,285.5 3,512.2
Uncompleted wells and equipment................ 182.3 291.6
---------- ----------
Gross capitalized costs................... 5,910.3 4,974.2
Accumulated depreciation, depletion and
amortization...................................... (3,214.6 ) (2,746.8)
---------- ----------
Net capitalized costs..................... $ 2,695.7 $ 2,227.4
---------- ----------
---------- ----------
</TABLE>
-----------------------------
1 Excludes gathering, processing and marketing assets.
G. COSTS INCURRED IN EXPLORATION AND DEVELOPMENT
Costs incurred (whether capitalized or expensed) in oil and gas property
acquisition, exploration and development activities are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Costs incurred:
Proved acreage................... $ 130.6 $ 85.7 $ 100.5
Unproved acreage................. 200.7 149.8 35.0
Exploration costs 1.............. 236.9 114.6 80.9
Development costs................ 621.8 429.5 382.2
---------- ---------- ----------
Total costs incurred 2........ $ 1,190.0 $ 779.6 $ 598.6
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
-----------------------------
1 Includes allocated exploration overhead costs of $23.5 million in 1997,
$22.5 million in 1996 and $17.1 million in 1995, and delay rentals of
$14.8 million in 1997, $4.4 million in 1996 and $3.6 million in 1995.
2 Excludes capital expenditures relating to gathering, processing and
marketing of $364.2 million in 1997, $118.1 million in 1996 and $106.5
million in 1995.
61
<PAGE>
H. RESULTS OF OPERATIONS FOR PRODUCING ACTIVITIES 1
The results of operations for producing activities is set forth below:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1997 1996 1995
--------- --------- ---------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Revenues........................... $ 1,334.7 $ 1,198.3 $ 1,027.7
Production costs................... (292.6) (259.5) (217.8)
Exploration expenses............... (204.7) (144.6) (89.4)
Depreciation, depletion and
amortization.......................... (493.0) (465.5) (403.1)
--------- --------- ---------
Total costs................... (990.3) (869.6) (710.3)
--------- --------- ---------
Pre-tax results.................... 344.4 328.7 317.4
Income taxes....................... (97.7) (94.9) (70.4)
--------- --------- ---------
Results of operations......... $ 246.7 $ 233.8 $ 247.0
--------- --------- ---------
--------- --------- ---------
</TABLE>
-----------------------------
1 Gathering, processing and marketing and minerals results, general and
administrative expenses and interest costs have been excluded in
computing these results of operations. Revenues include net gains from
sales of assets of $18.3 million in 1997, $3.9 million in 1996 and $14.2
million in 1995, and the $122.5 million Columbia bankruptcy settlement in
1995.
I. STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED
OIL AND GAS RESERVES
The standardized measure of discounted future net cash flows relating to
proved oil and gas reserves are set forth below:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------
1997 1996 1995
--------- --------- ---------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Future cash inflows from sales of
oil and gas........................... $ 9,191.9 $11,945.7 $ 5,809.2
Future production and development
costs................................. (2,091.1) (2,013.1) (1,747.8)
Future income taxes................ (2,042.8) (3,031.7) (1,114.6)
--------- --------- ---------
Future net cash flows.............. 5,058.0 6,900.9 2,946.8
10% annual discount................ (2,011.8) (2,661.9) (1,075.5)
--------- --------- ---------
Standardized measure of
discounted future net cash
flows......................... $ 3,046.2 $ 4,239.0 $ 1,871.3
--------- --------- ---------
--------- --------- ---------
</TABLE>
An analysis of changes in the standardized measure of discounted future net
cash flows follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------
1997 1996 1995
--------- --------- ---------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Beginning of year.................. $ 4,239.0 $ 1,871.3 $ 1,658.7
Changes due to current year
operations:
Additions and discoveries less
related production and other
costs......................... 1,000.4 1,135.5 549.7
Sales of oil and gas--net of
production costs.............. (1,078.1) (961.0) (716.1)
Development costs................ 621.8 429.5 382.2
Purchases of reserves-in-place... 125.4 181.1 48.8
Sales of reserves-in-place....... (3.8) (48.0) (49.5)
Changes due to revisions in:
Price............................ (2,451.9) 2,763.1 334.0
Development costs................ (427.4) (268.6) (293.6)
Quantity estimates............... 86.9 27.9 68.1
Income taxes..................... 638.9 (1,062.9) (271.5)
Other............................ (288.7) (69.6) (31.8)
Discount accretion................. 583.7 240.7 192.3
--------- --------- ---------
End of year...................... $ 3,046.2 $ 4,239.0 $ 1,871.3
--------- --------- ---------
--------- --------- ---------
</TABLE>
Future oil and gas sales and production and development costs have been
estimated using prices and costs in effect as of each year end. Prices used to
estimate future oil and gas sales represent the closing price for trading in
December contracts on the New York Mercantile Exchange adjusted for appropriate
regional price differentials. Such weighted average prices for 1997, 1996 and
1995 were $2.24 Mcfe, $3.41 Mcfe and $1.77 Mcfe,
62
<PAGE>
respectively. Future production hedged as of year end is included in future net
revenues at the hedged price. Such prices may vary significantly from actual
prices realized by the Company for its future production. Future net revenues
were discounted to present value at 10%, a uniform rate set by the Financial
Accounting Standards Board. Income taxes represent the tax effect (at statutory
rates) of the difference between the standardized measure values and tax bases
of the underlying properties at the end of the year.
Changes in the supply and demand for oil, natural gas and natural gas
liquids, hydrocarbon price volatility, inflation, timing of production, reserve
revisions and other factors make these estimates inherently imprecise and
subject to substantial revision. As a result, these measures are not the
Company's estimate of future cash flows nor do these measures serve as an
estimate of current market value.
J. SELECTED QUARTERLY DATA
Selected unaudited quarterly data are as follows:
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED
--------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1997
Operating revenues................. $531.7(a) $444.6 $ 449.0 $ 499.4
Operating income................... 186.4(a) 115.0 94.5 99.3
Net income--basic and diluted...... 117.2(a) 74.4 67.2 74.2
Per share:
Net income....................... $ 0.47 $ 0.30 $ 0.27 $ 0.30
Dividends........................ 0.05 0.05 0.05 0.05
Common stock price:
High............................. $ 31 5/8 $ 29 7/8 $ 26 15/16 $ 27 13/16
Low.............................. 23 7/8 24 1/2 23 23 1/4
1996
Operating revenues................. $389.7 $427.9 $ 447.1 $ 566.3 (a)
Operating income................... 97.3 120.1 127.3 181.9 (a)
Net income......................... 59.2 70.4 76.9 114.3 (a)
Per share:
Net income--basic and diluted.... $ 0.24 $ 0.28 $ 0.31 $ 0.46
Dividends........................ 0.05 0.05 0.05 0.05
Common stock price:
High............................. $26 5/8 $ 28 $ 29 $ 31 5/8
Low.............................. 24 1/8 24 1/4 25 3/8 25 3/4
</TABLE>
-----------------------
(a) First quarter 1997 and fourth quarter 1996 results reflect the impact
of increases in hydrocarbon prices (see 'Management's Discussion and
Analysis of Financial Condition and Results of Operations'). In
addition, during the fourth quarter of 1996, operating revenues reflect
the reduction of reserves by $31.3 million related to Columbia
bankruptcy settlement (see Note 4) and operating expenses were impacted
by $43.5 million related to the write-down and impairment of certain
oil and gas assets.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On December 4, 1997, the Company, with the approval of the Audit Committee
of the Company's Board of Directors, dismissed Deloitte & Touche LLP ('D&T') as
its independent accountants, effective upon D&T's completion of its audit of the
Company's financial statements for the fiscal year ended December 31, 1997. The
reports of D&T on the financial statements of the Company for either of the two
most recent fiscal years did not contain an adverse opinion or disclaimer of
opinion and was not qualified or modified as to uncertainty, audit scope or
accounting principle. During such years and during the period between December
31, 1996 and the date on which D&T was dismissed, there was no disagreement
between the Company and D&T on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of D&T, would have caused D&T
to make reference to the subject matter of such disagreement in connection with
its report on the Company's financial statements. On December 4, 1997, the
Company engaged Arthur Andersen LLP as its new independent auditor effective
January 1, 1998.
63
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Directors of Registrant.
Information as to the names, ages, positions and offices with the Company,
terms of office, periods of service, business experience during the past five
years and certain other directorships held by each director or person nominated
to become a director is set forth in the Election of Directors section of the
Proxy Statement and is incorporated herein by reference.
(b) Executive Officers of Registrant.
Information concerning executive officers is presented in Part I of this
report under Executive Officers of the Registrant.
(c) Section 16(a) Compliance.
Information concerning compliance with Section 16 (a) of the Securities
Exchange Act of 1934 is set forth in the Reports of Ownership--Section 16(a)
Reporting Compliance section of the Proxy Statement and is incorporated herein
by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning remuneration received by executive officers and
directors is presented in the Compensation of Directors, Compensation Committee
Interlocks and Insider Participation and Executive Compensation segments of the
Proxy Statement and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information as to the number of shares of equity securities beneficially
owned as of March 16, 1998, by each director and nominee for director, the five
most highly compensated executive officers and directors and executive officers
as a group is set forth in the Security Ownership of Certain Executive and
Beneficial Owners segment of the Proxy Statement and is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information on related transactions is set forth in the Compensation
Committee Interlocks and Insider Participation segment of the Proxy Statement
and is incorporated herein by reference.
64
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements and Schedules.
See 'Index to Consolidated Financial Statements' set forth on page 32.
No schedules are required to be filed because of the absence of conditions
under which they would be required or because the required information is set
forth in the financial statements referred to above.
(a) (3) Exhibits.
Exhibits not incorporated herein by reference to a prior filing are
designated by an asterisk (*) and are filed herewith; all exhibits not so
designated are incorporated herein by reference to the Company's Form S-1
Registration Statement, Registration No. 33-95398, filed on October 10, 1995
('Form S-1') or as otherwise indicated.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ -------------------------------------------------------------------------------------------------
<S> <C> <C>
1.2 -- Pre-acquisition Agreement between Union Pacific Resources Group Inc., Union Pacific Resources
Inc. and Norcen Energy Resources Limited, dated January 25, 1998 (incorporated herein by
reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on March 17, 1998).
3.1 -- Amended and Restated Articles of Incorporation of Union Pacific Resources Group Inc. (Exhibit 3.1
to Form S-1 and Exhibit 3.2 to the Company's Annual Report to Form 10-K filed on March 21, 1997).
3.3 -- Amended and Restated By-Laws of Union Pacific Resources Group Inc. (Exhibit 3.2 to Form S-1).
4.1 -- Specimen of Certificate evidencing the Common Stock (Exhibit 4 to Form S-1).
4.2 -- Rights Agreement, dated as of October 28, 1996, between Union Pacific Resources Group Inc. and
Harris Trust and Savings Bank, as rights agent (incorporated herein by reference to the Company's
Current Report on Form 8-K filed on November 1, 1996).
4.3 -- Indenture, dated as of March 27, 1996, between Union Pacific Resources Group Inc. and Texas
Commerce Bank National Association, as trustee (incorporated herein by reference to Exhibit 4.1
to the Company's Form S-3 Registration Statement, Registration No. 333-2984, dated May 23, 1996).
4.4 -- Terms Agreement, dated as of October 10, 1996, for $200,000,000 7 1/2% debentures due October 15,
2026 (incorporated herein by reference to Exhibit 4.4 to the Company's Current Report on Form 8-K
filed on March 17, 1998).
4.5 -- Terms Agreement, dated as of October 10, 1996, for $200,000,000 7% notes due October 15, 2006
(incorporated herein by reference to Exhibit 4.5 to the Company's Current Report on Form 8-K
filed on March 17, 1998).
4.6 -- Terms Agreement, dated as of October 31, 1996, for $150,000,000 7 1/2% debentures due November 1,
2096 (incorporated herein by reference to Exhibit 4.6 to the Company's Current Report on Form 8-K
filed on March 17, 1998).
4.7 -- Form of 7 1/2% Rate Debenture due October 15, 2026 (incorporated herein by reference to Exhibit
4.7 to the Company's Current Report on Form 8-K filed on March 17, 1998).
4.8 -- Form of 7% Rate Note due October 15, 2006 (incorporated herein by reference to Exhibit 4.8 to the
Company's Current Report on Form 8-K filed on March 17, 1998).
4.9 -- Form of 7 1/2% Rate Note due November 1, 2096 (incorporated herein by reference to Exhibit 4.9 to
the Company's Current Report on Form 8-K filed on March 17, 1998).
4.10 -- Trust Indenture, dated as of May 7, 1996, providing for the issue of Debt Securities in unlimited
principal amount, between Norcen Energy Resources Limited and Montreal Trust Company of Canada,
as trustee (incorporated herein by reference to Exhibit 4.10 to the Company's Current Report on
Form 8-K filed on March 17, 1998).
</TABLE>
65
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ -------------------------------------------------------------------------------------------------
<S> <C> <C>
4.11 -- First Supplemental Indenture, dated as of May 22, 1996, to Trust Indenture, dated as of May 7,
1996, providing for the issue of 7 3/8% Debentures due May 15, 2006 in aggregate principal amount
of U.S. $250,000,000 between Norcen Energy Resources Limited and Montreal Trust Company of
Canada, as trustee (incorporated herein by reference to Exhibit 4.11 to the Company's Current
Report on Form 8-K filed on March 17, 1998).
4.12 -- Second Supplemental Indenture, dated as of June 26, 1996, to Trust Indenture, dated as of May 7,
1996, providing for the issue of 7.8% Debentures due July 2, 2008 in aggregate principal amount
of U.S. $150,000,000 between Norcen Energy Resources Limited and Montreal Trust Company of
Canada, as trustee (incorporated herein by reference to Exhibit 4.12 to the Company's Current
Report on Form 8-K filed on March 17, 1998).
4.13 -- Third Supplemental Indenture, dated as of June 26, 1996, to Trust Indenture, dated as of May 7,
1996, providing for the issue of 6.8% Debentures due July 2, 2002 in aggregate principal amount
of U.S. $250,000,000 between Norcen Energy Resources Limited and Montreal Trust Company of
Canada, as trustee (incorporated herein by reference to Exhibit 4.13 to the Company's Current
Report on Form 8-K filed on March 17, 1998).
4.14 -- Fourth Supplemental Indenture, dated as of February 27, 1998, to Trust Indenture, dated as of May
7, 1996, providing for the Guarantee of all Securities be Issued or Previously Issued under the
Trust Indenture between Norcen Energy Resources Limited, Union Pacific Resources Group Inc., as
guarantor and Montreal Trust Company of Canada, as trustee (incorporated herein by reference to
Exhibit 4.14 to the Company's Current Report on Form 8-K filed on March 17, 1998).
10.1 -- Tax Allocation Agreement, dated October 6, 1995 (Exhibit 10.3 to Form S-1).
10.2 -- Indemnification Agreement, dated October 1, 1995 (Exhibit 10.4 to Form S-1).
10.3 -- Pension Plan Agreement, dated October 1, 1995 (Exhibit 10.7 to Form S-1).
10.4 -- The Supplemental Pension Plan for Officers and Managers of Union Pacific Corporation and
Affiliates, with amendments (incorporated herein by reference to Exhibit 10.11 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1995).
10.5 -- The Supplemental Pension Plan for Exempt Salaried Employees of Union Pacific Resources Company
and Affiliates, with amendments (incorporated herein by reference to Exhibit 10.12 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1995).
10.6 -- Executive Incentive Plan of Union Pacific Resources Group Inc. as amended and restated June 1,
1997 (incorporated herein by reference to Exhibit 10.2 to the Company's Quarterly Report on Form
10-Q for the period ended March 31, 1997).
10.7 -- 1995 Stock Option and Retention Stock Plan of Union Pacific Resources Group Inc. as amended and
restated, effective June 1, 1997 (incorporated herein by reference to the Company's Registration
Statement on Form S-8, dated February 28, 1997).
10.8 -- 1995 Directors Stock Option Plan, as amended and restated, effective June 1, 1997 (incorporated
herein by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the period
ended March 31, 1997).
10.9 -- Directors' Deferred Compensation Plan, as amended and restated, effective September 5, 1997
(incorporated herein by reference to the Company's Registration Statement on Form S-8, dated
September 15, 1997).
10.10 -- Executive's Deferred Compensation Plan, effective September 5, 1997 (incorporated herein by
reference to the Company's Registration Statement on Form S-8, dated September 15, 1997).
10.11(a) -- Conversion Agreement (Exhibit 10.13(a) to Form S-1).
10.11(b) -- Conversion Agreement for Drew Lewis (Exhibit 10.13(b) to Form S-1).
10.11(c) -- Conversion Agreement for Jack L. Messman (Exhibit 10.13(c) to Form S-1).
</TABLE>
66
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ -------------------------------------------------------------------------------------------------
<S> <C> <C>
10.12 -- The Union Pacific Resources Group Inc. Executive Life Insurance Plan, adopted February 26, 1997
(incorporated herein by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1996).
10.13(a) -- Form of Agreement relating to Change in Control by and between Union Pacific Resources Group Inc.
and Jack L. Messman, dated February 4, 1997 (incorporated herein by reference to Exhibit 10.17(a)
to the Company's Annual Report on Form 10-K for the year ended December 31, 1996).
10.13(b) -- Form of Agreement relating to Change in Control by and between Union Pacific Resources Group Inc.
and each of George Lindahl III and V. Richard Eales, dated February 4, 1997 (incorporated herein
by reference to Exhibit 10.17(b) to the Company's Annual Report on Form 10-K for the year ended
December 31, 1996).
10.13(c) -- Form of Agreement relating to Change in Control by and between Union Pacific Resources Group Inc.
and each of Anne M. Franklin, Joseph A. LaSala, Jr., Donald W. Niemiec, Morris B. Smith and John
B. Vering, dated February 4, 1997 (incorporated herein by reference to Exhibit 10.17(c) to the
Company's Annual Report on Form 10-K for the year ended December 31, 1996).
10.14 -- Amended and Restated 1976 Coal Purchase Contract, dated as of January 1, 1993, between
Commonwealth Edison Company and Black Butte Coal Company (Exhibit 10.19 to Form S-1).
10.15 -- Transportation Agreement, dated December 15, 1989, by and between Kern River Gas Transmission
Company and Union Pacific Fuels, Inc. (Exhibit 10.21 to Form S-1).
*10.16 -- Amendments to Transportation Agreement dated December 15, 1989, by and between Kern River Gas
Transmission Company and Union Pacific Fuels, Inc.
*10.17 -- Gas Transportation Agreement, dated June 18, 1997, by and between Union Pacific Fuels, Inc. and
Texas Gas Transmission Corporation.
10.19 -- Registration Rights Agreement, dated as of August 3, 1995, among Union Pacific Resources Group
Inc., The Anschutz Corporation and Anschutz Foundation (incorporated herein by reference to
Exhibit 10.19 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995).
10.20 -- Agreement, dated as of August 3, 1995, by and among Union Pacific Resources Group Inc., The
Anschutz Corporation, Anschutz Foundation and Mr. Philip F. Anschutz ('the Anschutz Agreement')
(incorporated herein by reference to Exhibit 10.20 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995).
10.21 -- Letter agreement, dated as of January 20, 1997, amending the Anschutz Agreement (incorporated
herein by reference to Exhibit 10.25 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996).
10.22 -- U.S. $900,000,000 Competitive Advance/Revolving Credit Agreement, dated as of April 16, 1996,
among Union Pacific Resources Group Inc., the lenders named therein and Texas Commerce Bank
National Association, as administrative agent, as amended through September 13, 1996
(incorporated herein by reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q
for the period ended September 30, 1996.)
*10.23 -- Third Amendment dated March 2, 1998, to the U.S. $600,000,000 Competitive Advance/Revolving
Credit Agreement, dated April 16, 1996, between Union Pacific Resources Group Inc. and Chase Bank
of Texas, N.A.
*10.24 -- U.S. $300,000,000 Competitive Advance/Revolving Credit Agreement, dated as of November 25, 1997,
among Union Pacific Resources Group Inc., the lenders named therein and Texas Commerce Bank
National Association, as administrative agent.
</TABLE>
67
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ -------------------------------------------------------------------------------------------------
<S> <C> <C>
*10.25 -- First Amendment dated March 2, 1998, to the U.S. $300,000,000 Competitive Advance/Revolving
Credit Agreement, dated November 25, 1997 among Union Pacific Resources Group Inc., the lenders
named therein and Chase Bank of Texas National Association, as administrative agent.
*10.26 -- U.S. $2,700,000,000 Competitive Advance/Revolving Credit Agreement, dated as of March 2, 1998,
among Union Pacific Resources Group Inc., the lenders named therein and the Chase Manhattan Bank,
as administrative agent and Bank of Montreal, as syndication agent.
*10.27 -- Cdn $200,000,000 Amended and Restated Extendible Revolving Term Credit Facility Agreement, dated
May 22, 1997, between Norcen Energy Resources Limited and Canadian Imperial Bank of Commerce.
*10.28 -- Cdn $100,000,000 Amended and Restated Extendible Revolving Term Credit Facility Agreement, dated
May 29, 1997, between Norcen Energy Resources Limited and Royal Bank of Canada.
*10.29 -- Cdn $100,000,000 Amended and Restated Extendible Revolving Term Credit Facility Agreement, dated
May 29, 1997, between Norcen Energy Resources Limited and Toronto-Dominion Bank.
*10.30 -- Cdn $50,000,000 Amended and Restated Extendible Revolving Term Credit Facility Agreement dated
May 29, 1997, between Norcen Energy Resources Limited and Union Bank of Switzerland (Canada).
*10.31 -- Cdn $50,000,000 Amended and Restated Extendible Revolving Term Credit Facility Agreement dated
June 9, 1997, between Norcen Energy Resources Limited and ABN AMRO Bank Canada.
*10.32 -- U.S. $150,000,000 Demand Credit Facility Agreement, dated November 20, 1997, between Norcen
Energy Venezuela, S.A. and Canadian Imperial Bank of Commerce West Indies Offshore Banking
Corporation.
*10.33 -- U.S. $25,000,000 Revolving Loan Agreement, dated July 14, 1997, between Basic Petroleum
International Limited and Royal Bank of Canada.
*10.34 -- Cdn $10,050,000 Revolving Demand Credit Facility Agreement, dated October 16, 1996, between
Superior Propane Inc. and Royal Bank of Canada.
*10.35 -- Amendment No. 1 to Amended and Restated 1976 Coal Purchase Contract between Commonwealth Edison
Company and Black Butte Coal Company, effective as of January 1, 1996.
*10.36 -- Amendment No. 2 to Amended and Restated 1976 Coal Purchase Contract between Commonwealth Edison
Company and Black Butte Coal Company, effective as of January 1, 1997.
*12 -- Computation of ratio of earnings to fixed charges.
16 -- Letter regarding change in certifying accountant from Deloitte & Touche LLP dated December 1997
(incorporated herein by reference to Exhibit 16.1 to the Company's Current Report on Form 8-K
dated December 10, 1997).
*21 -- List of subsidiaries.
*23(a) -- Consent of Deloitte & Touche LLP dated as of March 26, 1998.
*23(b) -- Consent of Ryder Scott Company Petroleum Engineers, dated as of March 9, 1998.
*24 -- Powers of attorney for certain Directors.
*27 -- Financial data schedule.
*99 -- Report from Ryder Scott Company Petroleum Engineers, dated as of Febuary 27, 1998, relating to
oil and gas reserves for Union Pacific Resources Group Inc. as of December 31, 1997.
</TABLE>
68
<PAGE>
(b) Reports on Form 8-K.
On December 11, 1997, the Company filed a Current Report on Form 8-K
concerning changes in the Company's certifying auditors. Deloitte & Touche, LLP,
will be dismissed effective with the completion of its annual audit of the
Company's financial statements for the fiscal year ended December 31, 1997. The
Company also engaged Arthur Andersen LLP as its new independent auditor
effective January 1, 1998.
On January 26, 1998, the Company filed a Current Report on Form 8-K
containing a copy of two press releases issued by the Company on January 26,
1998. The first press release announced that the Company's Board of Directors
and the Board of Directors of Norcen had unanimously approved the acquisition of
Norcen by Union Pacific Resources Inc., an Alberta corporation ('UPRI'), the
Company's indirect wholly-owned subsidiary. The second press release announced
the Company's 1997 annual operating revenues, net income and certain other
financial information.
On March 17, 1998, the Company filed a Current Report on Form 8-K
containing a copy of two press releases issued by the Company. The first press
release issued on March 3, 1998 announced the closing of its tender offer for up
to 100% of the common shares of Norcen Energy Resources Limited.
In the second press release, issued on March 6, 1998, UPRI announced that
on March 5, 1998, UPRI completed the compulsory acquisition procedures pursuant
to section 206 of the Canadian Business Corporation Act to acquire the remaining
issued and outstanding common shares of Norcen.
69
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on this 26th day of
March, 1998.
UNION PACIFIC RESOURCES GROUP INC.
BY /s/ MORRIS B. SMITH
-----------------------------------
Morris B. Smith,
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below, on this 26th day of March, 1998, by the following
persons on behalf of the registrant and in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------------- ---------------------------------------------------------
<S> <C>
/s/ JACK L. MESSMAN Chairman, Chief Executive Officer and Director
- --------------------------------------------------- (Principal Executive Officer)
(Jack L. Messman)
/s/ MORRIS B. SMITH Vice President and Chief Financial Officer
- --------------------------------------------------- (Principal Accounting and Financial Officer)
(Morris B. Smith)
* Director
- ---------------------------------------------------
H. Jesse Arnelle
* Director
- ---------------------------------------------------
Lynne V. Cheney
* Director
- ---------------------------------------------------
Preston M. Geren III
* Director
- ---------------------------------------------------
Lawrence M. Jones
* Director
- ---------------------------------------------------
Drew Lewis
* Director
- ---------------------------------------------------
Claudine B. Malone
* Director
- ---------------------------------------------------
John W. Poduska, Sr., Ph.D.
* Director
- ---------------------------------------------------
Michael E. Rossi
* Director
- ---------------------------------------------------
Samuel K. Skinner
* Director
- ---------------------------------------------------
James R. Thompson
*By /s/ MARK L. JONES
Mark L. Jones, as attorney-in-fact
</TABLE>
70
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ -------------------------------------------------------------------------------------------------
<S> <C> <C>
1.2 -- Pre-acquisition Agreement between Union Pacific Resources Group Inc., Union Pacific Resources
Inc. and Norcen Energy Resources Limited, dated January 25, 1998 (incorporated herein by
reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed March 17, 1998).
3.1 -- Amended and Restated Articles of Incorporation of Union Pacific Resources Group Inc. (Exhibit 3.1
to Form S-1 and Exhibit 3.2 to the Company's Annual Report to Form 10-K filed on March 21, 1997).
3.3 -- Amended and Restated By-Laws of Union Pacific Resources Group Inc. (Exhibit 3.2 to Form S-1).
4.1 -- Specimen of Certificate evidencing the Common Stock (Exhibit 4 to Form S-1).
4.2 -- Rights Agreement, dated as of October 28, 1996, between Union Pacific Resources Group Inc. and
Harris Trust and Savings Bank, as rights agent (incorporated herein by reference to the Company's
Current Report on Form 8-K filed on November 1, 1996).
4.3 -- Indenture, dated as of March 27, 1996, between Union Pacific Resources Group Inc. and Texas
Commerce Bank National Association, as trustee (incorporated herein by reference to Exhibit 4.1
to the Company's Form S-3 Registration Statement, Registration No. 333-2984, dated May 23, 1996).
4.4 -- Terms Agreement, dated as of October 10, 1996, for $200,000,000 7 1/2% debentures due October 15,
2026 (incorporated herein by reference to Exhibit 4.4 to the Company's Current Report on Form 8-K
filed on March 17, 1998).
4.5 -- Terms Agreement, dated as of October 10, 1996, for $200,000,000 7% notes due October 15, 2006
(incorporated herein by reference to Exhibit 4.5 to the Company's Current Report on Form 8-K
filed on March 17, 1998).
4.6 -- Terms Agreement, dated as of October 31, 1996, for $150,000,000 7 1/2% debentures due November 1,
2096 (incorporated herein by reference to Exhibit 4.6 to the Company's Current Report on Form 8-K
filed on March 17, 1998).
4.7 -- Form of 7 1/2% Rate Debenture due October 15, 2026 (incorporated herein by reference to Exhibit
4.7 to the Company's Current Report on Form 8-K filed on March 17, 1998).
4.8 -- Form of 7% Rate Note due October 15, 2006 (incorporated herein by reference to Exhibit 4.8 to the
Company's Current Report on Form 8-K filed on March 17, 1998).
4.9 -- Form of 7 1/2% Rate Note due November 1, 2096 (incorporated herein by reference to Exhibit 4.9 to
the Company's Current Report on Form 8-K filed on March 17, 1998).
4.10 -- Trust Indenture, dated as of May 7, 1996, providing for the issue of Debt Securities in unlimited
principal amount, between Norcen Energy Resources Limited and Montreal Trust Company of Canada,
as trustee (incorporated herein by reference to Exhibit 4.10 to the Company's Current Report on
Form 8-K filed on March 17, 1998).
4.11 -- First Supplemental Indenture, dated as of May 22, 1996, to Trust Indenture, dated as of May 7,
1996 providing for the issue of 7 3/8% Debentures due May 15, 2006 in aggregate principal amount
of U.S. $250,000,000 between Norcen Energy Resources Limited and Montreal Trust Company of
Canada, as trustee (incorporated herein by reference to Exhibit 4.11 to the Company's Current
Report on Form 8-K filed on March 17, 1998).
4.12 -- Second Supplemental Indenture, dated as of June 26, 1996, to Trust Indenture, dated as of May 7,
1996, providing for the issue of 7.8% Debentures due July 2, 2008 in aggregate principal amount
of U.S. $150,000,000 between Norcen Energy Resources Limited and Montreal Trust Company of
Canada, as trustee (incorporated herein by reference to Exhibit 4.12 to the Company's Current
Report on Form 8-K filed on March 17, 1998).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ -------------------------------------------------------------------------------------------------
<S> <C> <C>
4.13 -- Third Supplemental Indenture, dated as of June 26, 1996, to Trust Indenture, dated as of May 7,
1996, providing for the issue of 6.8% Debentures due July 2, 2002 in aggregate principal amount
of U.S. $250,000,000 between Norcen Energy Resources Limited and Montreal Trust Company of
Canada, as trustee (incorporated herein by reference to Exhibit 4.13 to the Company's Current
Report on Form 8-K filed on March 17, 1998).
4.14 -- Fourth Supplemental Indenture, dated as of February 27, 1998, to Trust Indenture, dated as of May
7, 1996, providing for the Guarantee of all Securities be Issued or Previously Issued under the
Trust Indenture between Norcen Energy Resources Limited, Union Pacific Resources Group Inc. as
guarantor and Montreal Trust Company of Canada, as trustee (incorporated herein by reference to
Exhibit 4.14 to the Company's Current Report on Form 8-K filed on March 17, 1998).
10.1 -- Tax Allocation Agreement, dated October 6, 1995 (Exhibit 10.3 to Form S-1).
10.2 -- Indemnification Agreement, dated October 1, 1995 (Exhibit 10.4 to Form S-1).
10.3 -- Pension Plan Agreement, dated October 1, 1995 (Exhibit 10.7 to Form S-1).
10.4 -- The Supplemental Pension Plan for Officers and Managers of Union Pacific Corporation and
Affiliates, with amendments (incorporated herein by reference to Exhibit 10.11 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1995).
10.5 -- The Supplemental Pension Plan for Exempt Salaried Employees of Union Pacific Resources Company
and Affiliates, with amendments (incorporated herein by reference to Exhibit 10.12 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1995).
10.6 -- Executive Incentive Plan of Union Pacific Resources Group Inc. as amended and restated June 1,
1997 (incorporated herein by reference to Exhibit 10.2 to the Company's Quarterly Report on Form
10-Q for the period ended March 31, 1997).
10.7 -- 1995 Stock Option and Retention Stock Plan of Union Pacific Resources Group Inc. as amended and
restated, effective June 1, 1997 (incorporated herein by reference to the Company's Registration
Statement on Form S-8, dated February 28, 1997).
10.8 -- 1995 Directors Stock Option Plan, as amended and restated, effective June 1, 1997 (incorporated
herein by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the period
ended March 31, 1997).
10.9 -- Directors' Deferred Compensation Plan, as amended and restated, effective September 5, 1997
(incorporated herein by reference to the Company's Registration Statement on Form S-8, dated
September 15, 1997).
10.10 -- Executive's Deferred Compensation Plan, effective September 5, 1997 (incorporated herein by
reference to the Company's Registration Statement on Form S-8, dated September 15, 1997).
10.11(a) -- Conversion Agreement (Exhibit 10.13(a) to Form S-1).
10.11(b) -- Conversion Agreement for Drew Lewis (Exhibit 10.13(b) to Form S-1).
10.11(c) -- Conversion Agreement for Jack L. Messman (Exhibit 10.13(c) to Form S-1).
10.12 -- The Union Pacific Resources Group Inc. Executive Life Insurance Plan, adopted February 26, 1997
(incorporated herein by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1996).
10.13(a) -- Form of Agreement relating to Change in Control by and between Union Pacific Resources Group Inc.
and Jack L. Messman, dated February 4, 1997 (incorporated herein by reference to Exhibit 10.17(a)
to the Company's Annual Report on Form 10-K for the year ended December 31, 1996).
10.13(b) -- Form of Agreement relating to Change in Control by and between Union Pacific Resources Group Inc.
and each of George Lindahl III and V. Richard Eales, dated February 4, 1997 (incorporated herein
by reference to Exhibit 10.17(b) to the Company's Annual Report on Form 10-K for the year ended
December 31, 1996).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ -------------------------------------------------------------------------------------------------
<S> <C> <C>
10.13(c) -- Form of Agreement relating to Change in Control by and between Union Pacific Resources Group Inc.
and each of Anne M. Franklin, Joseph A. LaSala, Jr., Donald W. Niemiec, Morris B. Smith and John
B. Vering, dated February 4, 1997 (incorporated herein by reference to Exhibit 10.17(c) to the
Company's Annual Report on Form 10-K for the year ended December 31, 1996).
10.14 -- Amended and Restated 1976 Coal Purchase Contract, dated as of January 1, 1993, between
Commonwealth Edison Company and Black Butte Coal Company (Exhibit 10.19 to Form S-1).
10.15 -- Transportation Agreement, dated December 15, 1989, by and between Kern River Gas Transmission
Company and Union Pacific Fuels, Inc. (Exhibit 10.21 to Form S-1).
*10.16 -- Amendments to Transportation Agreement dated December 15, 1989, by and between Kern River Gas
Transmission Company and Union Pacific Fuels, Inc.
*10.17 -- Gas Transportation Agreement, dated June 18, 1997, by and between Union Pacific Fuels, Inc. and
Texas Gas Transmission Corporation.
10.19 -- Registration Rights Agreement, dated as of August 3, 1995, among Union Pacific Resources Group
Inc., The Anschutz Corporation and Anschutz Foundation (incorporated herein by reference to
Exhibit 10.19 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995).
10.20 -- Agreement, dated as of August 3, 1995, by and among Union Pacific Resources Group Inc., The
Anschutz Corporation, Anschutz Foundation and Mr. Philip F. Anschutz ('the Anschutz Agreement')
(incorporated herein by reference to Exhibit 10.20 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995).
10.21 -- Letter agreement, dated as of January 20, 1997, amending the Anschutz Agreement.
10.22 -- U.S. $900,000,000 Competitive Advance/Revolving Credit Agreement, dated as of April 16, 1996,
among Union Pacific Resources Group Inc., the lenders named therein and Texas Commerce Bank
National Association, as administrative agent, as amended through September 13, 1996
(incorporated herein by reference to Exhibit 10 to the Third Company's Quarterly Report on Form
10-Q for the period ended September 30, 1996.)
*10.23 -- Third Amendment dated March 2, 1998, to the U.S. 900,000,000 Competitive Advance/Revolving Credit
Agreement, dated April 16, 1996, between Union Pacific Resources Group Inc. and Chase Bank of
Texas, N.A.
*10.24 -- U.S. $300,000,000 Competitive Advance/Revolving Credit Agreement, dated as of November 25, 1997,
among Union Pacific Resources Group Inc., the lenders named therein and Texas Commerce Bank
National Association, as administrative agent.
*10.25 -- First Amendment dated March 2, 1998, to the U.S. $300,000,000 Competitive Advance/Revolving
Credit Agreement, dated November 25, 1997 among Union Pacific Resources Group Inc., the lenders
named therein and Chase Bank of Texas National Association, as administrative agent.
*10.26 -- U.S. $2,700,000,000 Competitive Advance/Revolving Credit Agreement, dated as of March 2, 1998,
among Union Pacific Resources Group Inc., the lenders named therein and the Chase Manhattan Bank,
as administrative agent and Bank of Montreal, as syndication agent.
*10.27 -- Cdn $200,000,000 Amended and Restated Extendible Revolving Term Credit Facility Agreement, dated
May 22, 1997, between Norcen Energy Resources Limited and Canadian Imperial Bank of Commerce.
*10.28 -- Cdn $100,000,000 Amended and Restated Extendible Revolving Term Credit Facility Agreement, dated
May 29, 1997, between Norcen Energy Resources Limited and Royal Bank of Canada.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ -------------------------------------------------------------------------------------------------
<S> <C> <C>
*10.29 -- Cdn $100,000,000 Amended and Restated Extendible Revolving Term Credit Facility Agreement, dated
May 29, 1997, between Norcen Energy Resources Limited and Toronto-Dominion Bank.
*10.30 -- Cdn $50,000,000 Amended and Restated Extendible Revolving Term Credit Facility Agreement dated
May 29, 1997, between Norcen Energy Resources Limited and Union Bank of Switzerland (Canada).
*10.31 -- Cdn $50,000,000 Amended and Restated Extendible Revolving Term Credit Facility Agreement dated
June 9, 1997, between Norcen Energy Resources Limited and ABN AMRO Bank Canada.
*10.32 -- U.S. $150,000,000 Demand Credit Facility Agreement, dated November 20, 1997, between Norcen
Energy Venezuela, S.A. and Canadian Imperial Bank of Commerce West Indies Offshore Banking
Corporation.
*10.33 -- U.S. $25,000,000 Revolving Loan Agreement, dated July 14, 1997, between Basic Petroleum
International Limited and Royal Bank of Canada.
*10.34 -- Cdn $10,050,000 Revolving Demand Credit Facility Agreement, dated October 16, 1996, between
Superior Propane Inc. and Royal Bank of Canada.
*10.35 -- Amendment No. 1 to Amended and Restated 1976 Coal Purchase Contract between Commonwealth Edison
Company and Black Butte Coal Company, effective as of January 1, 1996.
*10.36 -- Amendment No. 2 to Amended and Restated 1976 Coal Purchase Contract between Commonwealth Edison
Company and Black Butte Coal Company, effective as of January 1, 1997.
*12 -- Computation of ratio of earnings to fixed charges.
16 -- Letter regarding change in certifying accountant from Deloitte & Touche LLP dated December 1997
(incorporated herein by reference to Exhibit 16.1 to the Company's Current Report on Form 8-K
dated December 10, 1997).
*21 -- List of subsidiaries.
-- Consent of Deloitte & Touche LLP dated as of March 26, 1998.
*23(a) -- Consent of Ryder Scott Company Petroleum Engineers, dated as of March 9, 1998.
*23(b) -- Powers of attorney for certain Directors.
*27 -- Financial data schedule.
*99 -- Report from Ryder Scott Company Petroleum Engineers, dated as of Febuary 27, 1998, relating to
oil and gas reserves for Union Pacific Resources Group Inc. as of December 31, 1997.
</TABLE>
- ------------------
* Filed herewith
<PAGE>
SEVENTH AMENDMENT
TO TRANSPORTATION AGREEMENT
DATED DECEMBER 15, 1989 (#1005)
THIS AMENDMENT ("Amendment"), made and entered into this 1st day of September,
1992 between Kern River Gas Transmission Company ("Transporter") and Union
Pacific Fuels, Inc. ("Shipper");
WHEREAS, Transporter and Shipper are parties to that certain Transportation
Agreement dated December 15, 1989 the (the "Agreement"); and
WHEREAS, Transporter and Shipper desire to temporarily amend Exhibit "A" and "B"
of the Agreement to reallocate the maximum volumes for the month of September
1992 at the Receipt Points and Delivery Points set forth in the currently
effective Exhibits "A" and "B";
NOW THEREFORE, in consideration of the mutual covenants and agreements herein
contained, Transporter and Shipper hereto agree as follows:
1.1 Exhibit "A" and "B" to the Transportation Agreement is temporarily
replaced with the attached Third Amended Exhibit "A" and "B".
1.2 This Amendment is effective September 1 through September 30, 1992.
1.3 Except as amended herein, all terms and conditions of the Agreement
shall remain in full force and effect as written.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed
in triplicate originals as of the date first written above.
UNION PACIFIC FUELS, INC. KERN RIVER GAS TRANSMISSION COMPANY
/s/ Robert E. Lindsey III /s/ E.J. Holm
- ------------------------- ----------------------
By: Robert E. Lindsey III E.J. Holm, President
Attorney-in-Fact Kern River Corporation
/s/ Cuba Wadlington, Jr.
-------------------------
Cuba Wadlington, Jr.
Vice President & General Manager
Williams Western Pipeline Company
<PAGE>
NINTH AMENDMENT
TO TRANSPORTATION AGREEMENT
DATED DECEMBER 15, 1989
(Contract 1005, Request #193A and #196)
THIS AMENDMENT ("Amendment"), made and entered into this 30th day of October,
1992 between Kern River Gas Transmission Company ("Transporter") and Union
Pacific Fuels, Inc. ("Shipper");
WHEREAS, Transporter and Shipper are parties to that certain Transportation
Agreement dated December 15, 1989 (the "Agreement"); and
WHEREAS, Transporter and Shipper desire to amend Exhibit "A" and "B" of the
Agreement to reallocate the maximum volumes at the Receipt Points and Delivery
Points set forth in the currently effective Exhibits "A" and "B";
NOW THEREFORE, in consideration of the mutual covenants and agreements herein
contained, Transporter and Shipper hereto agree as follows:
1.1 Exhibit "A" and "B" to the Transportation Agreement is hereby
deleted in its entirety and replaced with the attached Fifth
Amended Exhibit "A" and "B".
1.2 This amendment is effective November 1 through November 30, 1992.
1.2 (a) Effective December 1, 1992 the February 15, 1992 Exhibit "A" and
"B" to the Transportation Agreement will be reinstated.
1.3 Except as amended herein, all terms and conditions of the
Agreement shall remain in full force and effect as written.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed
in triplicate originals as of the date first written above.
UNION PACIFIC FUELS, INC. KERN RIVER GAS TRANSMISSION COMPANY
/s/ Robert E. Lindsay III /s/ E.J. Holm
- ------------------------- ---------------------------------
By: ATTORNEY-IN-FACT E. J. Holm, President
Kern River Corporation
/s/ Cuba Wadlington, Jr.
---------------------------------
Cuba Wadlington, Jr.
Vice President & General Manager
Williams Western Pipeline Company
<PAGE>
TENTH AMENDMENT
TO TRANSPORTATION AGREEMENT
DATED DECEMBER 15, 1989
(Contract 1005, Request #201)
THIS AMENDMENT ("Amendment"), made and entered into this 29th day of November,
1992 between Kern River Gas Transmission Company ("Transporter") and Union
Pacific Fuels, Inc. ("Shipper");
WHEREAS, Transporter and Shipper are parties to that certain Transportation
Agreement dated December 15, 1989 (the "Agreement"); and
WHEREAS, Transporter and Shipper desire to amend Exhibit "A" and "B" of the
Agreement to reallocate the maximum volumes at the Receipt Points and Delivery
Points set forth in the currently effective Exhibits "A" and "B";
NOW THEREFORE, in consideration of the mutual covenants and agreements herein
contained, Transporter and Shipper hereby agree as follows:
1.1 Exhibits "A" and "B" to the Agreement is hereby deleted in its
entirety and replaced with the attached Sixth Amended Exhibits "A"
and "B".
1.2 This amendment is effective December 1 through December 31, 1992.
1.2(a) Effective January 1, 1993 the existing Exhibit "A" and "B" to the
Transportation Agreement will be reinstated.
1.3 Except as amended herein, all terms and conditions of the Agreement
shall remain in full force and effect as written.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed
in triplicate originals as of me date first written above.
UNION PACIFIC FUELS, INC. KERN RIVER GAS TRANSMISSION COMPANY
/s/ Robert E. Lindsey /s/ E.J. Holm
- --------------------- ---------------------
By: ROBERT E. LINDSEY E. J. Holm, President
ATTORNEY-IN-FACT Kern River Corporation
/s/ Cuba Wadlington, Jr.
--------------------------------
Cuba Wadlington, Jr.
Vice President & General Manager
Williams Western Pipeline Company
<PAGE>
EIGHTH AMENDMENT
TO TRANSPORTATION AGREEMENT
DATED DECEMBER 15, 1989
(Contract 1005, Request #185 and #186)
THIS AMENDMENT ("Amendment"), made and entered into this 28th day of September,
1992 between Kern River Gas Transmission Company ("Transporter") and Union
Pacific Fuels, Inc. ("Shipper");
WHEREAS, Transporter a Shipper are parties to that certain Transportation
Agreement dated December 15, 1989 (the "Agreement"); and
WHEREAS, Transporter and Shipper desire to amend Exhibit "A" and "B" of the
Agreement to reallocate the maximum volumes at the Receipt Points and Delivery
Points set forth in the currently effective Exhibits "A" and "B";
NOW THEREFORE, in consideration of the mutual covenants and agreements herein
contained, Transporter and Shipper hereto agree as follows:
1.1 Exhibit "A" and "B" to the Transportation Agreement is hereby deleted
in its entirety and replaced with the attached Fourth Amended Exhibit
"A" and "B".
1.2 This amendment is effective October 1 through October 31, 1992.
1.2(a) Effective November 1, 1992 the existing Exhibit "A" and "B" in
effect on February 15, 1992 to the Transportation Agreement will be
reinstated.
1.3 Except as amended herein, all terms and conditions of the Agreement
shall remain in full force and effect as written.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed
in triplicate originals as of the date first written above.
UNION PACIFIC FUELS, INC. KERN RIVER GAS TRANSMISSION COMPANY
/s/ Robert E. Lindsey III /s/ E.J. Holm
- ------------------------- ---------------------------------
By: ATTORNEY-IN-FACT E.J. Holm, President
Kern River Corporation
/s/ Cuba Wadlington, Jr.
---------------------------------
Cuba Wadlington, Jr.
Vice President & General Manager
Williams Western Pipeline Company
<PAGE>
ELEVENTH AMENDMENT
TO TRANSPORTATION AGREEMENT
DATED DECEMBER 15, 1989
(Contract 1005, Requests 209 & 212)
THIS AMENDMENT ("Amendment"), made and entered into this 31st day of
December, 1992 between Kern River Gas Transmission Company ("Transporter") and
Union Pacific Fuels, Inc. ("Shipper");
WITNESSETH:
WHEREAS, Transporter and Shipper are parties to that certain Transportation
Agreement dated December 15, 1989 (the "Agreement"); and
WHEREAS, the Sixth Amended Exhibits "A" and "B" to the Agreement sets forth
Shipper's current Receipt and Delivery Point entitlements pursuant to the
Agreement;
WHEREAS, Shipper has submitted two requests to Transporter (Nos. 209 & 212)
to change its current Receipt and Delivery Point entitlements; and
WHEREAS, Transporter and Shipper desire to amend the Sixth Amended Exhibits
"A" and "B" of the Agreement to reflect new Receipt and Delivery Point
entitlements for Shipper pursuant to the Agreement and in accordance with
Shipper's requests (Nos. 209 & 212);
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, Transporter and Shipper hereto agree as follows:
1.1 The Sixth Amended Exhibits "A" and "B" to the Agreement are hereby
amended by deleting the Sixth Amended Exhibits "A" and "B" in their
entirety and by substituting in lieu thereof the attached Seventh
Amended Exhibits "A" and "B".
1.2 This Amendment shall be effective as of January 1 through January 31,
1993.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed
in triplicate originals as of the date first written above.
UNION PACIFIC FUELS, INC. KERN RIVER GAS TRANSMISSION COMPANY
/s/ Robert E. Lindsey /s/ E.J. Holm
- ---------------------- ----------------------
By: Robert E. Lindsey E.J. Holm, President
Attorney-in-Fact Kern River Corporation
/s/ Cuba Wadlington, Jr.
-------------------------
Cuba Wadlington, Jr.
Vice President & General Manager
Williams Western Pipeline Company
<PAGE>
TWELFTH AMENDMENT
TO TRANSPORTATION AGREEMENT
DATED DECEMBER 15, 1989
(Contract 1005, Requests 229)
THIS AMENDMENT ("Amendment"), made and entered into this 29th day of
January, 1993 between Kern River Gas Transmission Company ("Transporter") and
Union Pacific Fuels, Inc. ("Shipper");
WITNESSETH:
WHEREAS, Transporter and Shipper are parties to that certain Transportation
Agreement dated December 15, 1989, as amended (the "Agreement"); and
WHEREAS, Seventh Amended Exhibits "A" and "B" to the Agreement respectively
set forth Shipper's current Receipt and Delivery Point entitlements pursuant to
the Agreement;
WHEREAS, Shipper has submitted a request to Transporter (No. 229) to change
its current Receipt and Delivery Point entitlements for the month of February
1993; and
WHEREAS, Transporter and Shipper desire to amend the Seventh Amended
Exhibits "A" and "B" to the Agreement to reflect new Receipt and Delivery Point
entitlements for Shipper for the month of February 1993, pursuant to the
Agreement and in accordance with Shipper's requests (No. 229);
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, Transporter and Shipper hereby agree as follows:
1.1 Seventh Amended Exhibits "A" and "B" to the Agreement are hereby
amended by deleting Seventh Amended Exhibits "A" and "B" in their
entirety and by substituting in lieu thereof the attached Eighth
Amended Exhibits "A" and "B", which shall be effective solely for
the period from February 1, 1993 to February 28, 1993. Shipper shall
submit a separate request or requests to Transporter with respect to
Receipt and Delivery Point entitlements to be effective on March 1,
1993.
1.2 This amendment shall be effective as of February 1, 1993.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed
in triplicate originals as of the date first written above.
ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
UNION PACIFIC FUELS, INC. KERN RIVER GAS TRANSMISSION COMPANY
(Shipper) (Transporter), by its partners:
KERN RIVER CORPORATION
/s/ Robert E. Lindsey III /s/ E.J. Holm
- ------------------------- ----------------------
By: Attorney-in-Fact E.J. Holm, President
WILLIAMS WESTERN PIPELINE COMPANY
/s/ Cuba Wadlington, Jr.
-------------------------
Cuba Wadlington, Jr.
Williams Western Pipeline Company
<PAGE>
THIRTEENTH AMENDMENT
TO TRANSPORTATION AGREEMENT
DATED DECEMBER 15, 1989
(Contract 1005, Request 232)
THIS AMENDMENT ("Amendment"), made and entered into this 25th day of
February, 1993 between Kern River Gas Transmission Company ("Transporter") and
Union Pacific Fuels, Inc. ("Shipper");
WITNESSETH:
WHEREAS, Transporter and Shipper are parties to that certain Transportation
Agreement dated December 15, 1989, as amended (the "Agreement"); and
WHEREAS, Eighth Amended Exhibits "A" and "B" to the Agreement respectively
set forth Shipper's current Receipt and Delivery Point entitlements pursuant to
the Agreement;
WHEREAS, Shipper has submitted a request to Transporter (No. 232) to change
its current Receipt and Delivery Point entitlements to be effective on March 1,
1993; and
WHEREAS, Transporter and Shipper desire to amend the Eighth Amended
Exhibits "A" and "B" to the Agreement to reflect new Receipt and Delivery Point
entitlements for Shipper to be effective on March 1, 1993, pursuant to the
Agreement and in accordance with Shipper's requests (No. 232);
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, Transporter and Shipper hereby agree as follows:
1.1 Eighth Amended Exhibits "A" and "B" to the Agreement are hereby
amended by deleting Eighth Amended Exhibits "A" and "B" in their
entirety and by substituting in lieu thereof the attached Ninth
Amended Exhibits "A" and "B".
1.2 This amendment shall be effective as of March 1, 1993.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed
in triplicate originals as of the date first written above.
UNION PACIFIC FUELS, INC. KERN RIVER GAS TRANSMISSION COMPANY
(Shipper) (Transporter), by its partners:
KERN RIVER CORPORATION
/s/ Robert E. Lindsey III /s/ E.J. Holm
- ------------------------- ----------------------
By: Attorney-in-Fact E.J. Holm, President
WILLIAMS WESTERN PIPELINE COMPANY
/s/ Cuba Wadlington, Jr.
-------------------------
Cuba Wadlington, Jr.
Williams Western Pipeline Company
<PAGE>
FOURTEENTH AMENDMENT TO
TRANSPORTATION AGREEMENT
CONTRACT 1005, REQUEST 251
THIS AMENDMENT to Transportation Agreement ("Agreement"), made and entered
into this 23rd day of March, 1993 by and between KERN RIVER GAS TRANSMISSION
COMPANY ("Transporter") and Union Pacific Fuels, Inc. ("Shipper"),
WITNESSETH:
WHEREAS, Transporter and Shipper are parties to that certain Transportation
Agreement dated December 15, 1989, (the "Agreement"); and
WHEREAS, Ninth Amended Exhibit "B" to the Agreement sets forth Shipper's
current Delivery Point entitlements pursuant to the Agreement; and
WHEREAS, Shipper has requested a modification of its Delivery Point
entitlements, and Transporter is able to so modify such entitlements; and
WHEREAS, Transporter and Shipper desire to amend Ninth Amended Exhibit "B"
to the Agreement to reflect Shipper's modified Delivery Point entitlements;
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, Transporter and Shipper do hereby agree as follows:
I.
1.1 Ninth Amended Exhibit "B" to the Agreement as hereby amended by deleting
Ninth Amended Exhibit "B" in its entirety, and by substituting in lieu thereof
the attached Tenth Amended Exhibit "B".
1.2 This Amendment shall be effective as of April 1, 1993.
IN WITNESS WHEREOF, Transporter and Shipper have caused this Amendment to be
executed as of the date first written above.
UNION PACIFIC FUELS, INC. KERN RIVER GAS TRANSMISSION COMPANY
(Shipper) (Transporter), by its partners:
KERN RIVER CORPORATION
By: /s/ Robert E. Lindsey III By: /s/ E.J. Holm
------------------------- ----------------------
Title: Attorney-in-Fact E.J. Holm, President
WILLIAMS WESTERN PIPELINE COMPANY
By: /s/ Cuba Wadlington, Jr.
-------------------------
Cuba Wadlington, Jr.
Williams Western Pipeline Company
<PAGE>
FIFTEENTH AMENDMENT
TO TRANSPORTATION AGREEMENT
DATED DECEMBER 15, 1989
(Contract 1005, Request 259)
THIS AMENDMENT to Transportation Agreement ("Amendment") made and entered
into this 29th day of April, 1993 by and between Kern River Gas Transmission
Company ("Transporter") and Union Pacific Fuels, Inc. ("Shipper");
WITNESSETH:
WHEREAS, Transporter and Shipper are parties to that certain Transportation
Agreement dated December 15, 1989 (the "Agreement"); and
WHEREAS, Ninth Amended Exhibit "A" to the Agreement sets forth Shipper's
current Receipt Point entitlements pursuant to the Agreement; and
WHEREAS, Shipper has requested a modification of its Receipt Point
entitlements, and Transporter is able to so modify such entitlements; and
WHEREAS, Transporter and Shipper deisre to amend Ninth Amended Exhibit "A"
to the Agreement to reflect Shipper's modified Receipt Point entitlements;
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, Transporter and Shipper do hereby agree as follows:
1.1 Ninth Amended Exhibit "A" to the Agreement is hereby amended by
deleting Ninth Amended Exhibit "A" in its entirety and by
substituting in lieu thereof the attached Tenth Amended
Exhibit "A".
1.2 This amendment shall be effective as of May 1, 1993.
IN WITNESS WHEREOF, Transporter and Shipper have caused this Amendment to be
duly executed as of the date first written above.
UNION PACIFIC FUELS, INC. KERN RIVER GAS TRANSMISSION COMPANY
(Shipper) (Transporter), by its partners:
KERN RIVER CORPORATION
By: /s/ Robert E. Lindsey III By: /s/ E.J. Holm
------------------------- ----------------------
Title: Attorney-in-Fact E.J. Holm, President
WILLIAMS WESTERN PIPELINE COMPANY
By: /s/ Cuba Wadlington, Jr.
-------------------------
Cuba Wadlington, Jr.
Sr. Vice President & General Manager
<PAGE>
SIXTEENTH AMENDMENT
TO TRANSPORTATION AGREEMENT
DATED DECEMBER 15, 1989
(Contract 1005, Request 266)
THIS AMENDMENT to Transportation Agreement ("Amendment") made and entered
into this 18th day of June, 1993 by and between Kern River Gas Transmission
Company ("Transporter") and Union Pacific Fuels, Inc. ("Shipper");
WITNESSETH:
WHEREAS, Transporter and Shipper are parties to that certain Transportation
Agreement dated December 15, 1989 (the "Agreement"); and
WHEREAS, Tenth Amended Exhibit "B" to the Agreement sets forth Shipper's
current Delivery Point entitlements pursuant to the Agreement; and
WHEREAS, Shipper has requested a modification of its Delivery Point
entitlements, and Transporter is able to so modify such entitlements; and
WHEREAS, Transporter and Shipper desire to amend Tenth Amended Exhibit "B"
to the Agreement to reflect Shipper's modified Delivery Point entitlements;
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, Transporter and Shipper do hereby agree as follows:
1.1 Tenth Amended Exhibit "B" to the Agreement is hereby amended by
deleting Tenth Amended Exhibit "B" in its entirety and by
substituting in lieu thereof the attached Eleventh Amended
Exhibit "B".
1.2 This amendment shall be effective as of June 21, 1993.
IN WITNESS WHEREOF, Transporter and Shipper have caused this Amendment to be
duly executed as of the date first written above.
UNION PACIFIC FUELS, INC. KERN RIVER GAS TRANSMISSION COMPANY
(Shipper) (Transporter), by its partners:
KERN RIVER CORPORATION
By: /s/ Robert E. Lindsey III By: /s/ E.J. Holm
------------------------- ----------------------
Title: Attorney-in-Fact E.J. Holm, President
WILLIAMS WESTERN PIPELINE COMPANY
By: /s/ Cuba Wadlington, Jr.
-------------------------
Cuba Wadlington, Jr.
Sr. Vice President & General Manager
<PAGE>
SEVENTEENTH AMENDMENT
TO TRANSPORTATION AGREEMENT
DATED DECEMBER 15, 1989
(Contract 1005, Requests 267)
THIS AMENDMENT to Transportation Agreement ("Amendment") made and entered
into this 21st day of June, 1993 by and between Kern River Gas Transmission
Company ("Transporter") and Union Pacific Fuels, Inc. ("Shipper");
WITNESSETH:
WHEREAS, Transporter and Shipper are parties to that certain Transportation
Agreement dated December 15, 1989 (the "Agreement"); and
WHEREAS, Eleventh Amended Exhibit "B" to the Agreement sets forth Shipper's
current Delivery Point entitlements pursuant to the Agreement; and
WHEREAS, Shipper has requested a modification of its Delivery Point
entitlements, and Transporter is able to so modify such entitlements; and
WHEREAS, Transporter and Shipper desire to amend Eleventh Amended
Exhibit "B" to the Agreement to reflect Shipper's modified Delivery Point
entitlements;
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, Transporter and Shipper do hereby agree as follows:
1.1 Eleventh Amended Exhibit "B" to the Agreement is hereby amended by
deleting Eleventh Amended Exhibit "B" in its entirety and by
substituting in lieu thereof the attached Twelfth Amended Exhibit "B".
1.2 This amendment shall be effective as of July 1, 1993.
IN WITNESS WHEREOF, Transporter and Shipper have caused this Amendment to be
duly executed as of the date first written above.
UNION PACIFIC FUELS, INC. KERN RIVER GAS TRANSMISSION COMPANY
(Shipper) (Transporter), by its partners:
KERN RIVER CORPORATION
By: /s/ Robert E. Lindsey III By: /s/ E.J. Holm
------------------------- ----------------------
Title: Attorney-in-Fact E.J. Holm, President
WILLIAMS WESTERN PIPELINE COMPANY
By: /s/ Cuba Wadlington, Jr.
-------------------------
Cuba Wadlington, Jr.
Sr. Vice President & General Manager
<PAGE>
SEVENTEENTH AMENDMENT
TO TRANSPORTATION AGREEMENT
DATED DECEMBER 15, 1989
(Contract 1005, Requests 267)
THIS AMENDMENT to Transportation Agreement ("Amendment") made and entered
into this 21st day of June, 1993 by and between Kern River Gas Transmission
Company ("Transporter") and Union Pacific Fuels, Inc. ("Shipper");
WITNESSETH:
WHEREAS, Transporter and Shipper are parties to that certain Transportation
Agreement dated December 15, 1989 (the "Agreement"); and
WHEREAS, Eleventh Amended Exhibit "B" to the Agreement sets forth Shipper's
current Delivery Point entitlements pursuant to the Agreement; and
WHEREAS, Shipper has requested a modification of its Delivery Point
entitlements, and Transporter is able to so modify such entitlements; and
WHEREAS, Transporter and Shipper desire to amend Eleventh Amended
Exhibit "B" to the Agreement to reflect Shipper's modified Delivery Point
entitlements;
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, Transporter and Shipper do hereby agree as follows:
1.1 Eleventh Amended Exhibit "B" to the Agreement is hereby amended by
deleting Eleventh Amended Exhibit "B" in its entirety and by
substituting in lieu thereof the attached Twelfth Amended Exhibit "B".
1.2 This amendment shall be effective as of July 7, 1993.
IN WITNESS WHEREOF, Transporter and Shipper have caused this Amendment to be
duly executed as of the date first written above.
UNION PACIFIC FUELS, INC. KERN RIVER GAS TRANSMISSION COMPANY
(Shipper) (Transporter), by its partners:
KERN RIVER CORPORATION
By: /s/ Robert E. Lindsey III By: /s/ E.J. Holm
------------------------- ----------------------
Title: Attorney-in-Fact E.J. Holm, President
WILLIAMS WESTERN PIPELINE COMPANY
By: /s/ Cuba Wadlington, Jr.
-------------------------
Cuba Wadlington, Jr.
Sr. Vice President & General Manager
<PAGE>
EIGHTEENTH AMENDMENT
TO TRANSPORTATION AGREEMENT
DATED DECEMBER 15, 1989
(Contract 1005, Request 273)
THIS AMENDMENT to Transportation Agreement ("Amendment") made and entered
into this 16th day of July, 1993 by and between Kern River Gas Transmission
Company ("Transporter") and Union Pacific Fuels, Inc. ("Shipper");
WITNESSETH:
WHEREAS, Transporter and Shipper are parties to that certain Transportation
Agreement dated December 15, 1989 (the "Agreement"); and
WHEREAS, Tenth Amended Exhibit "A" to the Agreement sets forth Shipper's
current Delivery Point entitlements pursuant to the Agreement; and
WHEREAS, Shipper has requested a modification of its Delivery Point
entitlements, and Transporter is able to so modify such entitlements; and
WHEREAS, Transporter and Shipper desire to amend Tenth Amended Exhibit "A"
to the Agreement to reflect Shipper's modified Delivery Point entitlements;
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, Transporter and Shipper do hereby agree as follows:
1.1 Tenth Amended Exhibit "A" to the Agreement is hereby amended by
deleting Tenth Amended Exhibit "A" in its entirety and by
substituting in lieu thereof the attached Eleventh Amended
Exhibit "A".
1.2 This Amendment shall be effective as of July 16, 1993.
IN WITNESS WHEREOF, Transporter and Shipper have caused this Amendment to be
duly executed as of the date first written above.
UNION PACIFIC FUELS, INC. KERN RIVER GAS TRANSMISSION COMPANY
(Shipper) (Transporter), by its partners:
KERN RIVER CORPORATION
By: /s/ Robert E. Lindsey III By: /s/ E.J. Holm
------------------------- ----------------------
Title: Attorney-in-Fact E.J. Holm, President
WILLIAMS WESTERN PIPELINE COMPANY
By: /s/ Cuba Wadlington, Jr.
-------------------------
Cuba Wadlington, Jr.
Sr. Vice President & General Manager
<PAGE>
NINETEENTH AMENDMENT
TO TRANSPORTATION AGREEMENT
DATED DECEMBER 15, 1989
(Contract 1005 Request #286)
THIS AMENDMENT to Transportation Agreement ("Amendment") made and entered
into this 23rd day of May, 1994 by and between Kern River Gas Transmission
Company ("Transporter") and Union Pacific Fuels, Inc. ("Shipper");
WITNESSETH:
WHEREAS, Transporter and Shipper are parties to that certain Transportation
Agreement dated December 15, 1989 (the "Agreement"); and
WHEREAS, Shipper by letter dated May 24, 1993 notified Transporter of its
election to reduce its MDQ under the Agreement by 25,000 Mcf per day effective
June 1, 1994; and (the "MDQ Reduction").
WHEREAS, Transporter and Shipper desire to amend the Agreement to reflect
the MDQ Reduction as well as a corresponding reduction in Shipper's Receipt
and Delivery Point entitlements under the Agreement;
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, Transporter and Shipper do hereby agree as follows:
1.1 Section 2.1.1 of the Agreement is amended effective June 1, 1994,
to state that Shipper's MDQ shall be 75,000 Mcf per day.
1.2 The Agreeement is hereby amended effective May 23, 1994, by deleting
Eleventh Amended Exhibit "A" and Twelfth Amended Exhibit "B" in their
entireties and by substituting in lieu thereof the attached Twelfth
Amended Exhibit "A" and Thirteenth Amended Exhibit "B".
.
IN WITNESS WHEREOF, Transporter and Shipper have caused this Amendment to be
duly executed as of the date first written above.
UNION PACIFIC FUELS, INC. KERN RIVER GAS TRANSMISSION COMPANY
(Shipper) (Transporter), by its partner:
KERN RIVER CORPORATION
By: /s/ Robert E. Lindsey III By: /s/ E.J. Holm
------------------------- ----------------------
Title: Attorney-in-Fact E.J. Holm, President
WILLIAMS WESTERN PIPELINE COMPANY
By: /s/ Cuba Wadlington, Jr.
-------------------------
Cuba Wadlington, Jr.
Sr. Vice President & General Manager
<PAGE>
[Letterhead of Kern River Gas Transmission Company] [LOGO]
July 23, 1990
1010 Milam St.
Union Pacific Fuels, Inc. P.O. Box 2511
801 Cherry Street Houston, Texas 77001
Fort Worth, Texas 76101 (713) 757-2131
Attn: Don Niemiec
Re: Amendment to Transportation Agreement
dated December 15, 1989
Gentlemen:
Please refer to that certain Firm Transportation Service Agreement (the
"Agreement") dated December 15, 1989, between Kern River Gas Transmission
Company ("Transporter") and Union Pacific Fuels, Inc. ("Shipper"). To reflect
Shipper's increase of the maximum daily quantity under the Agreement and to
better enable Transporter to obtain financing for Transporter's proposed natural
gas pipeline system to the mutual benefit of Transporter and Shipper,
Transporter and Shipper hereby agree in consideration of such mutual benefits of
these amendments to amend the Agreement as follows:
1. Pursuant to the option granted to Shipper on December 15, 1989 to
increase its maximum daily quantity and Shippers's exercise of such option on
March 6, 1990, Section 2.1 "MDQ" is amended by deleting the words "50,000 Mcf
per day" and replacing them with "100,000 Mcf per day".
2. Exhibit "A" of the December 15, 1989 agreement is amended by
deleting Exhibit "A" in its entirety and replacing it with the attached new
Exhibit "A".
3. Section 8.2 of the Agreement is amended by adding the following new
sentence at the end thereof:
"Subject to the provisions of Section 9.1.2 and 13.1 hereof, Shipper
shall make payment of that portion of the statement identified as the
Monthly Demand Charge in full, irrespective of any dispute as to the
invoiced amount of said Monthly Demand Charge, and Shipper shall not be
entitled to any abatement or setoff against said amount, including, but
not limited to, those alleged to be due by reason of any past, present or
future claims or other rights of Shipper against Transporter or any other
person or entity whether in connection herewith or any unrelated
transaction. Nothing contained herein shall prejudice or limit Shipper's
ability to withhold amounts disputed in good faith, including any amount
attributable to the Monthly Demand Charge, so long as such amounts are
withheld only from the Monthly Commodity Charge or other charges other
than the Monthly Demand charges invoiced or claimed by Transporter.
Except as otherwise specifically provided, nothing herein shall prejudice
or limit Shipper's right to dispute the propriety or amount of any
statement or portion thereof received from Transporter."
<PAGE>
4. Section 17.1 of the Agreement is amended by adding the following new
sentences at the end thereof:
"Upon request of either party, the other party shall acknowledge in
writing any permitted assignment described herein and the right of any
permitted assignee (including any assignee upon enforcement of any
assignment made as security for indebtedness) to enforce this Agreement
against such other party, and shall also deliver such certificates,
copies of corporate documents and opinions of counsel as may be
reasonably requested by such permitted assignee relating to such party,
this Agreement and any other matters relevant thereto. Unless otherwise
agreed by the parties hereto in a separate writing or pursuant to any
provision of this Agreement that expressly allows Shipper to be
relieved of its obligations hereunder in connection with an assignment,
no permitted assignment shall relieve the assigning party from any of
its obligations urder this agreement; provided however that if Shipper
assigns its rights hereunder to an Eligible Assignee and otherwise
complies with the foregoing provisions of this Section 17.1, then
effective upon such assignment the Shipper shall be relieved of its
obligations hereunder to the extent of such assignment with respect to
any period beginning on or after the date of such assignment. As used
in the preceding sentence, Eligible Assignee means an entity that (i)
at the time of such assigment (A) has senior unsecured long term public
debt that has a rating by Standard & Poor's Corporation ("S&P") or
Moody's Investors Service Inc. (Moody's), or, if such entity is not
rated by such agencies, that has an imputed credit rating as determined
by a mutually agreeable independent financial consultant based on the
application of the standards and methods used by S&P or Moody's to rate
corporate debt, that is at least as high as the explicit or imputed
credit rating in effect as of the date of this Agreement for Union
Pacific Resources Company, which the parties shall deem to be "A" ( by
S&P) and "A2" (by Moody's) and (B) is not on Credit Watch with negative
implications, in the case of S&P, or under review for possible
downgrade, in the case of Moody's and (ii) has unconditionally assumed
the obligations of the Shipper hereunder pursuant to such instruments
as may be reasonably requested by Transporter.
If Shipper is in agreement with the foregoing, please so indicate by
signing in the space provided below, and return two fully executed copies of
this letter agreement for our records.
<PAGE>
Very truly yours,
KERN RIVER GAS TRANSMISSION COMPANY
By: /s/ E.J. Holm
------------------------------
E.J. Holm
President
Kern River Corporation
By: /s/ Cuba Wadlington, Jr.
------------------------------
Cuba Wadlington, Jr.
Vice President
Williams Western Pipeline Company
AGREED TO AND ACCEPTED:
UNION PACIFIC FUELS, INC.
By: /s/ D.W. Niemiec
-----------------------
D.W. Niemiec
President
<PAGE>
EXHIBIT "A"
(Note 1)
AMENDMENT
to the
TRANSPORTATION AGREEMENT
DATE December 15, 1989
by and between
KERN RIVER GAS TRANSMISSION COMPANY
and
UNION PACIFIC FUELS, INC.
RECEIPT POINTS
Maximun Maximum
Receipt Receipt Volumes
Meter Pressure Mcf per Day
Description Location Ownership PSIG (Note 2)
- ----------- -------- --------- -------- ---------------
Opal Gas Plant T21N-R114W TBD TBD 40,000
Questar Pipeline TBD TBD TBD 35,000
Overthrust Pipeline TBD TBD TBD 10,000
Painter NGL/NRU Complex TBD TBD TBD 22,000
Anschutz Ranch East TBD TBD TBD 15,000
Whitney Canyon TBD TBD TBD 13,000
Colorado Interstate Gas TBD TBD TBD 25,000
-------
150,000
Notes:
(1) Shipper and Transporter agree to amend this Exhibit, as to specific
Location, Receipt Points, Receipt Volumes, and Maximum Receipt Pressure
120 days prior to the Construction Notification Date.
(2) The Maximum Receipt Volume for all Receipt Points in the aggregate
shall not exceed 150 percent of Shipper's MDQ and the Maximum Receipt
Volume for any individual Receipt Point shall not exceed Shipper's MDQ.
TBD - To be determined.
<PAGE>
[Letterhead of Kern River Gas Transmission Company] [LOGO]
1010 Milam St.
P.O. Box 2511
Houston, Texas 77252-2511
(713)757-2131
November 2, 1990
LETTER AGREEMENT
Mr. Don Niemiec, President
Union Pacific Fuels, Inc.
801 Cherry Street
Fort Worth, Texas 76101
Re: Amendment to Transportation Agreement
dated December 15, 1989
Dear Mr. Niemiec:
Please refer to that certain Transportation Agreement dated
December 15, 1989, between Kern River Gas Transmission Company ("Transporter")
and Union Pacific Fuels, Inc. ("Shipper"), as amended on July 23, 1990 (the
"Transportation Agreement"). In consideration of the mutual benefits of such
amendments, Transporter and Shipper hereby amend the Transportation Agreement as
follows:
1. In the last sentence of Section 1.5 on page 3, the words "60
days" are deleted and are replaced with "150 days."
2. Section 2.1 "MDQ" is deleted in its entirety and is replaced
with the following:
2.1 MDQ.
2.1.1 Initial Service. Subject to the terms,
conditions and limitations hereof, the MDQ shall
be 100,000 Mcf per day.
2.1.2 Option to decrease MDQ. At the Commencement
Date and at the end of each of the first four
Contract Years, Shipper shall have the right to
reduce the MDQ for the remaining term of this
Agreement, commencing with the next Contract Year
by up to 25,000 Mcf per day, provided,
<PAGE>
however, (a) this right shall not be effective
unless the total MDQ of all firm shippers on
Transporter's pipeline system totals at least
525,000 Mcf per day on the date on which Shipper
seeks to make effective a reduction in its MDQ;
and (b) Shipper's MDQ never shall be reduced to
less than 75,000 Mcf per day. Shipper shall
exercise its right to reduce the MDQ (i) for the
first Contract Year, by providing written notice
to Transporter at least 120 days prior to the
Commencement Date (as estimated by Transporter in
a notice provided to Shipper at least 150 days
prior to the Commencement Date) (ii) for the
second Contract Year, by providing written notice
at least nine months prior to the end of the
first Contract Year; and (iii) for each of the
three Contract Years thereafter, by providing
written notice at least 12 months before the
commencement of the Contract Year to which the
reduction would apply.
3. Section 3.4 "Rate Parity" is deleted and is replaced with
the following:
3.4 Contract Parity. At least 30 days prior to
the Commencement Date, Transporter shall provide
Shipper with copies of all firm service
transportation agreements which provide for the
transportation of gas from receipt points in
Wyoming to delivery points in California
(hereinafter referred to as "MFN Contracts"). At
Shipper's option ("Election Option"), exercised
by the giving of written notice five days prior
to the Commencement Date any MFN Contract will be
made available to Shipper for the service to be
provided under this agreement on the same terms
and conditions as the MFN Contract. If the
transportation rates (i.e., those transportation
rates derived from the rate provisions of an MFN
Contract related to payments for capacity and/or
throughput volumes) in such MFN Contract are
mileage or zone-based, the distance for service
provided thereunder shall be reflected in
determining Shipper's rate
-2-
<PAGE>
under this Section 3.4. The terms and conditions
of such MFN Contract, as modified from time to
time pursuant to such MFN Contract, shall be
applied to the lesser of Shipper's MDQ or the MDQ
contained in the MYN Contract, for a term
extending to the lesser of the remaining term of
this agreement or the remaining term or date of
earlier termination, cancellation, or amendment,
of the MFN Contract. If the MDQ in an MFN
Contract selected by Shipper is less than
Shipper's MDQ hereunder, Shipper may apply more
than one MFN Contract to its service hereunder at
any given time, until the aggregate MDQ's of the
MFN Contracts match or exceed Shipper's MDQ,
provided, however, that if Shipper seeks to apply
more than one MFN Contract to its service
hereunder at any given time, Transporter and
Shipper shall enter into amendments to this
agreement and/or replacement contracts with
respect to the portion of Shipper's service to
which each MFN Contract is to apply and such
amendments and replacement contracts shall be
subject to any necessary regulatory approvals.
At least 30 days prior to the first day of each
Contract Year, Transporter shall provide Shipper
with copies of any new MFN Contracts or other MFN
Contracts which have been amended during the
previous Contract Year and the applicable rates
associated with such MFN Contracts. Following
such notice, and prior to 5 days before the start
of the Contract Year, Shipper shall have the same
Election Option as set forth above, exercisable
under the same terms and conditions.
4. Article XII is amended to add at page 37 a new Section
12.3, as follows:
12.3 FERC Regulation. In the event the FERC does not approve in
its entirety the Transportation Agreement in response to the
filings made by Transporter at the FERC on July 24, 1990 in
Docket Nos. CP89-2047-003 and CP89-1794 through CP89-1810, then
Shipper and Transporter will renegotiate
-3-
<PAGE>
any rejected provisions of the Transportation Agreement in good
faith, replacing each such provision with terms that are
consistent with the FERC's orders on the July 24, 1990 filings.
It is understood that the MDQ, 15-year contract term and receipt
and delivery points shall not be changed, unless both parties
mutually agree to a change. Notwithstanding the foregoing
commitment, both parties expressly reserve the right to seek
rehearing and/or judicial review of any modification ordered by
the FERC.
If Shipper is in agreement with the foregoing, please so
indicate by signing in the space provided below and return two fully-executed
originals of this document for our records.
Yours very truly,
KERN RIVER GAS TRANSMISSION
COMPANY
BY: /s/ E. J. Holm
-------------------------
E. J. Holm
President
Kern River Corporation
BY: /s/ Cuba Wadlington, Jr.
-------------------------
Cuba Wadlington, Jr.
Vice President
Williams Western Pipeline
Agreed to and accepted:
UNION PACIFIC FUELS, INC.
By: /s/ D. W. Niemiec
----------------------
Title: President
Date: November 2, 1990
-4-
<PAGE>
[Letterhead of Kern River Gas Transmission Company] [LOGO]
1010 Milam St.
P.O. Box 2511
Houston, Texas 77252-2511
(713)757-2131
November 2, 1990
LETTER AGREEMENT
Mr. Don Niemiec, President
Union Pacific Fuels, Inc.
801 Cherry Street
Fort Worth, Texas 76101
Dear Mr. Niemiec:
Please refer to that certain Transportation Agreement dated
December 15, 1989 between Kern River Gas Transmission Company ("Transporter")
and Union Pacific Fuels, Inc. ("Shipper"), as amended on July 23, 1990 (the
"Transportation Agreement"), and to the Precedent Agreement dated December 15,
1989, by and among Kern River Gas Transmission Company, Union Pacific Resources
Company ("UPRC") and Union Pacific Fuels, Inc.
You will recall that on October 3, 1990, Transporter sent to
Shipper a letter advising of the impending date on which Transporter would begin
incurring financial liabilities for the manufacture of the pipe needed to
construct Transporter's interstate natural gas pipeline system from southwestern
Wyoming to Kern County, California, in accordance with certificates issued by
the Federal Energy Regulatory Commission ("FERC") on January 21, 1990. In recent
weeks, Transporter, Shipper and UPRC have discussed at length the matters
addressed in Transporter's letter of October 3. This letter agreement
memorializes the arrangements the parties have mutually agreed upon with
respect to such matters.
1. This agreement shall be effective on the date it is executed,
unless Transporter fails to receive sufficient commitments for firm
transportation on its pipeline, as provided in paragraph 5(a) below. All parties
shall execute this agreement by November 2, 1990; otherwise, this agreement
<PAGE>
shall terminate. Upon becoming effective, this agreement shall supersede the
Precedent Agreement of December 15, 1989 in its entirety, and such Precedent
Agreement shall be terminated. Except as otherwise expressly provided, this
agreement will terminate on the Commencement Date of the Transportation
Agreement as defined in the Transportation Agreement or at such earlier date as
provided hereunder. Unless otherwise stated herein, all capitalized terms used
in this agreement have the same meaning as the like terms used in the
Transportation Agreement.
2. The parties agree that 50,000 Mcf per day of the MDQ under the
Transportation Agreement shall be regarded as the "Base Commitment." Shipper and
UPRC shall not enter into any other agreement for the firm transportation of gas
by any other entity which proposes to build a pipeline and transport gas from
Wyoming and Utah to California unless such agreement is expressly for the
transportation of volumes in addition to the Base Commitment. Any public
announcement by Shipper or UPRC of such other agreement shall state that it
pertains to the firm transportation of volumes of gas in addition to the Base
Commitment.
3. UPRC and Shipper may terminate this agreement and the Transportation
Agreement upon written notice to Kern River within 7 days after the Commencement
Date of the Transportation Agreement, if Transporter has failed by the
Commencement Date to establish the receipt points identified in Exhibit A to the
Transportation Agreement and the delivery point identified in Exhibit B to the
Transportation Agreement. Transporter shall pursue the establishment of such
receipt and delivery points.
4. (a) On or before December 31, 1990, Transporter and Shipper shall
enter into additional transportation agreements providing Shipper with (1)
25,000 Mcf per day of firm transportation service on Transporter's pipeline
commencing on the Commencement Date; (2) 25,000 Mcf per day of firm
transportation service on Transporter's pipeline commencing on the date five
years after the Commencement Date under the Transportation Agreement, and (3)
25,000 Mcf per day of firm transportation service on Transporter's pipeline
commencing on the date 10 years after the Commencement Date (these three
increments of 25,000 Mcf per day are hereafter collectively referred to as
"Additional Service"). Subject to the receipt of all necessary regulatory
authorizations satisfactory to Transporter and Shipper, Additional Service shall
be provided on the same terms and conditions as service under the Transportation
Agreement, as amended, provided, however, that the remaining terms and
conditions of this paragraph 4 shall apply to Additional Service and shall be
incorporated into the transportation agreements to be entered
-2-
<PAGE>
into pursuant to this paragraph. To the extent that the terms herein are
inconsistent with any terms of the Transportation Agreement, the terms herein
supersede the terms of the Transportation Agreement and shall control with
respect to Additional Service.
(b) Additional Service will be provided on the capacity of Transporter's
initial, 700,OOO Mcf per day system, if such capacity is available, consistent
with Transporter's tariff, with all applicable laws and regulations, and with
any contractual rights of third parties to utilize such capacity for firm
transportation service under agreements executed by Transporter and such third
parties prior to the date of this agreement.
(c) If all or a portion of the capacity is not available on
Transporter's system for Additional Service as contemplated in paragraph 4(b)
above, Transporter shall utilize its best efforts to assist Shipper in acquiring
by assignment from other firm shippers on Transporter's pipeline, as provided by
the applicable transportation agreements and terms of Transporter's FERC Gas
Tariff, the right to firm transportation service needed to provide the
additional service contemplated herein.
(d) If all or a portion of the capacity for any increment of Additional
Service is not available to Shipper by either of the means identified in
paragraphs 4(b) and 4(c) above, Shipper may request an expansion of
Transporter's system. Transporter shall diligently seek FERC authorization to
expand the capacity of its pipeline system, and, unless such expansion would
result in an increase in the Maximum Firm Transportation Rate for Transporter's
existing firm transportation customers, shall utilize its best efforts to obtain
rolled-in rate treatment for such expansion. Upon receipt of such authority to
expand on terms satisfactory to Transporter and Shipper, Transporter shall
promptly undertake such expansion by an amount sufficient to provide the
increment of Additional Service that Shipper seeks, subject to satisfaction of
the following conditions:
(i) such expansion would not be inconsistent with the rights of third
parties to firm service on Transporter's pipeline under agreements executed by
Transporter and such third parties prior to the date of this agreement; and
(ii) if the cost of the incremental facilities associated with such
expansion, as estimated by Transporter using techniques generally accepted in
the pipeline industry, when rolled in with the costs of Transporter's
then-existing pipeline system, would result in an increase in the Maximum
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Firm Transportation Rate for Transporter's existing firm transportation
customers, then Shipper agrees to either (a) reduce the increment of Additional
Service that it seeks to an amount which would result, after the expansion, in
the Maximum Firm Transportation Rate for Transporter's existing firm
transportation customers being no greater than the Maximum Firm Transportation
Rate in effect at the time of Shipper's request for expansion; or (b) be solely
responsible for that portion of the incremental costs, including compressor
fuel, associated with the incremental facilities needed to provide Shipper's
desired increment of Additional Service and which otherwise would result in an
increase in the Maximum Firm Transportation Rate.
(e) For purposes of ensuring the clarity of this agreement, Transporter
and Shipper agree that if Additional Service is provided through the means
described in paragraph 4(b) above, the Transportation Rate and Transportation
Charges for Additional Service shall be determined in accordance with Article
III of the Transportation Agreement. If any portion of Additional Service is
provided by the means described in paragraph 4(c) above, the rates and charges
for such portion of Additional Service shall be determined in accordance with
the terms of the assignment agreement(s) pursuant to which the portion of
Additional Service is provided. If Additional Service is provided in whole or in
part by the means described in paragraph 4(d) above, the rates and charges for
such Additional Service shall be determined as provided in paragraph 4(d).
(f) Shipper shall have the right, at the Commencement Date and at the
end of each of the first four Contract Years under its contract for the
increment of Additional Service described in paragraph 4(a)(1), to reduce such
increment of Additional Service for the remaining term of such contract,
commencing with the next Contract Year, by up to 12,500 Mcf per day, provided,
however, that (i) this right shall not be effective unless the total MDQ of all
firm shippers on Transporter's pipeline system totals at least 537,500 Mcf per
day on the date on which Shipper seeks to make effective a reduction in the
paragraph 4(a)(1) increment of Additional Service and (ii) the paragraph 4(a)(1)
increment of Additional Service never shall be reduced to less than 12,500 Mcf
per day. Shipper shall exercise its right to reduce the paragraph 4(a)(1)
increment of Additional service (1) for the first Contract Year under the
contract for such increment, by providing written notice thereof to Transporter
at least 120 days prior to the Commencement Date (as estimated by Transporter in
a notice provided to Shipper at least 150 days prior to the Commencement Date);
(2) for the second Contract Year, by providing written notice at least nine
months prior to the end of the first Contract Year; and (3)
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<PAGE>
for each of the three Contract Years thereafter, by providing written notice at
least 12 months before the commencement of the Contract Year to which the
reduction would apply.
(g) Shipper shall have the right under its contracts for the increments
of Additional Service described in paragraphs 4(a)(2) and 4(a)(3) to reduce each
such increment of Additional Service by up to 25,000 Mcf per day. Shipper shall
notify Transporter whether Shipper will exercise its right to reduce each such
increment of Additional Service by providing written notice thereof to
Transporter at least 12 months, and no more than 15 months, prior to the date on
which Shipper is entitled to obtain the applicable increment of Additional
Service in accordance with paragraphs 4(a)(2) and 4(a)(3) above.
(h) Shipper's rights to reduce Additional Service shall terminate with
respect to each increment of Additional Service on the day after the last date
on which it may provide notice to Transporter of a reduction in such increment
pursuant to paragraphs 4(f) and 4(g).
(i) Notwithstanding anything expressed or implied to the contrary in the
Transportation Agreement or in any MFN Contract, the rights to firm
transportation service additional to the MDQ under the Transportation Agreement
that are provided to Shipper by paragraph 4 of this agreement shall be Shipper's
only rights to such additional service, unless the parties expressly agree
otherwise in writing.
(j) If this agreement and the Transportation Agreement are terminated
pursuant to paragraphs 5(c), 5(e), or 5(g) below, the transportation agreements
for Additional Service shall terminate on the same date as this agreement and
the Transportation Agreement.
5. (a) Transporter agrees to construct its pipeline system as presently
certificated by FERC, provided that it receives on or before November 2, 1990
commitments from shippers for the firm transportation of sufficient volumes to
warrant, in Transporter's sole judgment, proceeding with the construction of its
pipeline. If it receives sufficient commitments as provided above, Transporter
shall: (1) on or before November 15, 1990, deposit any monies, make any
payments, or otherwise begin incurring liabilities under the terms of its
purchase orders for the pipe necessary to build its pipeline system; (2)
commence physical construction of its pipeline by January 15, 1991, and
thereafter diligently and continuously pursue such construction; and (3)
complete construction of its pipeline and place it in service by June 1, 1992.
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<PAGE>
(b) Failure by Transporter to meet any milestone stated in paragraph
5(8) above shall be excused if such failure was caused by delays which are the
result of: any acts of God; strikes; lock-outs; other industrial disturbances;
acts of public enemies; sabotage; breakage of equipment; war; blockades;
insurrections; riots; epidemics; landslides; mudslides; lightning; earthquakes;
extreme cold or freezing weather; floods; hurricanes; storms; fire; wash outs;
unforeseen physical conditions encountered during construction; arrests and
restraints of rulers and peoples; civil disturbances; explosions; breakage or
freezing of or accident to machinery or of lines of pipe; through no fault or
act of Transporter, inability to obtain, or delays in obtaining, pipe, materials
or equipment; compliance with any order of any court or other governmenta1
authority purporting to have jurisdiction; curtailment or suspension of
activities to remedy or avoid an established or alleged violation of federal,
state or local environmental permits or standards; or any other cause of like or
similar kind herein enumerated or otherwise, not within Transporter's control
and which by the exercise of due diligence Transporter could not have prevented.
Transporter's failure to reach any of the milestones stated in paragraph 5(a)
for any of the reasons stated herein shall be deemed not to be a breach of
Transporter's obligations under this agreement, provided, however, that
Transporter shall use reasonable diligence to put itself in a position to carry
out its obligations. Nothing contained herein shall be construed to require
Transporter to settle any strike or lock-out by acceding against its judgement
to the demands of the opposing parties. No such cause excusing Transporter's
failure to achieve any milestone stated in paragraph 5(a) above shall continue
to excuse such failure after the expiration of a reasonable period of time
within which by the use of due diligence Transporter could have remedied the
situation causing its failure to achieve the milestone, nor shall any such cause
excuse Transporter's failure to achieve a milestone of paragraph 5(a) unless
Transporter shall give notice thereof in writing to Shipper with reasonable
promptness and like notice upon termination of such cause. For purposes of
ensuring the clarity of this provision, Transporter and Shipper expressly agree
that failure of Transporter to achieve any milestone of paragraph 5(a) shall not
be excused by the loss of shipper commitments or by the dendency or threat of
litigation, including regulatory proceedings, provided, however, that this
reference to such proceedings shall not alter the scope or meaning of the
preceding terms of this paragraph regarding compliance with orders of courts or
other governmental authorities and curtailment or suspension of activities to
remedy or avoid violations of environmental permits or standards.
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<PAGE>
(c) If Transporter fails to meet the first milestone of paragraph 5(a)
on the date specified therein, or such later date that may result from delays
excused under the terms of paragraph 5(b), then Shipper and UPRC may terminate
this agreement and the Transportation Agreement upon written notice to
Transporter within 30 days after the applicable milestone date. Transporter
shall incur no liability to Shipper or UPRC or any affiliate of either, and
neither Shipper nor UPRC nor any affiliate of either, shall be entitled to any
remedy, if Transporter fails for any reason to achieve the second milestone of
paragraph 5(a). If Transporter, on or before February 15, 1991, cancels its
contracts for the purchase of the pipe necessary to construct its pipeline, it
shall immediately so notify Shipper and UPRC by providing written notice thereof
to Shipper and UPRC. Within 30 days after receiving notice of Transporter's
cancellation of its pipe contracts prior to February 15, 1991, Shipper and UPRC
may terminate this agreement and the Transportation Agreement. If Shipper and
UPRC terminate this agreement and the Transportation Agreement pursuant to this
paragraph, such termination shall be the exclusive remedy available to Shipper
and UPRC for any unexcused failure of Transporter to achieve the first milestone
of paragraph 5(a) and/or for Transporter's cancellation of its pipe purchase
contracts.
(d) For each month after June 1, 1992, or such later date that is the
result of delays excused under the terms of paragraph 5(b), that Transporter
fails to complete and place in service its pipeline, Transporter shall pay to
Shipper the lesser of:
(1) $l,400,000.00 cash, or
(2) an amount equal to the result obtained by multiplying (a) the
difference between (i) the average spot market price for gas delivered at the
California/Arizona border for the applicable month, as reported in Natural Gas
Week, less an amount equal to Transporter's then-most-current estimate of its
100% load factor unit rate for firm transportation service, and (ii) the average
spot market price in the Rocky Mountain area for gas delivered into the
Northwest Pipeline Corporation pipeline for the applicable month, as reported in
Natural Gas week, by (b) the difference between (i) 100,000 Mcf per day times
the number of days in the month, and (ii) the total of all volumes purchased by
Transporter or any affiliate of Transporter from Shipper or UPRC or any
affiliate of either during the month pursuant to the purchase option described
in this paragraph at the locations indicated in Exhibit 1 to this agreement.
During the period of delay in the in service date of Transporter's pipeline,
Shipper and UPRC shall exercise good faith efforts
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<PAGE>
to sell to alternate markets volumes of gas otherwise destined for
transportation by Transporter. If, despite such efforts, Shipper and UPRC are
unable to sell such volumes and they desire to sell such volumes to Transporter
or affiliates of Transporter, then each applicable month Transporter or
affiliates of Transporter, at its or their option and in its or their sole
discretion, may purchase from Shipper or UPRC or any affiliate of either the
volumes Shipper and UPRC are unable to sell. Any purchases made pursuant to this
option shall be made at the receipt points listed in Exhibit 1 hereto at the
average spot market price for the month for gas delivered at the California/
Arizona border as reported in Natural Gas Week, less an amount equal to
Transporter's then most current estimate of its 100% load factor unit rate for
firm transportation service. Shipper or UPRC shall advise Transporter at least
15 days in advance of the applicable month of the volumes it is willing to make
available at the receipt points. Within five days after receiving such notice,
Transporter or any affiliate(s) of Transporter shall advise Shipper or UPRC
whether it elects to purchase any of the volumes made available and, if so, what
volumes it will purchase.
However, Transporter shall not be obligated to make any payments that
this paragraph 5(d) otherwise would require if the delay in completion of
Transporter's pipeline was caused by, or materially contributed to by, any act
or omission of Shipper or UPRC.
(e) If Transporter fails to complete and place in service its pipeline
for more than 12 months beyond June 1, 1992, or such later date that is the
result at delays excused under the terms of paragraph 5(b) above, Shipper and
UPRC shall have the right to terminate this agreement and the Transportation
Agreement upon 10 days' written notice to Transporter.
(f) The remedies provided to Shipper and UPRC by paragraphs 5(d) and
5(e) above shall be the exclusive remedies available to Shipper and UPRC for any
unexcused failure of Transporter to achieve the third milestone described in
paragraph 5(a) above. Except as provided in paragraph 5(d), Transporter shall
have no liability whatsoever to Shipper, UPRC or any affiliate of either arising
from, or otherwise related to, any unexcused failure of Transporter to achieve
the third milestone described in paragraph 5(a).
(g) If Transporter fails to complete and place in service its pipeline
for more than 18 months beyond June 1, 1992, Transporter shall have the right to
terminate this agreement and the Transportation Agreement upon 10 days' written
notice to Shipper and UPRC and Transporter thereafter
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<PAGE>
shall have no further liability to Shipper or UPRC with regard to Transporter's
proposed pipeline system.
6. Each party to this agreement recognizes the commercial sensitivity of
its existence and its terms. The parties therefore expressly agree that each
shall hold in the strictest confidence, and shall not communicate with any other
parties (other than their respective affiliates, consultants or agents)
regarding, the existence of this agreement, its terms and conditions, and the
contents of the negotiations of which this agreement is the culmination. No
party shall make any public statements regarding the existence or contents of
this agreement without the consent of the other parties. Any breach by Shipper
or UPRC (or any affiliate, consultant or agent thereof) of the terms of this
paragraph shall absolve Transporter of any obligation to make monetary payments
to Shipper that Transporter otherwise might incur under this agreement,
provided, however, that (a) this sentence shall not apply if the breach of this
paragraph results from a cause not within the control of Shipper or UPRC and
which, by the exercise of due diligence, Shipper or UPRC could not have
prevented; (b) this sentence shall not apply unless such a breach has a
material adverse effect on Transporter's business relationship with any other
entity or otherwise causes injury or damage to Transporter; and (c) Shipper and
UPRC shall take steps to control the dissemination of this agreement and its
contents within the corporate organizations of UPRC, Shipper and their parent
corporation to those key employees who are required for legitimate business
reasons to know of this agreement and/or its contents.
7. Transporter shall pursue diligently the low-interest financing that
may be available from the State of Wyoming and will keep UPRC apprised of
developments regarding such financing and its terms and conditions.
8. On or before November 15, 1990, Transporter shall provide to UPRC
guaranties, in a form mutually satisfactory to Transporter and UPRC, by
Transporter's parent corporations, Tennessee Gas Pipeline Company and The
Williams Companies Inc., of Transporter's payment obligations under paragraph
5(d) of this agreement.
9. Transporter shall notify Shipper and UPRC at least three days in
advance of Transporter's commencement of construction of its pipeline. From and
after the earlier of three days after Transporter commences construction of its
pipeline or January 15, 1991, Shipper and UPRC shall support Transporter's
pipeline project and shall indicate such support in all public statements by
Shipper or UPRC related to construction of a new natural gas pipeline from
Wyoming to California.
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<PAGE>
10. This agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. No assignment or
transfer by any party hereunder shall be made without written approval of the
other parties. Such approval shall not be unreasonably withheld. No such consent
of Transporter or Shipper shall be required when an assignment by Shipper or
Transporter is the result of, and part of, a corporate acquisition, merger or
reorganization; provided that Shipper is given advance notice of such an
assignment by Transporter and such assignment will not have a material adverse
effect on Shipper's economic interests under the Transportation Agreement.
Nothing contained herein shall prevent either party from pledging, mortgaging or
assigning its rights as security for its indebtedness and either party may
assign to the pledgee or mortgagee (or to a trustee for the holder of such
indebtedness) any money due or to become due under this Agreement. As between
the parties hereto, such assignment shall become effective on the first Day of
the Month following written notice that such assignment has been effectuated.
11. (a) All notices provided for herein shall be given in writing,
addressed as follows:
If to Kern River:
Kern River Gas Transmission Company
P.O. Box 2511
Houston, TX 77252
Telecopy: 713-757-7255
Kern River Gas Transmission Company
Attention: Williams Western Operations
295 Chipeta Way
P.O. Box 58900
Salt Lake City, UT 84158-0900
Telecopy: 801-584-6485
If to Union:
Union Pacific Fuels, Inc.
Attention: President
801 Cherry Street
Fort Worth, TX 76101
Telecopy: 817-877-6133
(b) No modification of this agreement shall be made except by the
execution of a written amendment by the parties.
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<PAGE>
(c) This agreement shall be interpreted and governed by the laws of the
State of Texas.
If Shipper and UPRC are in agreement with the foregoing, please so
indicate by signing in the space provided below and return two fully-executed
originals of this document for our records.
Yours very truly,
KERN RIVER GAS TRANSMISSION
COMPANY
BY: /s/ E.J. Holm
-------------------------
E.J. Holm
President
Kern River Corporation
BY: /s/ Cuba Wadlington, Jr.
-------------------------
Cuba Wadlington, Jr.
Vice President
Williams Western Pipeline
Company
Agreed to and accepted:
UNION PACIFIC FUELS, INC.
By: /s/ D.W. Niemiec
------------------------
Title: President
Date: November 2, 1990
Union Pacific Resources Company executes this agreement for the purpose
of acknowledging its agreement with Paragraphs 1, 2, 5, 6, 8, 9 and 10.
UNION PACIFIC RESOURCES COMPANY
BY: /s/ Robert S. Jackson
------------------------------
Title: Executive Vice President
and Chief Financial Officer
Date: November 2, 1990
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<PAGE>
[LETTERHEAD OF KERN RIVER] 1010 Milam Street
P.O. Box 2511
Houston, Texas 77252-2511
(713) 757-2131
October 28, 1991
FEDERAL EXPRESS
Union Pacific Fuels, Inc.
801 Cherry Street
P.O. Box 7
Fort Worth, TX 76101
Attn: Mark Borer
Re: Amendment to Firm Transportation
Agreement Dated December 15, 1989
Dear Mark:
Reference is made to that certain Gas Transportation Agreement ("Agreement")
dated December 15, 1989 by and between Kern River Gas Transmission Company, a
Texas partnership ("Kern River") and Union Pacific Fuels, Inc., a Delaware
Corporation, ("Union Pacific").
WHEREAS, Kern River and Union Pacific desire (i) to amend the existing quality
specifications to match the Southern California Gas Company gas quality
specifications (ii) to reflect new blending procedures; and
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein contained Kern River and Union Pacific agree as follows:
Effective as of November 1, 1991:
1. A new definition to Article I - DEFINITIONS is added as follows: " 1.31
"Composite Gas Stream" shall mean the composite of all Gas receipts and/or
nominations from all Shippers for transportation by Kern River. Composite
Gas Stream shall be the theoretical gas stream that will result from the
combination of all gas receipts from all Shippers as determined by a
computer model that utilizes analytical and flow data generated at each of
the Receipt Points. The computer model determines what the Composite Gas
Stream composition will be on a feed forward basis."
2. Article V - QUALITY is deleted in its entirety and substituted therefore
shall be the attached Article V.
Except as amended herein, all terms and provisions of the Agreement shall remain
in full force and effect as written.
<PAGE>
Mr. Mark Borer
October 28, 1991
Page Two
If the foregoing is in accordance with your understanding of our agreement,
please so indicate by signing and returning to my attention all originals of
this letter. Upon Kern River's execution an original will be forwarded to you
for your files.
Should you have any questions, please do not hesitate in contacting me at (713)
757-5701.
Very truly yours,
KERN RIVER GAS TRANSMISSION COMPANY
/s/ Tony Rabago
-------------------
Tony Rabago
Account Manager
Transportation Services
ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
UNION PACIFIC FUELS, INC. KERN RIVER GAS TRANSMISSION COMPANY
/s/ Mark A. Borer /s/ E. J. Holm
- -------------------------- --------------------------
By: Mark A. Borer By: E. J. Holm
Attorney-In-Fact President
Kern River Corporation
/s/ Cuba Wadlington
---------------------------
By: Cuba Wadlington
Vice President & General Manager
Williams Western Pipeline Company
<PAGE>
UNION PACIFIC FUELS, INC.
ARTICLE V - QUALITY
5. QUALITY
5.1 Gas Quality at Delivery Point(s): The Gas delivered by Transporter for
Shipper at the Delivery Point(s):
(a) shall be merchantable Natural Gas commercially free from
objectionable odors, solid matter, dust, gums, and gum forming
constituents, or any other substance which interferes with its
intended purpose, or causes interference with the proper and safe
operation of the lines, meters, regulators, or other appliances
through which it may flow,
(b) shall contain not more than seven (7) pounds/MMcf of water;
(c) shall contain no hydrocarbons in liquid form at the temperature
and pressure at which the Gas is delivered at the Delivery Point;
(d) shall not exceed a hydrocarbon dewpoint in excess of fifteen
degrees (15 degrees) Fahrenheit at pressures up to 800 psig;
(e) shall contain not more than 0.2% by volume of oxygen;
(f) shall contain not more than 3.0% by volume of carbon dioxide or
nitrogen;
(g) shall contain not more than a combined total of 4.0% by volume of
inerts, including carbon dioxide, nitrogen, oxygen and any other
inert compound;
(h) shall contain not more than 0.25 grain of hydrogen sulfide per
100 Cubic Feet of Gas (the gas shall not contain any entrained
hydrogen sulfide treatment chemical (solvent) or its
by-products);
(i) shall contain not more than 0.3 grains of mercaptan sulfur per
100 Cubic Feet of Gas;
(j) shall contain not more than 0.75 grains of total sulfur per 100
Cubic Feet of Gas;
(k) shall not contain any toxic or hazardous substance, in
concentrations which, in the normal use of the Gas, results in an
unacceptable risk to health, is injurious to pipeline facilities,
is a limit to merchantability or contrary to applicable
governmental standards;
(l) shall have a minimum total heating value of not less than nine
hundred seventy (970) Btu's per Cubic Foot of Gas on a dry basis;
<PAGE>
(m) shall have a temperature of not less than forty degrees
(40 degrees) Fahrenheit, and not more than one hundred twenty
degrees (120 degrees) Fahrenheit.
5.2 Gas Quality at Receipt Point(s):
Gas nominated or delivered by Shipper to Transporter at the Receipt
Point(s) for Transportation shall comport with the requirements set
forth in Section 5.1 herein, or be subject to rejection and
non-acceptance by Transporter pursuant to Section 5.5 (with the
exception of the Gas blending rights contained in Section 5.3).
5.3 Gas Blending Rights: Notwithstanding Section 5.2, if the Composite Gas
Stream contains less than ninety-five (95)% of the maximum allowable
concentrations of hydrogen sulfide (5.1(h)), mercaptan sulfur
(5.1(i)), total sulfur (5.1(j)), nitrogen or carbon dioxide (5.1(f)),
or total inerts (5.1(g)), then Transporter shall allow reduced
restrictions on said Gas components as described below and Shipper may
tender, at any Receipt Point, Gas which contains not more than:
(a) One (1) grain of hydrogen sulfide per 100 Cubic Feet of Gas,
subject to the condition that the volume weighted average
hydrogen sulfide content of the Composite Gas Stream does not
exceed 0.25 grain per 100 Cubic Feet of Gas; and
(b) Ten (10) grains of total sulfur per 100 Cubic Feet of Gas,
provided that the volume weighted average total sulfur content of
the Composite Gas Stream does not exceed 0.75 grain per 100 Cubic
Feet of Gas; and
(c) Five (5) grains of mercaptan sulfur per 100 Cubic Feet of Gas,
subject to the condition that the volume weighted average
mercaptan sulfur content of the Composite Gas Stream does not
exceed 0.30 grain per 100 Cubic Feet of Gas; and
(d) Four percent (40%) by volume of carbon dioxide, subject to the
condition that the volume weighted average carbon dioxide content
of the Composite Gas Stream does not exceed three percent (3.0%),
subject to Section 5.3(e) below; and
(e) Six percent (6.0%) by volume of nitrogen subject to the condition
that the volume weighted average nitrogen content of the
Composite Gas Stream shall not exceed three percent (3.0%),
subject to Section 5.3(f) below; and
(f) Six percent (6.0%) by volume of inerts, subject to the condition
that the volume weighted average total inerts of the Composite
Gas Stream shall not exceed four percent (4.0%).
<PAGE>
5.4 Quality Tests:
(a) Location of Tests. The quality of the Gas received and delivered
by Transporter hereunder shall be determined by tests which
Transporter shall cause to be made at each Receipt Point and
other locations along its system.
(b) Specification for Tests. Transporter shall determine the Total
Heating Value of Gas and its component analysis at least once
each Month in accordance with the Gas Measurement Committee
Report No. 3 prepared by the Gas Measurement Committee of the
American Gas Association, dated September 1985 or any subsequent
revisions (AGA-3). Such determination shall be made using either
an on-line chromatograph or by chromatographic analysis of a
representative sample of Gas taken with a continuous flow
proportional sampler. Chromatography shall be performed in
accordance with Gas Processors Association (GPA) publications
2261-86 and 2286-86 or any subsequent revisions. The values of
the physical constants for the Gas components shall be determined
by the use of the physical constants listed in Table 5 of AGA-3.
For components of the Gas not listed in said Table 5, GPA
publication 2145-88 or any subsequent revision shall be used.
(c) Non-Hydrocarbon Tests. Tests shall be made to determine the total
sulfur, hydrogen sulfide, mercaptans, carbon dioxide, nitrogen
and oxygen content of the Gas, and the hydrocarbon dew point and
water vapor content of such Gas by approved standard methods in
general use in the gas industry. Tests shall be made frequently
enough to assure that the Gas continuously conforms to the
quality requirements.
5.5 Failure to Conform:
(a) If the Gas offered for Transportation by Shipper shall fail at
any time to conform to any of the specifications set forth in
Section 5.2, then Transporter shall have the right, upon written
(including by telecopy) or oral notice to Shipper to be followed
by written notice, to immediately refuse to accept all or any
portion of such Gas.
(b) Notwithstanding the foregoing, however, in the event the
provisions of Section 5.3 are in effect, the following procedures
shall apply:
(i) When the calculated quality of the Composite Gas Stream
approaches 90% of the allowable maximums for those Gas
components whose specifications are subject to blending,
then Transporter shall notify all Shippers whose Gas does
not conform with Section 5.1.
(ii) When the calculated quality of the Composite Gas Stream
equals or exceeds 95% of the allowable maximums for those
Gas components whose specifications are subject to
blending, Transporter shall immediately notify all Shippers
whose Gas does not conform, that Transporter will commence
curtailing receipt of their Gas in the following manner:
1) Transporter shall determine which Gas nominations or
receipts do not conform with Section 5.1. For each
Shipper, whose Gas nominations or deliveries to
Transporter do not conform with
<PAGE>
Section 5.1, Transporter shall identify the quantity
of the Gas component that is in excess of the limits
set forth in Section 5.1, compute a total thereof for
all such Shippers, and calculate the percentage of said
total for each such Shipper.
2) The calculated percentage shall be used to determine
the quantity of non-conforming component that each of
the non-conforming Shippers must eliminate from its Gas
nominations and/or receipts, in order to bring said
Composite Gas Stream back to within 93%, of the
quality specification described in Section 5.1. The
required reduction of the non-conforming component, as
well as the newly calculated maximum allowable
concentration of the non-conforming component in
Shipper's Gas deliveries to Transporter, shall be
communicated to each of the non-conforming Shippers.
3) Shipper shall reduce the non-conforming component to
the maximum allowable concentration in 5.5(b)(ii)(2)
above by either replacing nominated or existing Gas
deliveries to Transporter with Gas containing less of
the non-conforming component or by reducing nominations
or deliveries of non-conforming Gas until, inclusive of
the reductions of non-conforming components similarly
required of any other non-conforming Shippers, the
Composite Gas Stream is again calculated not to exceed
93% of the requirements of Section 5.1 herein.
4) Should Shipper fail to take adequate corrective action
to comply with Transporter's requirements, Transporter
shall have the right to curtail certain receipts
from Shipper as described in Section 5.5(a) above
and it shall be relieved of its obligations hereunder
to the extent of rightful suspension for the duration
of such time as the Gas does not meet such
specifications, provided, however, that Transporter
shall not apply the provisions of this Section 5.5 to
Shipper in a manner less favorable than Transporter
applies the same or similar provisions to other
shippers, and provided further that Transporter shall
not apply the provisions of this Section 5.5 to
Shipper so long as the aggregate of all Gas tendered
to Transporter by Shipper at all Receipt Points
complies with the quality specifications of Section
5.2 herein.
(c) Continuation of Obligation to Pay: In the event Transporter
refuses to accept Gas tendered by Shipper because such Gas does
not conform to the specifications set forth herein, Shipper shall
within a reasonable time make a diligent effort to correct such
failure by treatment or dehydration consistent with prudent
operations and by means which are economically feasible in
Shipper's opinion so as to deliver Gas conforming to the above
specifications. Shipper shall not be relieved of its obligation
to pay any Monthly Demand Charge provided for in Shipper's
Transportation Service Agreement during the time such Gas does
not conform to the specifications set forth herein.
(d) Transporter shall deliver to Shipper Gas which conforms to the
quality specifications of Section 5.1 herein. If Transporter
fails to deliver gas which
<PAGE>
conforms to such quality specifications, then the Monthly Demand
Charge Amount for the Month in which such failure occurs shall be
reduced by an amount calculated by multiplying each Mcf of
non-conforming Gas tendered but not delivered by Transporter to
Shipper by an amount equal to the applicable Monthly Reservation
Rate divided by the number of days in such Month, provided
however, that if during the Month of Transporter's non-conforming
deliveries, Transporter receives from Shipper Gas which does not
conform to the quality specifications of this Article V, all
non-conforming volumes received by Transporter from Shipper
during such Month shall be subtracted from the volumes of
non-conforming deliveries by Transporter to Shipper before the
amount of the reduction to the Monthly Demand Charge Amount is
calculated.
<PAGE>
[LETTERHEAD OF KERN RIVER] 1010 Milam Street
P.O. Box 2511
Houston, Texas 77252-2511
(713) 757-2131
FEDERAL EXPRESS
January 23, 1992
Union Pacific Fuels, Inc.
801 Cherry Street
P. 0. Box 7
Fort Worth, TX 76101
Attn: Mark Borer
Re: Amendment to Firm Transportation
Agreement Dated December 15, 1989
Dear Mark:
Reference is made to that certain Gas Transportation Agreement ("Agreement")
dated December 15, 1989 by and between Kern River Gas Transmission Company, a
Texas partnership ("Kern River") and Union Pacific Fuels, Inc., a Delaware
Corporation, ("Union Pacific").
WHEREAS, Kern River and Union Pacific desire (i) to amend the existing Exhibit
"A" Receipt Points to provide Union Pacific reduced operating pressures and
plant pipeline connections at Receipt Points 5, 6 and 7 of the attached Exhibit
"A" as a result of Kern River's addition of the Anschutz and E. Painter
compression and related facilities and (ii) to provide additional Delivery
Points as noted on the attached Exhibit "B"; and
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein contained Kern River and Union Pacific agree as follows:
Effective as of February 11th, 1992:
Exhibit "A" and "B" are deleted in their entirety and substituted therefore
shall be the attached Exhibit "A" and "B".
Except as amended herein, all terms and provisions of the Agreement shall remain
in full force and effect as written.
If the foregoing is in accordance with your understanding of our agreement,
please so indicate by signing and returning to my attention all originals of
this letter. Upon Kern River's execution an original will be forwarded to you
for your files.
<PAGE>
Mr. Mark Borer
January 23, 1992
Page Two
Should you have any questions, please do not hesitate in contacting me at (713)
757-5701.
Very truly yours,
KERN RIVER GAS TRANSMISSION COMPANY
/s/ Tony Rabago
Tony Rabago
Account Manager
Transportation Services
ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
UNION PACIFIC FUELS, INC. KERN RIVER GAS TRANSMISSION
COMPANY
/s/ Mark A. Borer
- ---------------- /s/ E.J. Holm
By: ---------------------------
E.J. Holm
President
Kern River Corporation
/s/ Cuba Wadlington
---------------------------
Cuba Wadlington
Vice President & General Manager
Williams Western Pipeline Company
<PAGE>
AMENDMENT TO
EXHIBIT "A"
of the Firm Transportation Service Agreement
between
KERN RIVER GAS TRANSMISSION COMPANY (Transporter)
and UNION PACIFIC FUELS, INC.
Date: December 15, 1989
RECEIPT POINTS
Maximum
Receipt
Transporter's Pressure Maximum
Description Meter Number p.s.i.g. Receipt Volumes
(Note 1) (Note 2) (Note 4) MCF Per Day
- ----------- ------------- -------- ---------------
Upstream of Muddy Creek:
1. Opal Gas Plant 1-4001 TBD 35,000
2. Colorado Interstate Gas (CIG) 1-4008 TBD 20,000
3. Northwest Pipeline 1-4002 TBD 30,000
4. Overland Trail Transmission TBD TBD 15,000
(Note 3)
Downstream of Muddy Creek:
5. Painter NGL/NRU 1-4005 900 10,000
6. Anschutz Ranch East 1-4006 1,050 10,000
7. Whitney Canyon/
Canyon Creek Compression 1-4004 900 5,000
8. Questar Pipeline 1-4007 1,212 55,000
Notes:
(1) During periods of time when Transporter's other firm shippers are
nominating and utilizing their full allocated portion of their MDQ for all
Receipt Points on the upstream side of the Transporter's Muddy Creek
Compressor and such volumes exceed the Muddy Creek Compressor's capacity
from time to time, Shipper's total Firm Service rights for capacity at
Receipt Points upstream of Transporter's Muddy Creek Compressor under this
Agreement with Transporter shall be limited to 50 MMCFD for such combined
Receipt Points. During periods of time when Transporter's firm shippers are
not nominating and utilizing their full allocated portion of their MDQ
upstream of Muddy Creek, Shipper shall be entitled to utilize as Firm
Service receipt volumes upstream of Muddy Creek up to a maximum receipt
volumes of 100 MMCFD. Shipper will have the right to reallocate, upon three
(3) business days notice pursuant to Section 15.1, the maximum receipt
volumes upstream of Muddy Creek among the Opal, CIG, Northwest Pipeline
Receipt Point(s), and any other new Receipt Points upstream of Muddy Creek
which Shipper requests Transporter to install in accordance with Section
6.1.1. Receipt Points 5. through 8. are to be located downstream of the
Kern River's Muddy Creek Compressor Station. In the event of a curtailment
of Firm Service on the inlet side of Transporter's Muddy Creek Compressor,
Transporter shall use 50 MMCFD as the base to determine Shipper's pro rata
portion under Section 14.1(c) of this Agreement.
(2) Transporter will accept Shipper's gas at the inlet side of Transporter's
meter.
(3) Pipeline connection to be mutually determined sometime after the Kern River
in-service date. All connection and related costs including tap, side valve
and meter are to be paid by the Shipper. Prior to in-service of Receipt
Point 4 the Shipper can nominate on as available firm service basis up to
an additional 20 MMCF per day at Receipt Point 3, subject to Note (1).
(4) The Maximum Receipt Pressures shall be based upon the maximum delivery
pressure requirements, if any, under the various interconnect agreements
between the transporter and upstream transporters at Receipt Points 2, 3,
and 4 and the plant operator at Receipt Point 1.
TBD To be determined.
<PAGE>
AMENDMENT TO
EXHIBIT "B"
of the Firm Transportation Service Agreement
between
KERN RIVER GAS TRANSMISSION COMPANY (Transporter)
and UNION PACIFIC FUELS, INC.
Date: December 15, 1989
DELIVERY POINTS
Maximum Maximum Delivery
Delivery Volume
Description Transporter's Pressure MCF Per Day
(Note 1) Meter Number p.s.i.g (Note 2)
- -------- ------------ ------- --------
1. Interconnection of Transporter's 2-5011 TBD 89,000
System and Southern California
Gas Company at SoCal Gas line 225
Wheeler Ridge
2. China Grade 2-5006 450 9,100
3. Boron 2-5002 650 11,000
4. Coolwater Station 2-5001 775 TBD
5. Apex 2-4002 450 TBD
TBD - To be determined.
Note:
(1) Receipt Points w, 3, 4 and 5 will not be available until after the Kern
River in-service date.
(2) The Maximum Delivery Volume for all Delivery Points in the aggregate
shall not exceed 109.1 MMcf per day unless otherwise agreed to by Kern
River. However, the aggregate actual delivery volumes shall not exceed the
Shipper's MDQ.
<PAGE>
[LETTERHED OF KERN RIVER]
April 22, 1992
VIA TELECOPY
Mr. Rob Lindsey
Union Pacific Fuels, Inc.
801 Cherry Street
Fort Worth, TX 76101
Re: Transportation Service Agreement
1. Kern River agrees to withdraw its February 26, 1992 and March 23, 1992
notices of the Commencement Date and not provide a Commencement Date prior
to May 1, 1992, provided however, the February 26, 1992 Notice of
Commencement Date shall continue to be effective for purposes of the
termination right contained in paragraph 3 of the November 2, 1990 letter
agreement between Kern River and Union Pacific, but nothing else contained
herein shall alter or change the obligations and rights of Kern River and
Union Pacific under such letter agreement. Kern River shall provide Union
Pacific Fuels at least four (4) business days advance notification of the
Second Notice of Commencement Date.
2. Union Pacific Fuels will not hold Kern River liable for any reliance on the
February 26, 1992 and March 23, 1992 notices, for any failure by Kern River
to provide firm service or for any failure by Kern River to deliver gas
that does not meet the quality specification in Section 5.1 (b) contained
in Union Pacific Fuel's firm transportation agreement or any matters
related thereto. Nothing contained herein shall require UPFI to indemnify
Kern for any claims asserted against it with respect to the foregoing
matters, provided however, UPFI will indemnify Kern River for any claims
asserted against Kern River by any affiliate or subsidiary of UPFI with
respect to the foregoing matters.
3. Nothing contained in paragraph 2 above shall be considered a waiver of any
rights that Union Pacific Fuels may have after Kern River provides the
Second Notice of Commencement Date for any failure by Kern River from and
after such date to (i) provide firm service, or (ii) to deliver gas that
does not meet the quality specifications in Section 5.1(b) of Union Pacific
Fuel's firm transportation agreement.
4. Prior to the Commencement Date set forth in the Second Notice of
Commencement Date, Kern River agrees to operate under Section 3.2 of Union
Pacific's firm transportation agreement to provide service on a best effort
basis, to charge a volumetric charge equal to the Authorized Overrun Rate
and to maintain priority of service equal to all other firm shippers.
<PAGE>
Rob Lindsey
April 22, 1992
Page Two
Prior to the Commencement Date set forth in the Second Notice of
Commencement Date, gas tendered by the Shipper and received but not
accepted by SoCalGas due to excess water vapor content will be treated as
an imbalance volume.
5. Subject to Kern's ability to receive such volumes, Union Pacific will
provide on a reasonable efforts basis at the firm transportation agreement
receipt points, 50 MMCFD per day of gas for transportation effective April
1, 1992 and continuing through Commencement Date.
6. Kern River agrees to provide at its expense a receipt point tie-in and
connection for Union Pacific's proposed 12 inch or 16 inch Overland Trail
Pipeline and measurement facilities capable of receiving 15 MMCF per day of
gas, provided, however, Union Pacific Fuels may at its expense, upgrade the
receipt point measurement facilities to enable such point to accommodate
volumes in excess of 15 MMCF per day.
7. This Agreement contains proprietary and confidential information. Union
Pacific and Kern agree to keep this Agreement and the terms of this
Agreement confidential. Disclosure by either party may cause the other
party substantial economic damage; however, neither party shall be held
liable for the disclosure of any information contained herein, as required
by any governmental authority or agencies.
UNION PACIFIC FUELS, INC. KERN RIVER GAS TRANSMISSION COMPANY
/s/ Mark A. Borer /s/ E.J. Holm
- -------------------------- --------------------
Title: Attorney-In-Fact E.J. Holm
President
<PAGE>
[LETTERHEAD OF KERN RIVER] 1010 Milam Street
P.O. Box 2511
Houston, Texas 77252-2511
(713) 757-2131
June 23, 1992
Union Pacific Fuels, Inc.
801 Cherry Street
P.O. Box 7
Fort Worth, TX 76101
Attn: Rob Lindsey
Re: Amendment to Firm Transportation Agreement
Dated December 15, 1989, as Amended
Dear Rob:
Reference is made to that certain Gas Transportation Agreement ("Agreement")
dated December 15, 1989, by and between Kern River Gas Transmission Company, a
Texas partnership ("Kern River") and Union Pacific Fuels, Inc., a Delaware
Corporation, ("Union Pacific"), as amended.
WHEREAS, Kern River and Union Pacific ("Parties") amended Exhibit "A" and "B" of
the referenced Agreement which was effective on February 11, 1992; and
WHEREAS, be Parties desire to amend Exhibit "B" of such Agreement to
reflect the requirements of the Parties; and
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein contained, Kern River and Union Pacific agree as follows:
Effective as of February 15, 1992
1. Exhibit "B" of the referenced Agreement is deleted in its entirety and
replaced with Exhibit "B" attached hereto.
2. Failure to have Receipt Point 4 of Exhibit "A" of the referenced Agreement
and Delivery Points 2, 3, 4 and 5 of Exhibit "B" attached hereto in service
on May 1, 1992 shall not affect the Commencement Date of the referenced
agreement for the purpose of (i) Union Pacific's waiver of termination
rights as set forth in the February 6, 1992 Agreement between the parties;
or (ii) the definition of Commencement Date under Section 1.5 of the
Agreement.
3. In order to provide Union Pacific flexibility until some of its end users
are ready to take gas, Union Pacific shall have a maximum delivery volume
per day at Delivery Point I of 89,000 Mcf per day until August 1, 1992.
<PAGE>
Mr. Rob Lindsey
June 23, 1992
Page Two
Except as amended herein, all terms and provisions of the Agreement shall remain
in full force and effect as written.
If the foregoing is in accordance with your understanding of our agreement,
please so indicate by signing and returning to my attention all originals of
this letter. Upon Kern River's execution, an original will be forwarded to you
for your files.
Sincerely,
/s/ Tony Rabago
-----------------------
Tony Rabago
Account Manager
Transportation Services
ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
UNION PACIFIC FUELS, INC. KERN RIVER GAS TRANSMISSION COMPANY
By: /s/ Mark A. Borer By: /s/ E. J. Holm
------------------ ----------------------------------
By: Vice President E. J. Holm
President, Kern River Corporation
By: /s/ Cuba Wadlington, Jr.
-----------------------------------
Cuba Wadlington, Jr.
Vice President & General Manager
Williams Western Pipeline Company
<PAGE>
EFFECTIVE FEBRUARY 15, 1992
AMENDMENT TO
EXHIBIT "B"
of the Firm Transportation Service Agreement
between
KERN RIVER GAS TRANSMISSION COMPANY (Transporter)
and UNION PACIFIC FUELS, INC.
Date: December 15, 1989
DELIVERY POINTS
Maximum
Maximum Delivery
Delivery Volume
Transporter's Pressure MCF Per Day
Description Meter Number p.s.i.g (Note 2)
- ----------- ------------ ------- --------
1. Interconnection of Transporter's 2-5011 TBD 84,000
System and Southern California
Gas Company at SoCalGas line 225
Wheeler Ridge
2. China Grade 2-5006 450 15,600
3. Boron 2-5002 650 11,000
4. Coolwater Station 2-5001 775 Note 1
5. Apex 2-4002 450 Note 1
TBD - To be determined
Notes:
(1) Delivery Points 4 and 5 can be utilized only to the extent capacity is
available at those points. To the extent Shipper reduces deliveries to
Delivery Point 1, within the Maximum Delivery Volume limits, Shipper may
make pursuant to Section 15.3 of the Agreement a corresponding delivery at
Delivery Points 4 and 5 equal to the reduced volume at Delivery Point 1,
provided however, the total volume at Delivery Points 4 and 5 shall not
exceed 40,000 MCF per day. Any future FERC filings relating to the
establishment of alternate delivery points for all firm shippers shall not
alter the rights of Shipper under Section 15.3 provided however, to the
extent Transporter makes such FERC filings Shipper's rights at Delivery
Points 4 and 5 shall be equal to the rights given to all firm shippers at
such alternate points.
(2) The Maximum Delivery Volume for all Delivery Points in the aggregate shall
not exceed 110.6 MMCF per day. The aggregate actual delivery volumes shall
not exceed the Shipper's MDQ.
<PAGE>
Initial for ID Purposes
Transporter____________
Shipper ____________
THIRD AMENDED
EXHIBIT "A"
of the Transportation Agreement
between
KERN RIVER GAS TRANSMISSION COMPANY (Transporter)
and UNION PACIFIC FUELS, INC. (Shipper)
Date: December 15, 1989
RECEIPT POINTS
Maximum
Receipt
Transporter's Pressure Maximum
Description Meter Number p.s.i.g. Receipt Volumes
(Note 1) (Note 2) (Note4) Mcf Per Day
- ----------- ------------- -------- -----------
Upstream of Muddy Creek:
1. Opal Gas Plant 1-4001 TBD 35,000
2. Colorado Interstate Gas (CIG) 1-4008 TBD 20,000
3. Northwest Pipeline 1-4002 TBD 30,000
4. Overland Trail Transmission TBD TBD 15,000
(Note 3)
Downstream of Muddy Creek:
5. Painter NGL/NRU 1-4005 900 10,000
6. Anschutz Ranch East 1-4006 1,050 10,000
7. Whitney Canyon/
Canyon Creek Compression 1-4004 900 10,000
------
8. Questar Pipeline 1-4007 1,212 50,000
------
Notes:
(1) During periods of time when Transporter's other firm shippers are
nominating and utilizing their full allocated portion of their MDQ for
all Receipt Points on the upstream side of the Transporter's Muddy Creek
Compressor and such volumes exceed the Muddy Creek Compressor's capacity
from time to time, Shipper's total Firm Service rights for capacity at
Receipt Points upstream of Transporter's Muddy Creek Compressor under
this Agreement with Transporter shall be limited to 50 MMCFD for such
combined Receipt Points. During periods of time when Transporter's firm
shippers are not nominating and utilizing their full allocatad portion of
their MDQ upstream of Muddy Creek, Shipper shall be entitled to utilize
as Firm Service receipt volumes upstream of Muddy Creek up to a maximum
receipt volumes of 100 MMCFD. Shipper will have the right to reallocate,
upon three (3) business days notice pursuant to Section 15.1, the maximum
receipt volumes upstream of Muddy Creek among the Opal, CIG, Northwest
Pipeline Receipt Point(s), and any other new Receipt Points upstream of
Muddy Creek which Shipper requests Transporter to install in accordance
with Section 6.1.1. Receipt Points 5. through 8. are to be located
downstream of the Kern River's Muddy Creek Compressor Station. In the
event of a curtailment of Firm Service on the inlet side of Transporter's
Muddy Creek Compressor, Transporter shall use 50 MMCFD as the base to
determine Shipper's pro rata portion under Section 14. 1 (c) of this
Agreement.
(2) Transporter will accept Shipper's gas at the inlet side of Transporter's
meter.
(3) Pipeline connection to be mutually determined sometime after the Kern
River in-service date. All connection and related costs including tap,
side valve and meter are to be paid by the Shipper. Prior to in-service
of Receipt Point 4 the Shipper can nominate on as available firm service
basis up to an additional 20 MMCF per day at Receipt Point 3, subject to
Note (1).
(4) The Maximum Receipt Pressures shall be based upon the maximum delivery
pressure requirements, if any, under the various interconnect agreements
between the transporter and upstream transporters at Receipt Points 2, 3
and 4 and the plant operator at Receipt Point 1.
TBD To be determined.
<PAGE>
Initial for ID Purposes
Transporter____________
Shipper ____________
THIRD AMENDED
EXHIBIT "B"
of the Transportation Agreement
between
KERN RIVER GAS TRANSMISSION COMPANY (Transporter)
and UNION PACIFIC FUELS, INC. (Shipper)
Date: December 15, 1989
DELIVERY POINTS
Maximum Maximum Delivery
Delivery Volume
Transporter's Pressure MCF Per Day
Description Meter Number p.s.i.g. (Note 2)
- ----------- ------------- -------- -----------
1. Interconnection of Transporter's 2-5011 TBD 75,000
System and Southern California
Gas Company at SoCal Gas line 225
Wheeler Ridge
2. China Grade 2-5006 450 15,600
3. Boron 2-5002 650 11,000
4. Coolwater Station 2-5001 775 Note 1
5. Apex 2-4002 450 Note 1
6. Kern Front 2-5010 400 Note 3
7. S. Midway 2-5012 400 Note 3
8. McKittrick 2-5019 400 Note 3
TBD - To be determined.
Notes:
(1) Delivery Points 4 and 5 can be utilized only to the extent capacity
is available at those points. To the extent Shipper reduces deliveries to
Delivery Point 1, within the Maximum Delivery Volume limits, Shipper may
make pursuant to Section 15.3 of the Agreement a corresponding delivery
at Delivery Points 4 and 5 equal to the reduced volume at Delivery Point
1, provided however, the total volume at Delivery Points 4 and 5 shall
not exceed 40,000 MCF per day. Any future FERC filings relating to the
establishment of alternate delivery points for all firm shippers shall
not alter the rights of Shipper under Section 15.3 provided however, to
the extent Transporter makes such FERC filings Shipper's rights at
Delivery Points 4 and 5 shall be equal to the rights given to all firm
shippers at such alternate points.
(2) The Maximum Delivery Volume for all Delivery Points in the aggregate
shall not exceed 110.6 MMCF per day. The aggregate actual delivery
volumes shall not exceed the Shipper's MDQ.
(3) The Shipper's utilization of 9,000 MCF per day between Delivery Points
6, 7, and 8 is subject to the availability of firm capacity at such
points.
<PAGE>
Initial for ID Purposes
Transporter ___________
Shipper ___________
EFFECTIVE OCTOBER 1, 1992
FOURTH AMENDED
EXHIBIT "A"
of the Transportation Agreement
between
KERN RIVER GAS TRANSMISSION COMPANY (Transporter)
and UNION PACIFIC FUELS, INC. (Shipper)
Date: December 15, 1989
RECEIPT POINTS
Maximum
Receipt
Transporter's Pressure Maximum
Description Meter Number p.s.i.g Receipt Volumes
(Note 1) (Note 2) (Note 4) Mcf Per Day
- ----------- ------------- -------- -----------
Upstream of Muddy Creek:
1. Opal Gas Plant 1-4001 TBD 35,000
2. Colorado Interstate Gas (CIG) 1-4008 TBD 20,000
3. Northwest Pipeline 1-4002 TBD 30,000
4. Overland Trail Transmission TBD TBD 15,000
(Note 3)
Downstream of Muddy Creek:
5. Painter NGL/NRU 1-4005 900 10,000
6. Anschutz Ranch East 1-4006 1,050 10,000
7. Whitney Canyon/
Canyon Creek Compression 1-4004 900 20,000
------
8. Questar Pipeline 1-4007 1,212 40,000
------
Notes:
(1) During periods of time when Transporter's other firm shippers are
nominating and utilizing their full allocated portion of their MDQ for
all Receipt Points on the upstream side of the Transporter's Muddy Creek
Compressor and such volumes exceed the Muddy Creek Compressor's capacity
from time to time, Shipper's total Firm Service rights for capacity at
Receipt Points upstream of Transporter's Muddy Creek Compressor under
this Agreement with Transporter shall be limited to 50 MMCFD for such
combined Receipt Points. During periods of time when Transporter's firm
shippers are not nominating and utilizing their full allocated portion of
their MDQ upstream of Muddy Creek, Shipper shall be entitled to utilize
as Firm Service receipt volumes upstream of Muddy Creek up to a maximum
receipt volumes of 100 MMCFD. Shipper will have the right to reallocate,
upon three (3) business days notice pursuant to Section 15.1, the maximum
receipt volumes upstream of Muddy Creek among the Opal, CIG, Northwest
Pipeline Receipt Point(s), and any other new Receipt Points upstream of
Muddy Creek which Shipper requests Transporter to install in accordance
with Section 6.1.1. Receipt Points 5. through 8. are to be located
downstream of the Kern River's Muddy Creek Compressor Station. In the
event of a curtailment of Firm Service on the inlet side of Transporter's
Muddy Creek Compressor, Transporter shall use 50 MMCFD as the base to
determine Shipper's pro rata portion under Section 14.1 (c) of this
Agreement.
(2) Transporter will accept Shipper's gas at the inlet side of Transporter's
meter.
(3) Pipeline connection to be mutually determined sometime after the Kern
River in-service date. All connection and related costs including tap
side valve and meter are to be paid by the Shipper. Prior to in-service
of Receipt Point 4 the Shipper can nominate on as available firm service
basis up to an additional 20 MMCF per day at Receipt Point 3, subject to
Note (1).
(4) The Maximum Receipt Pressures shall be based upon the maximum delivery
pressure requirements, if any, under the various interconnect agreements
between the transporter and upstream transporters at Receipt Points 2, 3,
and 4 and the plant operator at Receipt Point 1.
TBD To be determined.
<PAGE>
Initial for ID Purposes
Transporter ___________
Shipper ___________
EFFECTIVE OCTOBER 1, 1992
FOURTH AMENDED
EXHIBIT "B"
of the Transportation Agreement
between
KERN RIVER GAS TRANSMISSION COMPANY (Transporter)
and UNION PACIFIC FUELS, INC. (Shipper)
Date: December 15, 1989
DELIVERY POINTS
Maximum Maximum Delivery
Delivery Volume
Transporter's Pressure MCF Per Day
Description Meter Number p.s.i.g. (Note 2)
- ----------- ------------- -------- -----------
1. Interconnection of Transporter's 2-5011 TBD 75,000
System and Southern California
Gas Company at SoCal Gas line 225
WheelerRidge
2. China Grade 2-5006 450 15,600
3. Boron 2-5002 650 11,000
4. Coolwater Station 2-5001 775 Note 1
5. Apex 2-4002 450 Note 1
6. Kern Front 2-5010 400 Note 3
7. S. Midway 2-5012 400 Note 3
8. McKittrick 2-5019 400 Note 3
TBD - To be determined.
Notes:
(1) Delivery Points 4 and 5 can be utilized only to the extent capacity is
available at those points. To the extent Shipper reduces deliveries to
Delivery Point 1, within the Maximum Delivery Volume limits, Shipper may
make pursuant to Section 15.3 of the Agreement a corresponding delivery
at Delivery Points 4 and 5 equal to the reduced volume at Delivery Point
1, provided however, the total volume at Delivery Points 4 and 5 shall
not exceed 40,000 MCF per day. Any future FERC filings relating to the
establishment of alternate delivery points for all firm shippers shall
not alter the right of Shipper under Section 15.3 provided however, to
the extent Transporter makes such FERC filings Shipper's rights at
Delivery Points 4 and 5 shall be equal to the rights given to all firm
shippers at such alternate points.
(2) The Maximum Delivery Volume for all Delivery Points in the aggregate
shall not exceed 110.6 MMCF per day. The aggregate actual delivery
volumes shall not exceed the Shipper's MDQ.
(3) The Shipper's utilization of 9,000 MCF per day between Delivery Points 6,
7, and 8 is subject to the availability of firm capacity at such points.
<PAGE>
Initial for ID Purposes
Transporter ___________
Shipper ___________
EFFECTIVE NOVEMBER 1, 1992
FIFTH AMENDED
EXHIBIT "A"
of the Transportation Agreement
between
KERN RIVER GAS TRANSMISSION COMPANY (Transporter)
and UNION PACIFIC FUELS, INC. (Shipper)
Date: December 15, 1989
RECEIPT POINTS
Maximum
Receipt
Transporter's Pressure Maximum
Description Meter Number p.s.i.g Receipt Volumes
(Note 1) (Note 2) (Note 4) Mcf Per Day
- -------- ------------ -------- -----------
Upstream of Muddy Creek:
1. Opal Gas Plant 1-4001 TBD 35,000
2. Colorado Interstate Gas (CIG) 1-4008 TBD 20,000
3. Northwest Pipeline 1-4002 TBD 30,000
4. Overland Trail Transmission TBD TBD 15,000
(Note 3)
Downstream of Muddy Creek:
5. Painter NGL/NRU 1-4005 900 10,000
6. Anschutz Ranch East 1-4006 1,050 10,000
7. Whitney Canyon/
Canyon Creek Compression 1-4004 900 20,000
8. Questar Pipeline 1-4007 1,212 40,000
Notes:
(1) During periods of time when Transporter's other firm shippers are
nominating and utilizing their full allocated portion of their MDQ for all
Receipt Points on the upstream side of the Transporter's Muddy Creek
Compressor and such volumes exceed the Muddy Creek Compressor's capacity
from time to time, Shipper's total Firm Service rights for capacity at
Receipt Points upstream of Transporter's Muddy Creek Compressor under this
Agreement with Transporter shall be limited to 50 MMCFD for such combined
Receipt Points. During periods of time when Transporter's firm shippers are
not nominating and utilizing their full allocated portion of their MDQ
upstream of Muddy Creek, Shipper shall be entitled to utilize as Firm
Service receipt volumes upstream of Muddy Creek up to a maximum receipt
volumes of 100 MMCFD. Shipper will have the right to reallocate, upon three
(3) business days notice pursuant to Section 15.1, the maximum receipt
volumes upstream of Muddy Creek among the Opal, CIG, Northwest Pipeline
Receipt Point(s), and any other new Receipt Points upstream of Muddy Creek
which Shipper requests Transporter to install in accordance with Section
6.1.1. Receipt Points 5. through 8. are to be located downstream of the
Kern River's Muddy Creek Compressor Station. In the event of a curtailment
of Firm Service on the inlet side of Transporter's Muddy Creek Compressor,
Transporter shall use 50 MMCFD as the base to determine Shipper's pro rata
portion under Section 14.1(c) of this Agreement.
(2) Transporter will accept Shipper's gas at the inlet side of Transporter's
meter.
(3) Pipeline connection to be mutually determined sometime after the Kern River
in-service date. Prior to in-service of Receipt Point 4 the Shipper can
nominate on as available firm service basis up to an additional 20 MMCF per
day at Receipt Point 3, subject to Note (1).
(4) The Maximum Receipt Pressures shall be based upon the maximum delivery
pressure requirements, if any, under the various interconnect agreements
between the transporter and upstream transporters at Receipt Points 2, 3,
and 4 and the plant operator at Receipt Point 1.
TBD To be determined.
<PAGE>
Initial for ID Purposes
Transporter ___________
Shipper ___________
EFFECTIVE NOVEMBER 1, 1992
FIFTH AMENDED
EXHIBIT "B"
of the Transportation Agreement
between
KERN RIVER GAS TRANSMISSION COMPANY (Transporter)
and UNION PACIFIC FUELS, INC. (Shipper)
Date: December 15, 1989
DELIVERY POINTS
Maximum Maximum Delivery
Delivery Volume
Transporter's Pressure MCF Per Day
Description Meter Number p.s.i.g (Note 2)
- ----------- ------------ ------- -----------
1. Interconnection of Transporter's 2-5011 TBD 75,000
System and Southern California
Gas Company at SoCal Gas line 225
Wheeler Ridge
2. China Grade 2-5006 450 15,600
3. Boron 2-5002 650 11,000
4. Coolwater Station 2-5001 775 Note 1
5. Apex 2-4002 450 Note 1
6. Kern Front 2-5010 400 Note 3
7. S. Midway 2-5012 400 Note 3
8. McKittrick 2-5019 400 Note 3
TBD - To be determined.
Notes:
(1) Delivery Points 4 and 5 can be utilized only to the extent capacity is
available at those points. To the extent Shipper reduces deliveries to
Delivery Point 1, within the Maximum Delivery Volume limits, Shipper may
make pursuant to Section 15.3 of the Agreement a corresponding delivery at
Delivery Points 4 and 5 equal to the reduced volume at Delivery Point 1,
provided however, the total volume at Delivery Points 4 and 5 shall not
exceed 40,000 MCF per day. Any future FERC filings relating to the
establishment of alternate delivery points for all firm shippers shall not
alter the rights of Shipper under Section 15.3 provided however, to the
extent Transporter makes such FERC filings Shipper's rights at Delivery
Points 4 and 5 shall be equal to the rights given to all firm shippers at
such alternate points.
(2) The Maximum Delivery Volume for all Delivery Points in the aggregate shall
not exceed 110.6 MMCF per day. The aggregate actual delivery volumes shall
not exceed the Shipper's MDQ.
(3) The Shipper's utilization of 9,000 MCF per day between Delivery Points 6,
7, and 8 is subject to the availability of firm capacity at such points.
<PAGE>
Initial for ID Purposes
Transporter ___________
Shipper ___________
EFFECTIVE DECEMBER 1, 1992
SIXTH AMENDED
EXHIBIT "A"
of the Transportation Agreement
between
KERN RIVER GAS TRANSMISSION COMPANY (Transporter)
and UNION PACIFIC FUELS, INC. (Shipper)
Date: December 15, 1989
RECEIPT POINTS
Maximum
Receipt
Transporter's Pressure Maximum
Description Meter Number p.s.i.g Receipt Volumes
(Note 1) (Note 2) (Note 4) Mcf Per Day
- -------- ------------ -------- -----------
Upstream of Muddy Creek:
1. Opal Gas Plant 1-4001 TBD 35,000
2. Colorado Interstate Gas (CIG) 1-4008 TBD 20,000
3. Northwest Pipeline 1-4002 TBD 30,000
4. Overland Trail Transmission TBD TBD 15,000
(Note 3)
Downstream of Muddy Creek:
5. Painter NGL/NRU 1-4005 900 10,000
6. Anschutz Ranch East (Note 5) 1-4006 1,050 20,000
7. Whitney Canyon/
Canyon Creek Compression 1-4004 900 20,000
8. Questar Pipeline 1-4007 1,212 30,000
Notes:
(1) During periods of time when Transporter's other firm shippers are
nominating and utilizing their full allocated portion of their MDQ for all
Receipt Points on the upstream side of the Transporter's Muddy Creek
Compressor and such volumes exceed the Muddy Creek Compressor's capacity
from time to time, Shipper's total Firm Service rights for capacity at
Receipt Points upstream of Transporter's Muddy Creek Compressor under this
Agreement with Transporter shall be limited to 50 MMCFD for such combined
Receipt Points. During periods of time when Transporter's firm shippers are
not nominating and utilizing their full allocated portion of their MDQ
upstream of Muddy Creek, Shipper shall be entitled to utilize as Firm
Service receipt volumes upstream of Muddy Creek up to a maximum receipt
volumes of 100 MMCFD. Shipper will have the right to reallocate, upon three
(3) business days notice pursuant to Section 15.1, the maximum receipt
volumes upstream of Muddy Creek among the Opal, CIG, Northwest Pipeline
Receipt Point(s), and any other new Receipt Points upstream of Muddy Creek
which Shipper requests Transporter to install in accordance with Section 6.
1. 1. Receipt Points 5. through 8. are to be located downstream of the Kern
River's Muddy Creek Compressor Station. In the event of a curtailment of
Firm Service on the inlet side of Transporter's Muddy Creek Compressor,
Transporter shall use 50 MMCFD as the base to determine Shipper's pro rata
portion under Section 14. 1 (c) of this Agreement.
(2) Transporter will accept Shipper's gas at the inlet side of Transporter's
meter.
(3) Prior to in-service of Receipt Point 4 the Shipper can nominate on as
available firm service basis up to an additional 20 MMCF per day at Receipt
Point 3, subject to Note (1).
(4) The Maximum Receipt Pressures shall be based upon the maximum delivery
pressure requirements, if any, under the various interconnect agreements
between the transporter and upstream transporters at Receipt Points 2, 3,
and 4 and the plant operator at Receipt Point 1.
(5) Transporter may utilize Anschutz receipt point for up to 20 MMcfd, 10 MMcfd
of which will be subject to capacity availability at that point (Alternate
Receipt Point). To the extent that on any given day there is insufficient
capacity at the Alternate Receipt Point to satisfy all requests for
capacity by Shipper and other firm shippers utilizing such point as an
Alternative Receipt Point, then Shipper and such other firm shippers shall
be allocated capacity at the Alternate Receipt Point on a pro rata basis in
proportion to each shipper's respective MDQ. This Alternate Receipt Point
utilization and allocation methodology shah be superseded by any alternate
receipt point tariff provision filed by Transporter and accepted by the
FERC.
TBD To be determined.
<PAGE>
Initial for ID Purposes
Transporter ___________
Shipper ___________
EFFECTIVE DECEMBER 1, 1992
SIXTH AMENDED
EXHIBIT "B"
of the Transportation Agreement
between
KERN RIVER GAS TRANSMISSION COMPANY (Transporter)
and UNION PACIFIC FUELS, INC. (Shipper)
Date: December 15, 1989
DELIVERY POINTS
Maximum Maximum Delivery
Delivery Volume
Transporter's Pressure MCF Per Day
Description Meter Number p.s.i.g (Note 2)
- ----------- ------------ ------- -----------
1. Interconnection of Transporter's 2-5011 TBD 75,000
System and Southern California
Gas Company at SoCal Gas line 225
Wheeler Ridge
2. China Grade 2-5006 450 15,600
3. Boron 2-5002 650 0
4. Coolwater Station 2-5001 775 Note 1
5. Apex 2-4002 450 Note 1
6. Chevron 17Z 2-5020 400 11,000
7. Kern Front 2-5010 400 (0)
8. S. Midway 2-5012 400 (0)
9. McKittrick 2-5019 400 (0)
TBD - To be determined.
Notes:
(1) Delivery Points 4 and 5 can be utilized only to the extent capacity is
available at those points. To the extent Shipper reduces deliveries to
Delivery Point 1, within the Maximum Delivery Volume limits, Shipper may
make pursuant to Section 15.3 of the Agreement a corresponding delivery at
Delivery Points 4 and 5 equal to the reduced volume at Delivery Point 1,
provided however, the total volume at Delivery Points 4 and 5 shall not
exceed 40,000 MCF per day. Any future FERC filings relating to the
establishment of alternate delivery points for all firm shippers shall not
alter the rights of Shipper under Section 15.3 provided however, to the
extent Transporter makes such FERC filings Shipper's rights at Delivery
Points 4 and 5 shall be equal to the rights given to all firm shippers at
such alternate points.
(2) The Maximum Delivery Volume for all Delivery Points in the aggregate shall
not exceed 110.6 MMCF per day. The aggregate actual delivery volumes shall
not exceed the Shipper's MDQ.
<PAGE>
SEVENTH AMENDED EXHIBIT "A"
to the Transportation Agreement
Dated December 15, 1989
by and between
KERN RIVER GAS TRANSMISSION COMPANY
and
UNION PACIFIC FUELS, INC.
Effective as of January 1, 1993
Shipper's Maximum Daily Quantity: 100,000 Mcf per day
RECEIPT POINTS
Maximum
Receipt
Transporter's Pressure Maximum
Description Meter Number p.s.i.g. Receipt Volumes
(Note 1) (Note 2) (Note4) Mcf Per Day
- ----------- ------------- -------- -----------
Upstream of Muddy Creek:
1. Opal Gas Plant 1-4001 TBD 35,000
2. Colorado Interstate Gas (CIG) 1-4008 TBD 20,000
3. Northwest Pipeline 1-4002 TBD 30,000
4. Overland Trail Transmission TBD TBD 15,000
(Note 3)
Downstream of Muddy Creek:
5. Painter NGL/NRU 1-4005 900 10,000
6. Anschutz Ranch East (Note 5) 1-4006 1,050 10,000
7. Whitney Canyon/
Canyon Creek Compression 1-4004 900 20,000
------
8. Questar Pipeline 1-4007 1,212 30,000
------
Notes:
(1) During periods of time when Transporter's other firm shippers are
nominating and utilizing their full allocated portion of their MDQ for
all Receipt Points on the upstream side of the Transporter's Muddy Creek
Compressor and such volumes exceed the Muddy Creek Compressor's capacity
from time to time, Shipper's total Firm Service rights for capacity at
Receipt Points upstream of Transporter's Muddy Creek Compressor under
this Agreement with Transporter shall be limited to 50 MMCFD for such
combined Receipt Points. During periods of time when Transporter's firm
shippers are not nominating and utilizing their full allocatad portion of
their MDQ upstream of Muddy Creek, Shipper shall be entitled to utilize
as Firm Service receipt volumes upstream of Muddy Creek up to a maximum
receipt volumes of 100 MMCFD. Shipper will have the right to reallocate,
upon three (3) business days notice pursuant to Section 15.1, the maximum
receipt volumes upstream of Muddy Creek among the Opal, CIG, Northwest
Pipeline Receipt Point(s), and any other new Receipt Points upstream of
Muddy Creek which Shipper requests Transporter to install in accordance
with Section 6.1.1. Receipt Points 5. through 8. are to be located
downstream of the Kern River's Muddy Creek Compressor Station. In the
event of a curtailment of Firm Service on the inlet side of Transporter's
Muddy Creek Compressor, Transporter shall use 50 MMCFD as the base to
determine Shipper's pro rata portion under Section 14.1(c) of this
Agreement.
(2) Transporter will accept Shipper's gas at the inlet side of Transporter's
meter.
(3) Pipeline connection to be mutually determined sometime after the Kern
River in-service date. All connection and related costs including tap,
side valve and meter are to be paid by the Shipper. Prior to in-service
of Receipt Point 4 the Shipper can nominate on as available firm service
basis up to an additional 20 MMCF per day at Receipt Point 3, subject to
Note (1).
(4) The Maximum Receipt Pressures shall be based upon the maximum delivery
pressure requirements, if any, under the various interconnect agreements
between the transporter and upstream transporters at Receipt Points 2, 3
and 4 and the plant operator at Receipt Point 1.
(5) Transporter may utilize Anschutz receipt point for up to 20 MMcfd, 10
MMcfd of which will be subject to capacity availability at that point
(Alternate Receipt Point). To the extent that on any given day there is
insufficient capacity at the Alternate Receipt Point to satisfy all
requests for capacity by Shipper and other firm shippers utilizing such
point as an Alternative Receipt Point, then Shipper and such other firm
shippers shall be allocated capacity at the Alternate Receipt Point on
a pro rata basis in proportion to each shipper's respective MDQ. This
Alternate Receipt Point utilization and allocation methodology shall be
superseded by any alternate receipt point tarrif provision filed by
Transporter and accepted by the FERC.
TBD To be determined.
Initialized for Identification Purposes: Transporter________ Shipper_________
<PAGE>
SEVENTH AMENDED EXHIBIT "B"
to the Transportation Agreement
by and between
KERN RIVER GAS TRANSMISSION COMPANY
and
UNION PACIFIC FUELS, INC.
Effective as of January 1, 1993
Shipper's Maximum Daily Quantity: 100,000 Mcf per day
DELIVERY POINTS
Maximum Maximum Delivery
Delivery Volume
Transporter's Pressure MCF Per Day
Description Meter Number p.s.i.g. (Note 2)
- ----------- ------------- -------- -----------
1. Interconnection of Transporter's 2-5011 TBD 73,000
System and Southern California
Gas Company at SoCal Gas line 225
Wheeler Ridge
2. China Grade 2-5006 450 10,600
3. Boron 2-5002 650 7,000
4. Coolwater Station 2-5001 775 Note 1
5. Apex 2-4002 450 Note 1
6. Chevron 17Z 2-5020 400 -0-
7. Kern Front 2-5010 400 20,000
(Note 3)
7. S. Midway 2-5012 400 (0)
8. McKittrick 2-5019 400 (0)
TBD - To be determined.
Notes:
(1) Delivery Points 4 and 5 can be utilized only to the extent capacity
is available at those points. To the extent Shipper reduces deliveries to
Delivery Point 1, within the Maximum Delivery Volume limits, Shipper may
make pursuant to Section 15.3 of the Agreement a corresponding delivery
at Delivery Points 4 and 5 equal to the reduced volume at Delivery Point
1, provided however, the total volume at Delivery Points 4 and 5 shall
not exceed 40,000 MCF per day. Any future FERC filings relating to the
establishment of alternate delivery points for all firm shippers shall
not alter the rights of Shipper under Section 15.3 provided however, to
the extent Transporter makes such FERC filings Shipper's rights at
Delivery Points 4 and 5 shall be equal to the rights given to all firm
shippers at such alternate points.
(2) The Maximum Delivery Volume for all Delivery Points in the aggregate
shall not exceed 110.6 MMCF per day. The aggregate actual delivery
volumes shall not exceed the Shipper's MDQ.
(3) The Shipper's utilization of 20,000 Mcf per day between Delivery Point 7
is subject to the availability of firm capacity at such point.
Initialized for Identification Purposes: Transporter________ Shipper_________
<PAGE>
EIGHTH AMENDED EXHIBIT
of the Transportation Agreement
Dated December 15, 1989
by and between
KERN RIVER GAS TRANSMISSION COMPANY
and
UNION PACIFIC FUELS, INC.
Effective from February 1, 1993 - February 28, 1993
Shipper's Maximum Daily Quantity; 100,000 Mcf per day
RECEIPT POINTS
Maximum
Receipt
Transporter's Pressure Maximum
Description Meter Number p.s.i.g. Receipt Volumes
(Note 1) (Note 2) (Note 4) Mcf Per Day
- ----------- ------------- -------- -----------
Upstream of Muddy Creek:
1. Opal Gas Plant 1-4001 TBD 35,000
2. Colorado Interstate Gas (CIG) 1-4008 TBD 20,000
3. Northwest Pipeline 1-4002 TBD 15,000
4. Overland Trail Transmission TBD TBD 30,000
(Note 3)
Downstream of Muddy Creek:
5. Painter NGL/NRU 1-4005 900 10,000
6. Anschutz Ranch East (Note 5) 1-4006 1,050 28,000
7. Whitney Canyon/
Canyon Creek Compression 1-4004 900 16,300
------
8. Questar Pipeline 1-4007 1,212 25,700
------
Notes:
(1) During periods of time when Transporter's other firm shippers are
nominating and utilizing their full allocated portion of their MDQ for
all Receipt Points on the upstream side of the Transporter's Muddy Creek
Compressor and such volumes exceed the Muddy Creek Compressor's capacity
from time to time, Shipper's total Firm Service rights for capacity at
Receipt Points upstream of Transporter's Muddy Creek Compressor under
this Agreement with Transporter shall be limited to 50 MMCFD for such
combined Receipt Points. During periods of time when Transporter's firm
shippers are not nominating and utilizing their full allocatad portion of
their MDQ upstream of Muddy Creek, Shipper shall be entitled to utilize
as Firm Service receipt volumes upstream of Muddy Creek up to a maximum
receipt volumes of 100 MMCFD. Shipper will have the right to reallocate,
upon three (3) business days notice pursuant to Section 15.1, the maximum
receipt volumes upstream of Muddy Creek among the Opal, CIG, Northwest
Pipeline Receipt Point(s), and any other new Receipt Points upstream of
Muddy Creek which Shipper requests Transporter to install in accordance
with Section 6.1.1. Receipt Points 5. through 8. are to be located
downstream of the Kern River's Muddy Creek Compressor Station. In the
event of a curtailment of Firm Service on the inlet side of Transporter's
Muddy Creek Compressor, Transporter shall use 50 MMCFD as the base to
determine Shipper's pro rata portion under Section 14.1(c) of this
Agreement.
(2) Transporter will accept Shipper's gas at the inlet side of Transporter's
meter.
(3) Prior to in-service of Receipt Point 4 the Shipper can nominate on as
available firm service basis up to an additional 20 MMCF per day at
Receipt Point 3, subject to Note (1).
(4) The Maximum Receipt Pressures shall be based upon the maximum delivery
pressure requirements, if any, under the various interconnect agreements
between the transporter and upstream transporters at Receipt Points 2, 3
and 4 and the plant operator at Receipt Point 1.
(5) Transporter may utilize Anschutz receipt point for up to 28 MMcfD, 18
MMcfd of which will be subject to capacity availability at that point
(Alternate Receipt Point). To the extent that on any given day there is
insufficient capacity at the Alternate Receipt Point to satisfy all
requests for capacity by Shipper and other firm shippers utilizing such
point as an Alternative Receipt Point, then Shipper and such other firm
shippers shall be allocated capacity at the Alternate Receipt Point on a
pro rata basis in proportion to each shipper's respective MDQ. This
alternate receipt point tariff provision filed by Transporter and
and accepted by the FERC.
TBD To be determined.
Initialed for Identification Purposes: Transporter_________ Shipper________
<PAGE>
EIGHTH AMENDED EXHIBIT
of the Transportation Agreement
Dated December 15, 1989
by and between
KERN RIVER GAS TRANSMISSION COMPANY
and
UNION PACIFIC FUELS, INC.
Effective from February 1, 1993 - February 28, 1993
Shipper's Maximum Daily Quantity: 100,000 Mcf per day
DELIVERY POINTS
Maximum Maximum Delivery
Delivery Volume
Transporter's Pressure MCF Per Day
Description Meter Number p.s.i.g. (Note 2)
- ----------- ------------- -------- -----------
1. Interconnection of Transporter's 2-5011 TBD 68,000
System and Southern California
Gas Company at SoCal Gas line 225
Wheeler Ridge
2. China Grade 2-5006 450 10,600
3. Boron 2-5002 650 6,000
4. Coolwater Station 2-5001 775 Note 1
5. Apex 2-4002 450 Note 1
6. Chevron 17Z 2-5020 400 (0)
7. Kern Front 2-5010 400 (Note 3)
8. S. Midway 2-5012 400 (Note 3)
9. McKittrick 2-5019 400 (Note 3)
10. Kern River Station 2-5005 400 6,000
TBD - To be determined.
Notes:
(1) Delivery Points 4 and 5 can be utilized only to the extent capacity
is available at those points. To the extent Shipper reduces deliveries to
Delivery Point 1, within the Maximum Delivery Volume limits, Shipper may
make pursuant to Section 15.3 of the Agreement a corresponding delivery
at Delivery Points 4 and 5 equal to the reduced volume at Delivery Point
1, provided however, the total volume at Delivery Points 4 and 5 shall
not exceed 40,000 MCF per day. Any future FERC filings relating to the
establishment of alternate delivery points for all firm shippers shall
not alter the rights of Shipper under Section 15.3 provided however, to
the extent Transporter makes such FERC filings Shipper's rights at
Delivery Points 4 and 5 shall be equal to the rights given to all firm
shippers at such alternate points.
(2) The Maximum Delivery Volume for all Delivery Points in the aggregate
shall not exceed 110.6 MMCF per day. The aggregate actual delivery
volumes shall not exceed the Shipper's MDQ.
(3) The Shipper's utilization of 9,000 MCF per day between Delivery Points 6,
7, and 8 is subject to the availability of firm capacity at such point.
Initialed for Identification Purposes: Transporter_________ Shipper_________
<PAGE>
NINTH AMENDED EXHIBIT A
to the Transportation Agreement
Dated December 15, 1989
by and between
KERN RIVER GAS TRANSMISSION COMPANY
and
UNION PACIFIC FUELS, INC.
Effective from March 1, 1993
Shipper's Maximum Daily Quantity; 100,000 Mcf per day
RECEIPT POINTS
Maximum
Receipt
Transporter's Pressure Maximum
Description Meter Number p.s.i.g. Receipt Volumes
(Note 1) (Note 2) (Note 4) Mcf Per Day
- ----------- ------------- -------- -----------
Upstream of Muddy Creek:
1. Opal Gas Plant 1-4001 TBD 35,000
2. Colorado Interstate Gas (CIG) 1-4008 TBD 20,000
3. Northwest Pipeline 1-4002 TBD 15,000
------
4. Overland Trail Transmission (Note 3) TBD TBD 30,000
------
Downstream of Muddy Creek:
5. Painter NGL/NRU 1-4005 900 10,000
6. Anschutz Ranch East (Note 5) 1-4006 1,050 28,000
7. Whitney Canyon/
Canyon Creek Compression 1-4004 900 16,300
------
8. Questar Pipeline 1-4007 1,212 25,700
------
Notes:
(1) During periods of time when Transporter's other firm shippers are
nominating and utilizing their full allocated portion of their MDQ for
all Receipt Points on the upstream side of the Transporter's Muddy Creek
Compressor and such volumes exceed the Muddy Creek Compressor's capacity
from time to time, Shipper's total Firm Service rights for capacity at
Receipt Points upstream of Transporter's Muddy Creek Compressor under
this Agreement with Transporter shall be limited to 50 MMCFD for such
combined Receipt Points. During periods of time when Transporter's firm
shippers are not nominating and utilizing their full allocated portion of
their MDQ upstream of Muddy Creek, Shipper shall be entitled to utilize
as Firm Service receipt volumes upstream of Muddy Creek up to a maximum
receipt volumes of 100 MMCFD. Shipper will have the right to reallocate,
upon three (3) business days notice pursuant to Section 15.1, the maximum
receipt volumes upstream of Muddy Creek among the Opal, CIG, Northwest
Pipeline Receipt Point(s), and any other new Receipt Points upstream of
Muddy Creek which Shipper requests Transporter to install in accordance
with Section 6.1.1. Receipt Points 5. through 8. are to be located
downstream of the Kern River's Muddy Creek Compressor Station. In the
event of a curtailment of Firm Service on the inlet side of Transporter's
Muddy Creek Compressor, Transporter shall use 50 MMCFD as the base to
determine Shipper's pro rata portion under Section 14.1(c) of this
Agreement.
(2) Transporter will accept Shipper's gas at the inlet side of Transporter's
meter.
(3) Prior to in-service of Receipt Point 4 the Shipper can nominate on as
available firm service basis up to an additional 20 MMCF per day at
Receipt Point 3, subject to Note (1).
(4) The Maximum Receipt Pressures shall be based upon the maximum delivery
pressure requirements, if any, under the various interconnect agreements
between the transporter and upstream transporters at Receipt Points 2, 3
and 4 and the plant operator at Receipt Point 1.
(5) Transporter may utilize Anschutz receipt point for up to 28 MMcfD, 18
MMcfd of which will be subject to capacity availability at that point
(Alternate Receipt Point). To the extent that on any given day there is
insufficient capacity at the Alternate Receipt Point to satisfy all
requests for capacity by Shipper and other firm shippers utilizing such
point as an Alternative Receipt Point, then Shipper and such other firm
shippers shall be allocated capacity at the Alternate Receipt Point on a
pro rata basis in proportion to each shipper's respective MDQ. This
Alternate Receipt Point utilization and allocation methodology shall be
superseded by any alternate receipt point tariff provision filed by
Transporter and accepted by the FERC.
TBD To be determined.
Initialed for Identification Purposes: Transporter_________ Shipper________
<PAGE>
NINTH AMENDED EXHIBIT B
to the Transportation Agreement
Dated December 15, 1989
by and between
KERN RIVER GAS TRANSMISSION COMPANY
and
UNION PACIFIC FUELS, INC.
Effective from March 1, 1993
Shipper's Maximum Daily Quantity: 100,000 Mcf per day
DELIVERY POINTS
Maximum Maximum Delivery
Delivery Volume
Transporter's Pressure MCF Per Day
Description Meter Number p.s.i.g. (Note 2)
- ----------- ------------- -------- -----------
1. Interconnection of Transporter's 2-5011 TBD 84,000
System and Southern California
Gas Company at SoCal Gas line 225
Wheeler Ridge
2. China Grade 2-5006 450 15,600
3. Boron 2-5002 650 11,000
4. Coolwater Station 2-5001 775 Note 1
5. Apex 2-4002 450 Note 1
6. Chevron 17Z 2-5020 400 (0)
7. Kern Front 2-5010 400 (Note 3)
8. S. Midway 2-5012 400 (Note 3)
9. McKittrick 2-5019 400 (Note 3)
10. Kern River Station 2-5005 400 (0)
TBD - To be determined.
Notes:
(1) Delivery Points 4 and 5 can be utilized only to the extent capacity
is available at those points. To the extent Shipper reduces deliveries to
Delivery Point 1, within the Maximum Delivery Volume limits, Shipper may
make pursuant to Section 15.3 of the Agreement a corresponding delivery
at Delivery Points 4 and 5 equal to the reduced volume at Delivery Point
1, provided however, the total volume at Delivery Points 4 and 5 shall
not exceed 40,000 MCF per day. Any future FERC filings relating to the
establishment of alternate delivery points for all firm shippers shall
not alter the rights of Shipper under Section 15.3 provided however, to
the extent Transporter makes such FERC filings Shipper's rights at
Delivery Points 4 and 5 shall be equal to the rights given to all firm
shippers at such alternate points.
(2) The Maximum Delivery Volume for all Delivery Points in the aggregate
shall not exceed 110.6 MMCF per day. The aggregate actual delivery
volumes shall not exceed the Shipper's MDQ.
(3) Shipper's utilization of 20,000 Mcf per day between Delivery Points 7
8, and 9 is subject to the availability of firm capacity at such point.
Initialed for Identification Purposes: Transporter_________ Shipper_________
<PAGE>
TENTH AMENDED EXHIBIT
to the Transportation Agreement
Dated December 15, 1989
by and between
KERN RIVER GAS TRANSMISSION COMPANY
and
UNION PACIFIC FUELS, INC.
Effective April 1, 1993
Shipper's Maximum Daily Quantity: 100,000 Mcf per day
DELIVERY POINTS
Maximum
Maximum Delivery
Delivery Volume MCF
Transporter's Pressure Per Day
Description Meter Number p.s.i.g. (Note 2)
- ----------- ------------- -------- ----------
1. Interconnection of Transporter's 2-5001 TBD 84,000
System and Southern California
Gas Company at SoCal Gas line 225
Wheeler Ridge (See Note 4 below)
2. China Grade 2-5006 450 15,600
3. Boron 2-5002 650 11,000
4. Coolwater Station 2-5001 775 Note 1
5. Apex 2-4002 450 Note 1
6. Chevron 17Z 2-5020 400 (0)
7. Kern Front 2-5010 400 (Note 3)
8. S. Midway 2-5012 400 (Note 3)
9. McKittrick 2-5019 400 (Note 3)
10. Kern River Station 2-5005 400 (0)
TBD - To be determined.
Initialed for Identification Purposes: Transporter_________ Shipper_________
<PAGE>
Notes:
(1) Delivery Points 4 and 5 can be utilized only to the extent capacity
is available at those points. To the extent Shipper reduces deliveries to
Delivery Point 1, within the Maximum Delivery Volume limits, Shipper may
make pursuant to Section 15.3 of the Agreement a corresponding delivery
at Delivery Points 4 and 5 equal to the reduced volume at Delivery Point
1, provided however, the total volume at Delivery Points 4 and 5 shall
not exceed 40,000 MCF per day. Any future FERC filings relating to the
establishment of alternate delivery points for all firm shippers shall
not alter the rights of Shipper under Section 15.3 provided however, to
the extent Transporter makes such FERC filings Shipper's rights at
Delivery Points 4 and 5 shall be equal to the rights given to all firm
shippers at such alternate points.
(2) The Maximum Delivery Volume for all Delivery Points in the aggregate
shall not exceed 110.6 MMCF per day. The aggregate actual delivery
volumes shall not exceed the Shipper's MDQ.
(3) Shipper's utilization of 20,000 Mcf per day at Delivery Points 7, 8,
and 9 is subject to the availability of firm capacity at such point.
(4) Shipper shall be entitled to deliver up to an aggregate of 84,000
Mcf/day to the Wheeler Ridge and PG&E delivery points for the period of
time during which SoCal's Line 225 is out of service due to hydrostatic
testing, commencing approximately April 1, 1993 and continuing for
approximately 6-8 weeks (the "Line 225 Outage Period"). During the Line
225 Outage Period, Transporter shall utilize its best efforts to deliver
to the PG&E delivery point, subject to capacity availability, all of
Shipper's volumes nominated to the Wheeler Ridge delivery point which are
confirmed for delivery to the PG&E delivery point (the "Alternate
Volumes"). Volumes nominated by firm shippers directly to the PG&E
delivery point ("Primary Volumes") shall have scheduling and curtailment
priority over Alternate Volumes. Alternate Volumes shall have scheduling
and curtailment priority over volumes delivered to the PG&E delivery
point for shippers under Kern River Rate Schedule KRI-1. If
sufficient capacity does not exist at the PG&E delivery point to allow
delivery of all volumes nominated by firm shippers to the Wheeler Ridge
delivery point which are confirmed for delivery to the PG&E delivery
point ("Aggregate Alternative Volumes"), or if Kern River cannot
accurately measure all of the Aggregate Alternate Volumes, then available
capacity shall be allocated for the Aggregate Alternate Volumes on a pro
rata basis according to each shipper's respective maximum daily delivery
entitlement at Wheeler Ridge. Shipper understands and agrees that
Transporter is only obligated to utilize its best efforts to deliver
Alternate Volumes to the PG&E delivery point. Accordingly, Transporter
shall not be liable to Shipper or to any third parties in any manner
whatsoever in the event of nondelivery of any Alternate Volumes to the
PG&E delivery point. Upon expiration of the Line 225 Outage Period,
Shipper shall no longer be entitled to delivery Alternate Volumes to the
PG&E delivery point. This alternate delivery point provision will be
suspended by an applicable alternate delivery point provision in
Transporter's FERC Gas Tariff which may become effective during the
Line 225 Outage Period.
<PAGE>
TENTH AMENDED EXHIBIT "A"
to the Transportation Agreement
Dated December 15, 1989
by and between
KERN RIVER GAS TRANSMISSION COMPANY
and
UNION PACIFIC FUELS, INC.
Effective May 1, 1993
Shipper's Maximum Daily Quantity: 100,000 Mcf per day
RECEIPT POINTS
Maximum
Receipt
Transporter's Pressure Maximum
Description Meter Number p.s.i.g. Receipt Volumes
(Note 1) (Note 2) (Note 4) Mcf Per Day
- ----------- ------------- -------- -----------
Upstream of Muddy Creek:
1. Opal Gas Plant 1-4001 TBD 35,000
2. Colorado Interstate Gas (CIG) 1-4008 TBD 10,000
3. Northwest Pipeline 1-4002 TBD 15,000
------
4. Overland Trail Transmission (Note 3) TBD TBD 40,000
------
Downstream of Muddy Creek:
5. Painter NGL/NRU 1-4005 900 10,000
6. Anschutz Ranch East 1-4006 1,050 28,000
7. Whitney Canyon/
Canyon Creek Compression 1-4004 900 16,300
------
8. Questar Pipeline 1-4007 1,212 25,700
------
Notes:
(1) During periods of time when Transporter's other firm shippers are
nominating and utilizing their full allocated portion of their MDQ for
all Receipt Points on the upstream side of the Transporter's Muddy Creek
Compressor and such volumes exceed the Muddy Creek Compressor's capacity
from time to time, Shipper's total Firm Service rights for capacity at
Receipt Points upstream of Transporter's Muddy Creek Compressor under
this Agreement with Transporter shall be limited to 50 MMCFD for such
combined Receipt Points. During periods of time when Transporter's firm
shippers are not nominating and utilizing their full allocated portion of
their MDQ upstream of Muddy Creek, Shipper shall be entitled to utilize
as Firm Service receipt volumes upstream of Muddy Creek up to a maximum
receipt volumes of 100 MMCFD. Shipper will have the right to reallocate,
upon three (3) business days notice pursuant to Section 15.1, the maximum
receipt volumes upstream of Muddy Creek among the Opal, CIG, Northwest
Pipeline Receipt Point(s), and any other new Receipt Points upstream of
Muddy Creek which Shipper requests Transporter to install in accordance
with Section 6.1.1. Receipt Points 5. through 8. are to be located
downstream of the Kern River's Muddy Creek Compressor Station. In the
event of a curtailment of Firm Service on the inlet side of Transporter's
Muddy Creek Compressor, Transporter shall use 50 MMCFD as the base to
determine Shipper's pro rata portion under Section 14.1(c) of this
Agreement.
(2) Transporter will accept Shipper's gas at the inlet side of Transporter's
meter.
(3) Prior to in-service of Receipt Point 4 the Shipper can nominate on as
available firm service basis up to an additional 20 MMCF per day
at Receipt Point 3, subject to Note (1).
(4) The Maximum Receipt Pressures shall be based upon the maximum delivery
pressure requirements, if any, under the various interconnect agreements
between the transporter and upstream transporters at Receipt Points 2, 3
and 4 and the plant operator at Receipt Point 1.
(5) Transporter may utilize Anschutz receipt point for up to 28 MMcfd,
18 MMcfd of which will will be subject to capacity availability at that
point (Alternate Receipt Point). To the extent that on any given day
there is insufficient capacity at the Alternate Receipt Point to satisfy
all requests for capacity by Shipper and other firm shippers utilizing
such point as an Alternative Receipt Point, then Shipper and such other
firm shippers shall be allocated capacity at the Alternate Receipt Point
on a pro rata basis in proportion to each shipper's respective MDQ. This
Alternate Receipt Point utilization and allocation methodology shall be
superseded by an alternate receipt point tariff provision filed by
Transporter and accepted by the FERC.
TBD To be determined.
Initialed for Identification Purposes: Transporter________ Shipper_________
<PAGE>
ELEVENTH AMENDED EXHIBIT "B"
to the Transportation Agreement
Dated December 15, 1989
by and between
KERN RIVER GAS TRANSMISSION COMPANY
and
UNION PACIFIC FUELS, INC.
Effective June 21, 1993
Shipper's Maximum Daily Quantity: 100,000 Mcf per day
DELIVERY POINTS
Maximum Maximum Delivery
Delivery Volume
Transporter's Pressure MCF Per Day
Description Meter Number p.s.i.g. (Note 2)
- ----------- ------------- -------- -----------
1. Interconnection of Transporter's 2-5011 TBD 79,000
System and Southern California
Gas Company at SoCal Gas line 225
Wheeler Ridge
2. China Grade 2-5006 450 15,600
3. Boron 2-5002 650 11,000
4. Coolwater Station 2-5001 775 Note 1
5. Apex 2-4002 450 Note 1
6. Chevron 17Z 2-5020 400 (0)
7. Kern Front 2-5010 400 (Note 3)
8. S. Midway 2-5012 400 (Note 3)
9. McKittrick 2-5012 400 (Note 3)
10. Kern River Station 2-5005 400 (0)
11. Crocker Springs (Note 4) 2-5018 400 5,000
TBD - To be determined.
Notes:
(1) Delivery Points 4 and 5 can be utilized only to the extent capacity
is available at those points. To the extent Shipper reduces deliveries to
Delivery Point 1, within the Maximum Delivery Volume limits, Shipper may
make pursuant to Section 15.3 of the Agreement a corresponding delivery
at Delivery Points 4 and 5 equal to the reduced volume at Delivery Point
1, provided however, the total volume at Delivery Points 4 and 5 shall
not exceed 40,000 MCF per day. Any future FERC filings relating to the
establishment of alternate delivery points for all firm shippers shall
not alter the rights of Shipper under Section 15.3 provided however, to
the extent Transporter makes such FERC filings Shipper's rights at
Delivery Points 4 and 5 shall be equal to the rights given to all firm
shippers at such alternate points.
(2) The Maximum Delivery Volume for all Delivery Points in the aggregate
shall not exceed 110.6 MMCF per day. The aggregate actual delivery
volumes shall not exceed the Shipper's MDQ.
(3) Shipper's utilization of 20,000 Mcf per day at Delivery Points 7, 8,
and 9 is subject to the availability of firm capacity at such points.
(4) Shipper's utilization of 5,000 Mcf per day at Delivery Point 11 is
subject to the availability of firm capacity in the lateral to such
point.
Initialed for Identification Purposes: Transporter________ Shipper_________
<PAGE>
TWELFTH AMENDED EXHIBIT "A"
to the Transportation Agreement
Dated December 15, 1989
by and between
KERN RIVER GAS TRANSMISSION COMPANY
and
UNION PACIFIC FUELS, INC.
Effective May 23, 1994
Shipper's Maximum Daily Quantity: 75,000 Mcf per day
RECEIPT POINTS
Maximum
Receipt
Transporter's Pressure Maximum
Description Meter Number p.s.i.g. Receipt Volumes
(Note 1) (Note 2) (Note 3) Mcf Per Day
- ----------- ------------- -------- -----------
Upstream of Muddy Creek:
1. Opal Gas Plant 1-4001 TBD 37,500
2. Colorado Interstate Gas (CIG) 1-4008 TBD 2,500
3. Northwest Pipeline 1-4002 TBD 2,500
4. Overland Trail Transmission 1-4009 TBD 32,500
Downstream of Muddy Creek:
5. Painter NGL/NRU 1-4005 900 2,500
6. Anschutz Ranch East 1-4006 1,050 7,500
7. Whitney Canyon/
Canyon Creek Compression 1-4004 900 27,500
------
Notes:
(1) During periods of time when Transporter's other firm shippers are
nominating and utilizing their full allocated portion of their MDQ for
all Receipt Points on the upstream side of the Transporter's Muddy Creek
Compressor and such volumes exceed the Muddy Creek Compressor's capacity
from time to time, Shipper's total Firm Service rights for capacity at
Receipt Points upstream of Transporter's Muddy Creek Compressor under
this Agreement with Transporter shall be limited to 37.5 MMCFD for such
combined Receipt Points. During periods of time when Transporter's firm
shippers are not nominating and utilizing their full allocated portion of
their MDQ upstream of Muddy Creek, Shipper shall be entitled to utilize
as Firm Service receipt volumes upstream of Muddy Creek up to a maximum
receipt volumes of 75 MMCFD. Shipper will have the right to reallocate,
upon three (3) business days notice pursuant to Section 15.1, the maximum
receipt volumes upstream of Muddy Creek among the Opal, CIG, Northwest
Pipeline Receipt Point(s), and any other new Receipt Points upstream of
Muddy Creek which Shipper requests Transporter to install in accordance
with Section 6.1.1. In the event of a curtailment of Firm Service on the
inlet side of Transporter's Muddy Creek Compressor, Transporter shall use
37.5 MMCFD as the base to determine Shipper's pro rata portion under
Section 14.1(c) of this Agreement.
(2) Transporter will accept Shipper's gas at the inlet side of Transporter's
meter.
(3) The Maximum Receipt Pressures shall be based upon the maximum delivery
pressure requirements, if any, under the various interconnect agreements
between the transporter and upstream transporters at Receipt Points 2, 3
and 4 and the plant operator at Receipt Point 1.
TBD To be determined.
Initialed for Identification Purposes: Transporter__________ Shipper__________
<PAGE>
TWELFTH AMENDED EXHIBIT "B"
to the Transportation Agreement
Dated December 15, 1989
by and between
KERN RIVER GAS TRANSMISSION COMPANY
and
UNION PACIFIC FUELS, INC.
Effective July 1, 1993
Shipper's Maximum Daily Quantity: 100,000 Mcf per day
DELIVERY POINTS
Maximum Maximum Delivery
Delivery Volume
Transporter's Pressure MCF Per Day
Description Meter Number p.s.i.g. (Note 2)
- ----------- ------------- -------- -----------
1. Interconnection of Transporter's 2-5011 TBD 84,000
System and Southern California
Gas Company at SoCal Gas line 225
Wheeler Ridge
2. China Grade 2-5006 450 15,600
3. Boron 2-5002 650 11,000
4. Coolwater Station 2-5001 775 Note 1
5. Apex 2-4002 450 Note 1
6. Chevron 17Z 2-5020 400 (0)
7. Kern Front 2-5010 400 (Note 3)
8. S. Midway 2-5012 400 (Note 3)
9. McKittrick 2-5019 400 (Note 3)
10. Kern River Station 2-5005 400 (0)
11. Crocker Springs 2-5018 400 (0)
TBD - To be determined.
Notes:
(1) Delivery Points 4 and 5 can be utilized only to the extent capacity
is available at those points. To the extent Shipper reduces deliveries to
Delivery Point 1, within the Maximum Delivery Volume limits, Shipper may
make pursuant to Section 15.3 of the Agreement a corresponding delivery
at Delivery Points 4 and 5 equal to the reduced volume at Delivery Point
1, provided however, the total volume at Delivery Points 4 and 5 shall
not exceed 40,000 MCF per day. Any future FERC filings relating to the
establishment of alternate delivery points for all firm shippers shall
not alter the rights of Shipper under Section 15.3 provided however, to
the extent Transporter makes such FERC filings Shipper's rights at
Delivery Points 4 and 5 shall be equal to the rights given to all firm
shippers at such alternate points.
(2) The Maximum Delivery Volume for all Delivery Points in the aggregate
shall not exceed 110.6 MMCF per day. The aggregate actual delivery
volumes shall not exceed the Shipper's MDQ.
(3) Shipper's utilization of 20,000 MCF per day between Delivery Points 7,
8, and 9 is subject to the availability of firm capacity at such point.
Initialed for Identification Purposes: Transporter_________ Shipper_________
<PAGE>
TWELFTH AMENDED EXHIBIT "B"
to the Transportation Agreement
Dated December 15, 1989
by and between
KERN RIVER GAS TRANSMISSION COMPANY
and
UNION PACIFIC FUELS, INC.
Effective July 7, 1993
Shipper's Maximum Daily Quantity: 100,000 Mcf per day
DELIVERY POINTS
Maximum Maximum Delivery
Delivery Volume
Transporter's Pressure MCF Per Day
Description Meter Number p.s.i.g. (Note 2)
- ----------- ------------- -------- -----------
1. Interconnection of Transporter's 2-5011 TBD 84,000
System and Southern California
Gas Company at SoCal Gas line 225
Wheeler Ridge
2. China Grade 2-5006 450 15,600
3. Boron 2-5002 650 11,000
4. Coolwater Station 2-5001 775 Note 1
5. Apex 2-4002 450 Note 1
6. Chevron 17Z 2-5020 400 (0)
7. Kern Front 2-5010 400 (Note 3)
8. S. Midway 2-5012 400 (Note 3)
9. McKittrick 2-5019 400 (Note 3)
10. Kern River Station 2-5005 400 (0)
11. Crocker Springs 2-5018 400 (0)
TBD - To be determined.
Notes:
(1) Delivery Points 4 and 5 can be utilized only to the extent capacity
is available at those points. To the extent Shipper reduces deliveries to
Delivery Point 1, within the Maximum Delivery Volume limits, Shipper may
make pursuant to Section 15.3 of the Agreement a corresponding delivery
at Delivery Points 4 and 5 equal to the reduced volume at Delivery Point
1, provided however, the total volume at Delivery Points 4 and 5 shall
not exceed 40,000 MCF per day. Any future FERC filings relating to the
establishment of alternate delivery points for all firm shippers shall
not alter the rights of Shipper under Section 15.3 provided however, to
the extent Transporter makes such FERC filings Shipper's rights at
Delivery Points 4 and 5 shall be equal to the rights given to all firm
shippers at such alternate points.
(2) The Maximum Delivery Volume for all Delivery Points in the aggregate
shall not exceed 110.6 MMCF per day. The aggregate actual delivery
volumes shall not exceed the Shipper's MDQ.
(3) Shipper's utilization of 20,000 MCF per day between Delivery Points 7,
8, and 9 is subject to the availability of firm capacity at such point.
Initialed for Identification Purposes: Transporter_________ Shipper_________
<PAGE>
ELEVENTH AMENDED EXHIBIT "A"
to the Transportation Agreement
Dated December 15, 1989
by and between
KERN RIVER GAS TRANSMISSION COMPANY
and
UNION PACIFIC FUELS, INC.
Effective July 16, 1993
Shipper's Maximum Daily Quantity: 100,000 Mcf per day
RECEIPT POINTS
--------------
Maximum
Receipt
Transporter's Pressure Maximum
Description Meter Number p.s.i.g. Receipt Volumes
(Note 1) (Note 2) (Note 4) Mcf Per Day
- ----------- ------------- -------- -----------
Upstream of Muddy Creek:
1. Opal Gas Plant 1-4001 TBD 35,000
2. Colorado Interstate Gas (CIG) 1-4008 TBD 2,500
3. Northwest Pipeline 1-4002 TBD 15,000
------
4. Overland Trail Transmission TBD TBD 47,500
(Note 3) ------
Downstream of Muddy Creek:
5. Painter NGL/NRU 1-4005 900 10,000
6. Anschutz Ranch East (Note 5) 1-4006 1,050 28,000
7. Whitney Canyon/
Canyon Creek Compression 1-4004 900 16,300
------
8. Questar Pipeline 1-4007 1,212 25,700
------
Notes:
(1) During periods of time when Transporter's other firm shippers are
nominating and utilizing their full allocated portion of their MDQ for
all Receipt Points on the upstream side of the Transporter's Muddy Creek
Compressor and such volumes exceed the Muddy Creek Compressor's capacity
from time to time, Shipper's total Firm Service rights for capacity at
Receipt Points upstream of Transporter's Muddy Creek Compressor under
this Agreement with Transporter shall be limited to 50 MMCFD for such
combined Receipt Points. During periods of time when Transporter's firm
shippers are not nominating and utilizing their full allocated portion of
their MDQ upstream of Muddy Creek, Shipper shall be entitled to utilize
as Firm Service receipt volumes upstream of Muddy Creek up to a maximum
receipt volumes of 100 MMCFD. Shipper will have the right to reallocate,
upon three (3) business days notice pursuant to Section 15.1, the maximum
receipt volumes upstream of Muddy Creek among the Opal, CIG, Northwest
Pipeline Receipt Point(s), and any other new Receipt Points upstream of
Muddy Creek which Shipper requests Transporter to install in accordance
with Section 6.1.1. Receipt Points 5. through 8. are to be located
downstream of the Kern River's Muddy Creek Compressor Station. In the
event of a curtailment of Firm Service on the inlet side of Transporter's
Muddy Creek Compressor, Transporter shall use 50 MMCFD as the base to
determine Shipper's pro rata portion under Section 14.1(c) of this
Agreement.
(2) Transporter will accept Shipper's gas at the inlet side of Transporter's
meter.
(3) Prior to in-service of Receipt Point 4 the Shipper can nominate on as
available firm service basis up to an additional 20 MMCFD per day at
Receipt Point 3, subject to Note (1).
(4) The Maximum Receipt Pressures shall be based upon the maximum delivery
pressure requirements, if any, under the various interconnect agreements
between the transporter and upstream transporters at Receipt Points 2, 3
and 4 and the plant operator at Receipt Point 1.
(5) Transporter may utilize Anschutz receipt point for up to 28 MMcfd, 18
MMcfd of which will be subject to capacity availability at that point
(Alternate Receipt Point). To the extent that on any given day there is
insufficient capacity at the Alternate Receipt Point to satisfy all
requests for capacity by Shipper and other firm shippers utilizing such
point as an Alternative Receipt Point, then Shipper and such other firm
shippers shall be allocated capacity at the Alternate Receipt Point on a
pro rata basis in proportion to each shipper's respective MDQ. This
Alternate Receipt Point utilization and allocation methodology shall be
superseded by any alternate receipt point tariff provision filed by
Transporter and accepted by the FERC.
TBD To be determined.
Initialed for Identification Purposes: Transporter_________ Shipper________
<PAGE>
[LETTERHEAD OF KERN RIVER] 1010 Milam Street
P.O. Box 2511
Houston, Texas 77252-2511
(713) 757-2131
November 17, 1993
Union Pacific Fuels, Inc.
801 Cherry Street
P.O. Box 7
Fort Worth, TX 76101
Attn: Mr. John Keller
Re: Lone Mountain Delivery Point
Meter No. 1-4012
Contract No. 1005
Dear John:
Reference is made to that certain Transportation Service Agreement ("Agreement")
dated December 15, 1989 by and between Kern River Gas Transmission Company, a
Texas partnership ("Kern River") and Union Pacific Fuels, Inc., a Delaware
corporation ("Union Pacific").
Kern River and Shipper agree that, if Shipper receives service to the Lone
Mountain delivery point under Part 284, Subpart B, the Agreement will be deemed
amended to indicate that service to the Lone Mountain delivery point is being
provided under Part 284, Subpart B. On the date on which Kern River is
authorized to provide service to the Lone Mountain delivery point under Part
284, Subpart G, the Agreement will again be deemed amended to indicate that
service to the Lone Mountain delivery point is being provided pursuant to Part
284, Subpart G.
Shipper also certifies to Kern River that any gas transported for Shipper under
Part 284, Subpart B qualifies for service under Section 284.102 of the
Commission's regulations.
If the foregoing is in accordance with your understanding of our agreement,
please so indicate by signing and returning both originals of this Agreement to
my attention. Upon Kern River's execution, an original will be forwarded to you
for your files.
<PAGE>
Union Pacific Fuels, Inc.
Page No. 2
Should you have any questions, please do not hesitate in contacting me at (713)
757-2379.
Sincerely,
/s/ Marilyn Sobotik
----------------------
Marilyn Sobotik
Sr. Account Executive
ACCEPTED AND AGREED TO THIS KERN RIVER GAS TRANSMISSION COMPANY
23rd DAY OF November, 1993 ("Transporter"), by its partners:
UNION PACIFIC FUELS, INC. KERN RIVER CORPORATION
("Shipper")
By: /s/ Illegible By: /s/ E. J. Holm
--------------------- -----------------------------
ATTORNEY-IN-FACT E. J. Holm, President
WILLIAMS WESTERN PIPELINE COMPANY
By: /s/ Cuba Wadlington, Jr.
-------------------------
Cuba Wadlington, Jr.
Sr. Vice President & General Manager
<PAGE>
THIRTEENTH AMENDED EXHIBIT "B"
to the Transportation Agreement
Dated December 15, 1989
by and between
KERN RIVER GAS TRANSMISSION COMPANY
and
UNION PACIFIC FUELS, INC.
Effective May 20, 1994
Shipper's Maximum Daily Quantity: 75,000 Mcf per day
DELIVERY POINTS
Maximum Maximum Delivery
Delivery Volume
Transporter's Pressure MCF Per Day
Description Meter Number p.s.i.g. (Note 1)
- ----------- ------------- -------- -----------
1. Interconnection of Transporter's 2-5011 TBD 67,350
System and Southern California
Gas Company at SoCal Gas line 225
Wheeler Ridge
2. China Grade 2-5006 450 15,600
TBD - To be determined.
Notes:
(1) The Maximum Delivery Volume for all Delivery Points in the aggregate
shall not exceed 82,950 MCF per day. The aggregate actual delivery
volumes shall not exceed the Shipper's MDQ.
Initialed for Identification Purposes: Transporter__________ Shipper__________
<PAGE>
[LETTERHEAD OF KERN RIVER] 1010 Milam Street
P.O. Box 2511
Houston, Texas 77252-2511
(713) 757-2131
January 25, 1996
Mr. John Hogan
Union Pacific Fuels, Inc.
801 Cherry Street
Fort Worth, TX 76101
Re: Amendment to Transportation
Service Agreement Dated December 15, 1989
Hunter Park Delivery Point
Meter No. 2-4014
Contract No. 1005
Dear John:
Reference is made to that certain Transportation Service Agreement ("Agreement")
dated December 15, 1989 by and between Kern River Gas Transmission Company, a
Texas partnership ("Kern River") and Union Pacific Fuels, Inc., a Delaware
corporation ("Union Pacific").
Kern River and Union Pacific agree that, if Union Pacific receives service to
the Hunter Park delivery point, the Agreement will be deemed amended to indicate
that service to the Hunter Park delivery point is being provided under Part 284,
Subpart B. On the date on which Kern River is authorized to provide service to
the Hunter Park delivery point under Part 284, Subpart G, the Agreement will
again be deemed amended to indicate that service to the Hunter Park delivery
point is being provided pursuant to Part 284, Subpart G.
Union Pacific also certifies to Kern River that any gas transported for Union
Pacific under Part 284, Subpart B qualifies for service under Section
284.102(d)(1) of the Commission's regulations, in that Mountain Fuel Supply
Company, a Utah Local Distribution Company, will have physical custody of and
will transport all gas delivered to the Hunter Park Delivery Point.
If the foregoing is in accordance with your understanding of our agreement,
please so indicate by signing and returning all originals of this Amendment to
my attention. Upon execution by Kern River, an original will be forwarded to you
for your files.
<PAGE>
Should you have any questions, please do not hesitate in contacting me at
(713) 757-5701.
Sincerely,
Tony Rabago
Account Manager
ACCEPTED AND AGREED TO THIS
31st DAY OF January, 1996
UNION PACIFIC FUELS, INC. KERN RIVER GAS TRANSMISSION COMPANY
("Shipper") ("Transporter"), a general
partnership, by its partners:
KERN RIVER ACQUISITION CORPORATION
WILLIAMS WESTERN PIPELINE COMPANY
By: /s/ John R. Hogan By: /s/ Robert L. Sluder
------------------------- ----------------------
By: Attorney-in-Fact Robert L. Sluder
Sr. Vice President and
General Manager
<PAGE>
[LETTERHEAD OF KERN RIVER]
January 25, 1996
Mr. John Hogan
Union Pacific Fuels, Inc.
801 Cherry Street
Fort Worth, TX 76101
Re: Amendment to Transportation
Service Agreement Dated December 27, 1995
Hunter Park Delivery Point
Meter No. 2-4014
Contract No. 1031
Dear John:
Reference is made to that certain Transportation Service Agreement ("Agreement")
dated December 27, 1995 by and between Kern River Gas Transmission Company, a
Texas partnership ("Kern River") and Union Pacific Fuels, Inc., a Delaware
corporation ("Union Pacific").
Kern River and Union Pacific agree that, if Union Pacific receives service to
the Hunter Park delivery point, the Agreement will be deemed amended to indicate
that service to the Hunter Park delivery point is being provided under Part 284,
Subpart B. On the date on which Kern River is authorized to provide service to
the Hunter Park delivery point under Part 284, Subpart G, the Agreement will
again be deemed amended to indicate that service to the Hunter Park delivery
point is being provided pursuant to Part 284, Subpart G.
Union Pacific also certifies to Kern River that any gas transported for Union
Pacific under Part 284, Subpart B qualifies for service under Section
284.102(d)(1) of the Commission's regulations, in that Mountain Fuel Supply
Company, a Utah Local Distribution Company, will have physical custody of and
will transport all gas delivered to the Hunter Park Delivery Point.
If the foregoing is in accordance with your understanding of our agreement,
please so indicate by signing and returning all originals of this Amendment to
my attention. Upon execution by Kern River, an original will be forwarded to you
for your files.
<PAGE>
Should you have any questions, please do not hesitate in contacting me at (713)
757-5701.
Sincerely,
Tony Rabago
Account Manager
ACCEPTED AND AGREED TO THIS
31st DAY OF January, 1996
UNION PACIFIC FUELS, INC. KERN RIVER GAS TRANSMISSION COMPANY
("Shipper") ("Transporter"), a general
partnership, by its partners:
KERN RIVER ACQUISITION CORPORATION
WILLIAMS WESTERN PIPELINE COMPANY
By: /s/ John R. Hogan
------------------------- ----------------------
By: Attorney-in-Fact Robert L. Sluder
Sr. Vice President and
General Manager
<PAGE>
[TEXAS GAS TRANSMISSION LOGO]
P.O. BOX 20008-3800 FREDERICA STREET
OWENSBORO, KENTUCKY 42304
TEL. (502) 926-8686
June 18, 1997
Mr. Scott Harwell
Union Pacific Fuels, Inc.
801 Cherry Street
Fort Worth, Texas 76102
Dear Scott:
Texas Gas Transmission Corporation (Texas Gas) has reviewed Union
Pacific Fuels, Inc.'s (Union Pacific) request for a discounted transportation
rate for the time period listed below. Accordingly, Texas Gas is willing to
offer Union Pacific the following discount:
Contract Number: T11378
Rate Schedule: FT
Contract Demand: 90,000 MMBtu per day, Winter and Summer
Time Period: November 1, 1997 through October 31, 2008
Receipt Points: Zone SL and Zone 1 receipt points
Delivery Point: Lebanon-Columbia, Meter No. 1715; Lebanon-Congas,
Meter No. 1247; Lebanon-Texas Eastern, Meter No. 1859
Total Monthly Charges: Union Pacific shall pay each month, $0.23 times its
firm daily contract demand of 90,000 MMBtu times the
number of days in the month. Union Pacific shall also
pay each month the Maximum rate as filed with FERC for
all commodity charges. Such rates shall include all
surcharges currently applicable or that may become
applicable during the term of the firm transportation
agreement. Union Pacific also agrees to pay the
applicable fuel retention.
Additionally, Texas Gas shall have the right to adjust
the discounted demand rate set forth above to reflect
any adjustments to its rates due to changes in rate
design methodology (i.e. seasonal rate shift) or any
other regulatory event so that the annual demand
revenue requirement of Union Pacific remains the same.
Such adjustment will be accomplished in a manner
mutually acceptable to Union Pacific and Texas Gas and
in no event shall the annual demand revenue
responsibility of Union Pacific be increased as a
result of such adjustment.
<PAGE>
Union Pacific Fuels, Inc.
June 18, 1997
Page 2
If Union Pacific is agreeable to this discount, please sign and return
this original Letter Agreement to Texas Gas, along with the firm transportation
agreement between Texas Gas and Union Pacific dated June 18, 1997, to indicate
your acceptance of this discount. If any changes are made, please initial and
forward both originals to Texas Gas.
Very truly yours,
TEXAS GAS TRANSMISSION CORPORATION
By /s/
----------------------------------------
Title Vice President
-------------------------------------
Accepted and Agreed to this 17th day of July, 1997
UNION PACIFIC FUELS, INC.
By /s/ Mark A. Borer
--------------------------------
Title Vice President
-----------------------------
<PAGE>
GAS TRANSPORTATION AGREEMENT
BETWEEN
TEXAS GAS TRANSMISSION CORPORATION
AND
UNION PACIFIC FUELS, INC.
DATED JUNE 18,1997
<PAGE>
INDEX
PAGE NO.
--------
ARTICLE I Definitions 1
ARTICLE II Transportation Service 1
ARTICLE III Scheduling 2
ARTICLE IV Points of Receipt and Delivery 2
ARTICLE V Term of Agreement 3
ARTICLE VI Point(s) of Measurement 3
ARTICLE VII Facilities 3
ARTICLE VIII Rates and Charges 3
ARTICLE IX Miscellaneous 4
EXHIBIT "A"
FIRM POINT(S) OF RECEIPT
EXHIBIT "A-I"
SECONDARY POINT(S) OF RECEIPT
EXHIBIT "B"
FIRM POINT(S) OF DELIVERY
EXHIBIT "C"
SUPPLY LATERAL CAPACITY
STANDARD FACILITIES KEY
<PAGE>
FIRM TRANSPORTATION AGREEMENT
THIS AGREEMENT, made and entered into this 18th day of June, 1997, by
and between Texas Gas Transmission Corporation, a Delaware corporation,
hereinafter referred to as "Texas Gas," and Union Pacific Fuels, Inc., a
Delaware corporation, hereinafter referred to as "Customer,"
WITNESSETH:
WHEREAS, Customer has natural gas which it desires Texas Gas to move
through its existing facilities; and
WHEREAS, Texas Gas has the ability in its pipeline system to move
natural gas for the account of Customer; and
WHEREAS, Customer desires that Texas Gas transport such natural gas
for the account of Customer; and
WHEREAS, Customer and Texas Gas are of the opinion that the
transaction referred to above falls within the provisions of Section 284.223
of Subpart G of Part 284 of the Federal Energy Regulatory Commission's
(Commission) regulations and the blanket certificate issued to Texas Gas in
Docket No. CP88-686-000, and can be accomplished without the prior approval of
the Commission;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto covenant and agree as follows:
ARTICLE I
Definitions
1.1 Definition of Terms of the General Terms and Conditions of Texas Gas's FERC
Gas Tariff on file with the Commission is hereby incorporated by reference and
made a part of this Agreement.
ARTICLE II
Transportation Service
2.1 Subject to the terms and provisions of this Agreement, Customer agrees to
deliver or cause to be delivered to Texas Gas, at the Point(s) of Receipt in
Exhibit "A" hereunder, Gas for Transportation, and Texas Gas agrees to receive,
transport, and redeliver, at the Point(s) of Delivery in Exhibit "B" hereunder,
Equivalent Quantities of Gas to Customer or for the account of Customer, in
accordance with Section 3 of Texas Gas's effective FT Rate Schedule and the
terms and conditions contained herein, up to 90,000 MMBtu per day, which
shall be Customer's Firm Transportation Contract Demand, and up to 13,590,000
MMBtu during the winter season, and up to 19,260,000 MMBtu during the summer
season, which shall be Customer's Seasonal Quantity Levels.
2.2 Customer shall reimburse Texas Gas for the Quantity of Gas required for
fuel, company use, and unaccounted for associated with the transportation
service hereunder in accordance with Section 16 of the General Terms and
Conditions of Texas Gas's FERC Gas Tariff. The applicable fuel retention
percentage(s) is shown on Exhibit "A". Texas Gas may adjust the fuel retention
percentage as operating circumstances warrant; however, such change shall not
be retroactive. Texas Gas agrees to give Customer thirty (30) days written
notice before changing such percentage.
<PAGE>
2.3 Texas Gas, at its sole option, may, if tendered by Customer, transport
daily quantities in excess of the Transportation Contract Demand.
2.4 In order to protect its system, the delivery of gas to its customers and/or
the safety of its operations, Texas Gas shall have the right to vent excess
natural gas delivered to Texas Gas by Customer or Customer's supplier(s) in
that part of its system utilized to transport gas received hereunder. Prior
to venting excess gas, Texas Gas will use its best efforts to contact Customer
or Customer's supplier(s) in an attempt to correct such excess deliveries to
Texas Gas. Texas Gas may vent such excess gas solely within its reasonable
judgment and discretion without liability to Customer, and a pro rata share of
any gas so vented shall be allocated to Customer. Customer's pro rata share
shall be determined by a fraction, the numerator of which shall be the quantity
of gas delivered to Texas Gas at the Point of Receipt by Customer or Customer's
supplier(s) in excess of Customer's confirmed nomination and the denominator of
which shall be the total quantity of gas in excess of total confirmed
nominations flowing in that part of Texas Gas's system utilized to transport
gas, multiplied by the total quantity of gas vented or lost hereunder.
2.5 Any gas imbalance between receipts and deliveries of gas, less fuel and
PVR adjustments, if applicable, shall be cleared each month in accordance with
Section 17 of the General Terms and Conditions in Texas Gas's FERC Gas Tariff.
Any imbalance remaining at the termination of this Agreement shall also be
cashed-out as provided herein.
ARTICLE III
Scheduling
3.1 Customer shall nominate, confirm and/or schedule service under this
Agreement in a manner consistent with Section 26 "Nomination, Confirmation and
Scheduling of Services" of the General Terms and Conditions of Texas Gas's FERC
Gas Tariff.
3.2 Customer shall give Texas Gas, after the first of the month, at least
twenty-four (24) hours notice prior to the commencement of any day in which
Customer desires to change the quantity(ies) of gas it has scheduled to be
delivered to Texas Gas at the Point(s) of Receipt. Texas Gas agrees to waive
this 24-hour prior notice and implement nomination changes requested by
Customer to commence in such lesser time frame subject to Texas Gas's being
able to confirm and verify such nomination change at both Receipt and Delivery
Points, and receive PDAs reflecting this nomination change at both Receipt and
Delivery Points. Texas Gas will use its best efforts to make the nomination
change effective at the time requested by Customer; however, if Texas Gas is
unable to do so, the nomination change will be implemented as soon as
confirmation is received.
ARTICLE IV
Points of Receipt, Delivery, and Supply Lateral Allocation
4.1 Customer shall deliver or cause to be delivered natural gas to Texas Gas at
the Point(s) of Receipt specified in Exhibit "A" attached hereto and Texas Gas
shall redeliver gas to Customer or for the account of Customer at the Point(s)
of Delivery specified in Exhibit "B" attached hereto in accordance with
Sections 7 and 15 of the General Terms and Conditions of Texas Gas's FERC Gas
Tariff.
4.2 Customer's preferential capacity rights on each of Texas Gas's supply
laterals shall be as set forth in Exhibit "C" attached hereto, in accordance
with Section 34 of the General Terms and Conditions of Texas Gas's FERC Gas
Tariff.
2
<PAGE>
ARTICLE V
Term of Agreement
5.1 This Agreement shall become effective upon its execution and remain in full
force and effect for a primary term beginning November 1, 1997, (with the rates
and charges described in Article VIII becoming effective on that date) and
extending for a period of eleven years from that date, or through October 31,
2008; with extensions of one year at the end of the primary term and each
additional term thereafter unless written notice is given at least three
hundred sixty-five (365) days prior to the end of such term by either party.
ARTICLE VI
Point(s) of Measurement
6.1 The gas shall be delivered by Customer to Texas Gas and redelivered by
Texas Gas to Customer at the Point(s) of Receipt and Delivery hereunder.
6.2 The gas shall be measured or caused to be measured by Customer and/or Texas
Gas at the Point(s) of Measurement which shall be as specified in Exhibits "A",
"A-I", and "B" herein. In the event of a line loss or leak between the Point of
Measurement and the Point of Receipt, the loss shall be determined in
accordance with the methods described contained in Section 3, "Measuring and
Measuring Equipment," contained in the General Terms and Conditions of First
Revised Volume No. 1 of Texas Gas's FERC Gas Tariff.
ARTICLE VII
7.1 Texas Gas and Customer agree that any facilities required at the Point(s)
of Receipt, Point(s) of Delivery, and Point(s) of Measurement shall be
installed, owned, and operated as specified in Exhibits "A", "A-I", and "B"
herein. Customer may be required to pay or cause Texas Gas to be paid for the
installed cost of any new facilities required as contained in Sections 1.3,
1.4, and 1.5 of Texas Gas's FT Rate Schedule. Customer shall only be
responsible for the installed cost of any new facilities described in this
Section if agreed to in writing between Texas Gas and Customer.
ARTICLE VIII
Rates and Charges
8.1 Each month, Customer shall pay Texas Gas for the service hereunder an
amount determined in accordance with Section 5 of Texas Gas's FT Rate Schedule
contained in Texas Gas's FERC Gas Tariff, which Rate Schedule is by reference
made a part of this Agreement. The maximum rates for such service consist of a
monthly reservation charge multiplied by Customer's firm transportation demand
as specified in Section 2.1 herein. The reservation charge shall be billed as
of the effective date of this Agreement. In addition to the monthly reservation
charge, Customer agrees to pay Texas Gas each month the maximum commodity
charge up to Customer's Transportation Contract Demand. For any quantities
delivered by Texas Gas in excess of Customer's Transportation Contract Demand,
Customer agrees to pay the maximum FT overrun commodity charge. In addition,
Customer agrees to pay:
(a) Texas Gas's Fuel Retention percentage(s); provided, however, that
subject to Commission approval Customer shall be credited for any fuel
furnished by
3
<PAGE>
Customer under any separate firm transportation agreement between Texas
Gas and Customer which Customer uses to transport gas to the Point(s)
of Receipt hereunder for further transportation under this agreement.
(b) The currently effective GRI funding unit, if applicable, the currently
effective FERC Annual Charge Adjustment unit charge (ACA), the
currently effective Take-or-Pay surcharge, or any other then currently
effective surcharges, including but not limited to Order 636 Transition
Costs.
If Texas Gas declares force majeure which renders it unable to perform service
herein, then Customer shall be relieved of its obligation to pay demand charges
for that part of its FT Contract Demand affected by such force majeure event
until the force majeure event is remedied.
Unless otherwise agreed to in writing by Texas Gas and Customer, Texas Gas may,
from time to time, and at any time selectively after negotiation, adjust the
rate(s) applicable to any individual Customer; provided, however, that such
adjusted rate(s) shall not exceed the applicable Maximum Rate(s) nor shall they
be less than the Minimum Rate(s) set forth in the currently effective Sheet No.
10 of this Tariff. If Texas Gas so adjusts any rates to any Customer, Texas Gas
shall file with the Commission any and all required reports respecting such
adjusted rate.
8.2 In the event Customer utilizes a Secondary Point(s) of Receipt or Delivery
for transportation service herein, Customer will continue to pay the monthly
reservation charges as described in Section 8.1 above. In addition, Customer
will pay the maximum commodity charge applicable to the zone in which gas is
received and redelivered up to Customer's Transportation Contract Demand and
the maximum overrun commodity charge for any quantities delivered by Texas Gas
in excess of Customer's winter season or summer season Transportation Contract
Demand. Customer also agrees to pay the ACA, Take-or-Pay Surcharge, GRI
charges, fuel retention charge, and any other effective surcharges, if
applicable, as described in Section 8.1 above.
8.3 It is further agreed that Texas Gas may seek authorization from the
Commission and/or other appropriate body for such changes to any rate(s) and
terms set forth herein or in Rate Schedule FT, as may be found necessary to
assure Texas Gas just and reasonable rates. Nothing herein contained shall be
construed to deny Customer any rights it may have under the Natural Gas Act, as
amended, including the right to participate fully in rate proceedings by
intervention or otherwise to contest increased rates in whole or in part.
8.4 Customer agrees to fully reimburse Texas Gas for all filing fees, if any,
associated with the service contemplated herein which Texas Gas is required to
pay to the Commission or any agency having or assuming jurisdiction of the
transactions contemplated herein.
8.5 Customer agrees to execute or cause its supplier or processor to execute a
separate agreement with Texas Gas providing for the transportation of any
liquids and/or liquefiables, and agrees to pay or reimburse Texas Gas, or cause
Texas Gas to be paid or reimbursed, for any applicable rates or charges
associated with the transportation of such liquids and/or liquefiables, as
specified in Section 24 of the General Terms and Conditions of Texas Gas's FERC
Gas Tariff.
ARTICLE IX
Miscellaneous
9.1 Texas Gas's Transportation Service hereunder shall be subject to receipt of
all requisite regulatory authorizations from the Commission, or any successor
regulatory authority, and any other necessary governmental authorizations, in a
manner and form acceptable to Texas Gas. The parties
4
<PAGE>
agree to furnish each other with any and all information necessary to
comply with any laws, orders, rules, or regulations.
9.2 Except as may be otherwise provided, any notice, request, demand,
statement, or bill provided for in this Agreement or any notice which a party
may desire to give the other shall be in writing and mailed by regular mail, or
by postpaid registered mail, effective as of the postmark date, to the post
office address of the party intended to receive the same, as the case may be,
or by facsimile transmission, as follows:
Texas Gas
Texas Gas Transmission Corporation
3800 Frederica Street
Post Office Box 20008
Owensboro, Kentucky 42304
Attention: Gas Revenue Accounting (Billings and Statements)
Marketing Administration (Other Matters)
Gas Transportation and Capacity Allocation (Nominations)
Fax (502) 688-6817
Customer
Union Pacific Fuels, Inc.
801 Cherry Street
Fort Worth, Texas 76102
Attention: Mr. Scott Harwell (Notices and Customer Services)
Mr. Al Shields (Scheduling/Confirmations)
Mr. Dick Graham (Invoices and Statements)
The address of either party may, from time to time, be changed by a party
mailing, by certified or registered mail, appropriate notice thereof to the
other party. Furthermore, if applicable, certain notices shall be considered
duly delivered when posted to Texas Gas's Electronic Bulletin Board, as
specified in Texas Gas's tariff.
9.3 This Agreement shall be governed by the laws of the State of Kentucky.
9.4 Each party agrees to file timely all statements, notices, and petitions
required under the Commission's Regulations or any other applicable rules or
regulations of any governmental authority having jurisdiction hereunder and to
exercise due diligence to obtain all necessary governmental approvals required
for the implementation of this Transportation Agreement.
9.5 All terms and conditions of Rate Schedule FT and the attached Exhibits
"A", "A-I", "B", and "C" are hereby incorporated to and made a part of this
Agreement.
9.6 This contract shall be binding upon and inure to the benefit of the
successors, assigns, and legal representatives of the parties hereto.
9.7 Neither party hereto shall assign this Agreement or any of its rights or
obligations hereunder without the consent in writing of the other party.
Notwithstanding the foregoing, either party may assign its right, title and
interest in, to and by virtue of this Agreement including any and all
extensions, renewals, amendments, and supplements thereto, to a trustee or
trustees, individual or corporate, as security for bonds or other obligations
or securities, without such trustee or trustees
5
<PAGE>
assuming or becoming in any respect obligated to perform any of the obligations
of the assignor and, if any such trustee be a corporation, without its being
required by the parties hereto to qualify to do business in the state in which
the performance of this Agreement may occur, nothing contained herein shall
require consent to transfer this Agreement by virtue of merger or consolidation
of a party hereto or a sale of all or substantially all of the assets of a
party hereto, or any other corporate reorganization of a party hereto.
9.8 This Agreement insofar as it is affected thereby, is subject to all valid
rules, regulations, and orders of all governmental authorities having
jurisdiction.
9.9 No waiver by either party of any one or more defaults by the other in the
performance of any provisions hereunder shall operate or be construed as a
waiver of any future default or defaults whether of a like or a different
character.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed by their respective representatives thereunto duly authorized, on the
day and year first above written.
ATTEST: TEXAS GAS TRANSMISSION CORPORATION
/s/ By /s/
- ------------------------------- ---------------------------------------
Asst. Secretary Vice President
WITNESSES: UNION PACIFIC FUELS, INC.
/s/ By /s/
- ------------------------------- ---------------------------------------
Asst. Secretary Vice President
/s/
- ------------------------------- ---------------------------------------
Date of Execution by Customer:
- -------------------------------
6
<PAGE>
EXHIBIT "A-I"
SECONDARY POINT(S) OF RECEIPT
<TABLE>
<CAPTION>
TGT
Meter
Lateral Segment Zone No. DRN Supply Point
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NORTH LOUISIANA
Carthage-Haughton 1 2102 152451 Champlin
1 9805 43386 Delhi
1 9051 7148 Grigsby
1 8116 42473 Texas Eastern-Sligo
1 9884 49099 Valero-Carthage
Haughton-Sharon 1 8003 43390 Barksdale
1 2455 38387 Beacon
1 9866 44088 Cornerstone-Ada
1 2340 7787 F.E. Hargraves-Minden
1 2186 7790 LGI #1
1 2456 7046 McCormick
1 2457 7788 Minden-Hunt
1 2459 11259 Minden Pan-Am #1
1 9819 43554 Nelson-Sibley
1 9461 43555 Olin-McGoldrick
1 2760 38250 Sligo Plant
1 9834 49082 Texaco-Athens
Sharon 1 2145 38281 Claiborne
1 9439 185980 Energy Management-Antioch
1 2010 7795 Fina Oil-HICO
1 9818 7789 PGC-Bodcaw
1 2757 7792 Texas Eastern-Sharon
Sharon-East 1 9418 171295 Associated-Calhoun
1 2631 38310 Calhoun Plant
1 2632 38300 Dubach
1 2202 144066 Ergon-Monroe
1 8760 9334 Lonewa
1 8020 9217 MRT-Bastrop
1 9302 9335 Munce
1 9812 43556 Par Minerals/Downsville
1 9823 43559 Reliance-Bernice
1 2612 10799 Reliance-West Monroe
1 2634 9339 Southwest-Guthrie
EAST
Bosco-Eunice SL 2015 6512 Amerada Hess
SL 2016 6513 Amerada Hess-South Lewisburg
SL 2385 6517 D.B. McClinton #1
SL 9844 6507 Germany Oil-Church Point
SL 2288 6508 Great Southern-Mowata #2
SL 9804 6545 Great Southern-Mowata #3
SL 8142 6549 Ritchie
SL 2740 6499 Superior-Pure
</TABLE>
A-I-1
<PAGE>
<TABLE>
<CAPTION>
TGT
Meter
Lateral Segment Zone No. DRN Supply Point
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SOUTHEAST
Blk. 8-Morgan City SL 2198 10590 Bois D'Arc
SL 9142 140570 Bois D'Arc-Pelican Lake
SL 2109 31917 Chevron-Block 8
SL 2638 31567 Coon Point
SL 2845 10588 Lake Pagie
SL 2460 43557 Peltex Deep Saline #1
SL 2480 31554 S.S. 41
SL 9471 43569 Sohio
SL 2755 10587 Texaco-Bay Junop
SL 9836 10595 Texaco-Dog Lake
SL 2463 43572 Toce Oil
SL 9883 10591 Zeit-Lake Pagie
Henry-Lafayette SL 8190 10902 Faustina-Henry
SL 2790 42612 Henry Hub
Lafayette-Eunice SL 2125 8741 California Co.-North Duson
SL 2138 6500 California Co.-South Bosco #2
SL 2389 8737 Duson
SL 9837 43488 Excel-Judice
SL 2601 8732 Fina Oil-Anslem Coulee
SL 8040 6525 Florida
SL 2290 6544 Gulf Transport-Church Pt.
SL 9906 38741 Quintana-South Bosco
SL 9005 6538 Rayne-Columbia Gulf
SL 8067 8736 South Scott
SL 2810 8738 Tidewater-North Duson
SL 8051 8727 Youngsville
Maurice-Freshwater SL 9501 204880 Araxas-Abbeville
SL 2147 10898 CNG-Hell Hole Bayou
SL 2203 10890 Deck Oil-Perry/Hope
SL 9160 140571 LLOG-Abbeville
SL 2394 10906 LRC-Theall
SL 9800 43550 May Petroleum
SL 2748 127418 Parc Perdue
SL 2749 10896 Parc Perdue 2
SL 9830 43558 R&R Res-Abbeville
SL 9434 171296 Southwestern-Perry
SL 2706 40933 Sun Ray
SL 9422 160243 UNOCAL-Freshwater Bayou
SL 2840 10900 UNOCAL-N. Freshwater Bayou
Morgan City-Lafayette SL 2064 43425 Amoco-Charenton
SL 9173 10277 ANR-Calumet (Rec.)
SL 9803 38341 Atlantic
SL 9809 43733 B.H. Petroleum-S.E. Avery
SL 9881 80583 Bridgeline-Berwick
SL 2085 10270 British American-Ramos
SL 9412 185979 Equitable-Lake Peigneur
SL 9047 8223 Florida Gas-E.B. Pigeon
SL 2454 8215 FMP/Bayou Postillion
</TABLE>
A-I-2
<PAGE>
<TABLE>
<CAPTION>
TGT
Meter
Lateral Segment Zone No. DRN Supply Point
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SOUTHEAST (Cont.) SL 8059 10279 Franklin
SL 9437 171297 Hunt Oil-Taylor Point
SL 9502 211243 Hunt Oil-East Taylor Point
SL 9854 43546 Linder Oil-Bayou Penchant
SL 9853 60164 Linder Oil-Garden City
SL 2189 43561 Rutledge Deas
SL 2636 8240 Shell-Bayou Pigeon
SL 8149 8235 SONAT-East Bayou Pigeon
SL 2035 10264 Southwest-Jeanerette
SL 9895 59632 Texaco-Bayou Sale
SL 8205 10272 Transco-Myette Point
SL 9829 10263 Trunkline-Centerville
Thibodaux-Morgan City SL 2250 33435 A. Glassell-Chacahoula
SL 2335 186009 Amoco-North Rousseau
SL 2835 6912 Lake Palourde
SL 9873 8875 Linder Oil-Chacahoula
SL 9175 124990 LLOG-Chacahoula
SL 9847 43636 LRC-Choctaw
SL 2440 8877 Magna-Chacahoula #1
SL 2445 8878 Magna-St. John #2
SL 2470 60191 Patterson-Chacahoula
SL 2135 10145 Simon Pass
SL 9481 144064 Transco-Thibodaux
SOUTH
Egan-Eunice SL 9003 38233 Egan
SL 9415 171298 Tejas Power-Egan
SOUTHWEST
East Cameron-Lowry SL 2581 30074 E.C. 14
SL 2033 43548 Little Cheniere-Arco
SL 2034 43549 Little Cheniere-Linder
SL 2392 7561 LRC-Grand Cheniere
Lowry-Eunice SL 9843 156905 Mobil-Lowry
SL 9446 7580 NGPL-Lowry
SL 2437 149325 ENOGEX/NGPL Tap Washita
SL 9169 149326 TEX SW/NGPL Washita
SL 9171 149313 Transok/NGPL Inter #2 Beckham
SL 9170 149321 Transok/NGPL Inter #2 Custer
SL 9172 149329 Transok/NGPL Waggs Wheeler
WEST
Iowa-Eunice SL 9507 21777 Camex-China
SL 8170 8613 Iowa
SL 9445 8617 Kilroy Riseden-Woodlawn
Mallard Bay-Woodlawn SL 2140 8610 California Co.-South Thornwell
SL 2615 7585 Caroline Hunt Sands-S. Thornwell
SL 2207 60169 Franks Petroleum-Chalkley
SL 9028 43506 Gas Energy Development-Hayes
SL 2355 81054 Humble-Chalkley
SL 2383 7567 IMC Wintershall-Chalkley
</TABLE>
A-I-3
<PAGE>
<TABLE>
<CAPTION>
TGT
Meter
Lateral Segment Zone No. DRN Supply Point
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
WEST (Cont.) SL 8071 7571 LRC-Mallard Bay
SL 9828 8585 Riverside-Lake Arthur
SL 2635 107453 Shell-Chalkley
SL 2822 7586 Superior-S. Thornwell
SL 2885 8603 Union Texas-Welsh
W.C. 294
Entering at ANR- SL 9026 29497 W.C. 167/132
Eunice SL 9136 55151 W.C. 167/Near Shore
SL 9440 186036 W.C. 293/306A
SL 9396 60204 W.C. 293/H.I. 120/H.I. 120-128
SL 9383 43734 W.C. 293/H.I. 167/H.I. 167-166
SL 2838 29693 W.C. 294
HIOS
Offshore Points
entering at ANR-Eunice H.I. 247
SL 2868 33213 H.I. A-247/A-244A/A-231
SL 9176 154807 H.I. A-247/A-245
SL 9135 41343 W.C. 167/HIOS Mainline
H.I. 283
SL 9894 49103 H.I. A-283/A-283A
SL 9487 197839 H.I. A-283/A-443
SL 2855 33296 H.I. A-285/A-282
H.I. 303
SL 2858 43524 H.I. A-302A/A-303
H.I. 323
SL 9468 21334 H.I. A-323
H.I. 343
SL 9467 21339 H.I. A-343/A-355
H.I. A-345
SL 2863 33293 H.I. A-334A/A-335
SL 9327 43529 H.I. A-345/A-325A
H.I. A-498
SL 2529 197837 H.I. A-498/A-451
SL 2536 197838 H.I. A-498/A-462/Various
SL 2534 60171 H.I. A-498/A-489
SL 2533 60173 H.I. A-498/A-489/A-474
SL 2535 60174 H.I. A-498/A-489/A-499
SL 9371 60175 H.I. A-498/A-490
SL 2856 43723 H.I. A-498/A-517
H.I. A-539
SL 2537 60177 H.I. A-539/A-480
SL 9365 60178 H.I. A-539/A-511
SL 9508 216653 H.I. A-539/A-528
SL 9376 54856 H.I. A-539/A-532
SL 9328 60179 H.I. A-539/A-550
</TABLE>
A-I-4
<PAGE>
<TABLE>
<CAPTION>
TGT
Meter
Lateral Segment Zone No. DRN Supply Point
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HIOS (Cont.) SL 9901 81051 H.I. A-539/A-552/A-551
SL 9889 49104 H.I. A-539/A-552/A-553
SL 2539 60181 H.I. A-539/A-567
SL 9380 60182 H.I. A-539/A-568
H.I. 546
SL 9466 21336 H.I. A-546/A-548/A-545
H.I. A-555
SL 2857 36875 H.I. A-531A
SL 2861 43122 H.I. A-536C
SL 2862 43123 H.I. A-537B
SL 9127 54854 H.I. A-537B/A-537D/A-556
SL 9308 60183 H.I. A-555
SL 9125 54858 H.I. A-555/A-537D/A-556
SL 9887 49105 H.I. A-555/A-557A/A-556
H.I. A-573
SL 9909 60369 H.I. A-573/A-384/G B 224
SL 2859 43531 H.I. A-573B Complex
SL 2542 43721 H.I. A-595CF Complex
H.I. A-582
SL 9165 111967 H.I. A-582/A-561A
SL 9469 221329 H.I. A-582/A-563/A-564
SL 9470 221328 H.I. A-582/A-582C
SL 9133 49106 H.I. A-582/E.B. 110
SL 9377 49107 H.I. A-582/E.B. 160/Various
SL 9134 81052 H.I. A-582/E.B. 165
MAINLINE
Bastrop-North 3 8082 6463 ANR-Slaughters
3 2061 4308 Bee-Hunter
3 2072 6385 Blair
4 1229 108797 Cincinnati Gas and Electric Co.
2 8124 41187 Dyersburg
3 9459 186011 Gibbs-Henderson
3 9432 186010 Har-Ken/Austin Jennings #1
3 9530 6461 Har-Ken/Murray
1 9303 1484 Helena #2
4 1433 140534 Indiana Utilities Corporation
4 1489 132837 Lawrenceburg Gas Company
4 1715 16281 Lebanon-Columbia
4 1247 16283 Lebanon-Congas
4 1859 16284 Lebanon-Texas Eastern
3 9527 44100 Liberty-South Hill
1 1600 132977 Memphis Light, Gas and Water Division
3 8073 6134 Midwestern-Whitesville
1 3801 134577 Pooling Receipt-Zone 1
3 9525 6447 Pride Energy No. 1
3 9141 107451 Reynolds-Narge Creek
3 5800 128355 Slaughters-Storage Complex (Withdraw)
3 1810 132845 Southern Indiana Gas and Electric Co.
A-1-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TGT
Meter
Lateral Segment Zone No. DRN Supply Point
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MAINLINE (Cont.) 4 1872 125662 Union Light, Heat and Power Co.
3 9404 40221 United Cities-Barnsley
2 1885 132856 Western Kentucky Gas Company
3 1906 108800 Western Kentucky Gas Company
3 1912 21778 Western Kentucky Gas Company
4 1981 132852 Western Kentucky Gas Company
Eunice-Zone SL/1 Line SL 9035 6519 ANR-Eunice
SL 9084 105453 Bayou Pompey
SL 8107 8120 Evangeline
SL 8046 8121 Mamou
SL 3800 124803 Pooling Receipt-Zone SL
SL 3900 154805 SL Lateral Terminus
Zone SL/1 Line-Bastrop 1 2020 44085 Arkla-Perryville
1 9870 44087 Channel Explo.-Chicksaw Creek
1 9826 9332 Delhi-Ewing
1 2361 9321 Guffey-Millhaven
1 9814 43538 Hogan-Davis Lake
1 8063 9670 Pineville (LIG)
1 2648 9214 Spears
1 9832 43414 Wintershall-Clarks
</TABLE>
A-I-6
<PAGE>
CONTRACT NO. T11378
Contract Demand 90,000 MMBtu/D
EXHIBIT "B"
POINT(S) OF DELIVERY
ZONE 4
<TABLE>
<CAPTION>
Meter MAOP MDP*
No. DRN Name and Description Facilities (psig) (psig)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Columbia Gas Transmission Corporation
1715 16281 LEBANON-COLUMBIA - S9, T3, R4, Warren (1) 670 500
County, OH
</TABLE>
NOTE: SEE ATTACHED STANDARD FACILITIES KEY FOR EXPLANATION OF FACILITIES.
*MINIMUM DELIVERY PRESSURE
B-1
<PAGE>
Contract No. T-11378
-------
Firm Transportation
Agreement
Exhibit C
Supply Lateral Capacity
Union Pacific Fuels, Inc.
Preferential Rights
MMBtu/d
Supply Lateral Winter Summer
------ ------
Zone 1 Supply Lateral(s)
- --------------------------------
North Louisiana Leg: 17,972 17,972
-------------------------------------
Total Zone 1: 17,972 17,972
Zone SL Supply Lateral(s)
- --------------------------------
East Leg: 231 231
Southeast Leg: 20,482 20,482
South Leg: 11,573 11,573
Southwest Leg: 11,447 11,447
West Leg: 13,208 13,208
WC-294: 3,714 3,714
HIOS: 16,773 16,773
-------------------------------------
Total Zone SL: 77,428 77,428
-------------------------------------
Grand Total: 95,400 95,400
=====================================
Effective Date: November 1, 1997
<PAGE>
STANDARD FACILITIES KEY
(1) Measurement facilities are owned, operated, and maintained by Texas
Gas Transmission Corporation.
(2) Measurement facilities are owned, operated, and maintained by ANR
Pipeline Company.
(3) Measurement facilities are owned, operated, and maintained by Arkansas
Louisiana Gas Company.
(4) Measurement facilities are owned by Texas Gas Transmission Co
rporation and operated and maintained by Kerr-McGee Corporation.
(5) Measurement facilities are owned, operated, and maintained by Koch
Gateway Pipeline Company.
(6) Measurement facilities are owned by Texas Gas Transmission Corporation
and operated and maintained by Delhi Gas Pipeline Corporation.
(7) Measurement facilities are owned, operated, and maintained by
Kerr-McGee Corporation.
(8) Measurement facilities are owned, operated, and maintained by
Louisiana Intrastate Gas Corporation.
(9) Measurement facilities are owned, operated, and maintained by
Trunkline Gas Company.
(10) Measurement facilities are owned, operated, and maintained by Columbia
Gulf Transmission Company.
(11) Measurement facilities are owned by Texas Gas Transmission Corporation
and operated and maintained by Columbia Gulf Transmission Company.
(12) Measurement facilities are owned, operated, and maintained by Florida
Gas Transmission Company.
(13) Measurement facilities are owned by Texas Gas Transmission Corporation
and operated and maintained by ANR Pipeline Company.
(14) Measurement facilities are owned by Champlin Petroleum Company and
operated and maintained by ANR Pipeline Company.
(15) Measurement facilities are owned by Transcontinental Gas Pipe Line
Corporation and operated and maintained by ANR Pipeline Company.
(16) Measurement facilities are jointly owned by others and operated and
maintained by ANR Pipeline Company.
(17) Measurement facilities are owned by Koch Gateway Pipeline Company and
operated and maintained by ANR Pipeline Company.
(18) Measurement facilities are owned by Texas Gas Transmission Corporation
and operated and maintained by Texas Eastern Transmission Corporation.
(19) Measurement facilities are owned by Texas Gas Transmission Corporation
and operated and maintained by Natural Gas Pipeline Company of
America.
(20) Measurement facilities are owned by Louisiana Intrastate Gas
Corporation and operated and maintained by Texas Gas Transmission
Corporation.
(21) Measurement facilities are owned, operated, and maintained by Texas
Eastern Transmission Corporation.
<PAGE>
(22) Measurement facilities are owned by Kerr-McGee Corporation and
operated and maintained by ANR Pipeline Company.
(23) Measurement facilities are operated and maintained by ANR Pipeline
Company.
(24) Measurement facilities are owned, operated, and maintained by
Transcontinental Gas Pipe Line Corporation.
(25) Measurement facilities are owned by Texas Gas Transmission Corporation
and operated and maintained by Tennessee Gas Pipeline Company.
(26) Measurement facilities are owned, operated, and maintained by Northern
Natural Gas Company.
(27) Measurement facilities are owned and maintained by Faustina Pipeline
Company and operated by Texas Gas Transmission Corporation.
(28) Measurement facilities are owned by Samedan and operated and
maintained by ANR Pipeline Company.
(29) Measurement facilities are owned by Texas Gas Transmission Corporation
and operated and maintained by CNG Producing.
(30) Measurement facilities are owned, operated, and maintained by Devon
Energy Corporation.
(31) Measurement facilities are owned by Total Minatome Corporation and
operated and maintained by Texas Gas Transmission Corporation.
(32) Measurement facilities are owned by Texas Gas Transmission Corporation
and operated and maintained by Trunkline Gas Company.
(33) Measurement facilities are owned by Linder Oil Company and operated
and maintained by Texas Gas Transmission Corporation.
(34) Measurement facilities are owned, operated, and maintained by
Mississippi River Transmission Corporation.
(35) Measurement facilities are owned, operated, and maintained by Texaco
Inc.
(36) Measurement facilities are owned by Texas Gas Transmission Corporation
and operated and maintained by Louisiana Resources Company.
(37) Measurement facilities are owned, operated, and maintained by
Louisiana Resources Company.
(38) Measurement facilities are owned by Oklahoma Gas Pipeline Company and
operated and maintained by ANR Pipeline Company.
(39) Measurement and interconnecting pipeline facilities are owned and
maintained by Louisiana Resources Company. The measurement facilities
are operated and flow controlled by Texas Gas Transmission
Corporation.
(40) Measurement facilities are owned by Hall-Houston and operated and
maintained by ANR Pipeline Company.
(41) Measurement facilities are owned, operated, and maintained as
specified in Exhibit "B".
<PAGE>
(42) Measurement facilities are owned by Enron Corporation and operated and
maintained by Texas Gas Transmission Corporation.
(43) Measurement facilities are owned by United Cities Gas Company and
operated and maintained by TXG Engineering, Inc.
(44) Measurement facilities are owned, operated, and maintained by NorAm
Gas Transmission Company.
(45) Measurement facilities are owned by Falcon Seaboard Gas Company and
operated and maintained by Texas Gas Transmission Corporation.
(46) Measurement facilities are owned by ANR Pipeline Company and operated
and maintained by High Island Offshore System.
(47) Measurement facilities are owned by Forest Oil Corporation, et al.,
and operated and maintained by Tenneco Gas Transportation Company.
(48) Measurement facilities are owned by PSI, Inc., and operated and
maintained by ANR Pipeline Company.
(49) Measurement facilities are owned, operated, and maintained by
Tennessee Gas Pipeline Company.
(50) Measurement facilities are owned, operated, and maintained by Colorado
Interstate Gas Company.
(51) Measurement facilities are owned by Producer's Gas Company and
operated and maintained by Natural Gas Pipeline Company of America.
(52) Measurement facilities are owned by Zapata Exploration and operated
and maintained by ANR Pipeline Company.
(53) Measurement facilities are jointly owned by Amoco, Mobil, and Union;
operated and maintained by ANR Pipeline Company.
(54) Measurement facilities are owned, operated, and maintained by VHC Gas
Systems, L.P.
(55) Measurement facilities are owned by Walter Oil and Gas and operated
and maintained by Columbia Gulf Transmission Company.
(56) Measurement facilities are operated and maintained by Natural Gas
Pipeline Company of America.
(57) Measurement facilities are operated and maintained by Texas Gas
Transmission Corporation.
(58) Measurement facilities are operated and maintained by Tennessee Gas
Pipeline Company.
(59) Measurement facilities are operated and maintained by Columbia Gulf
Transmission Company.
(60) Measurement facilities are owned, operated, and maintained by
Midwestern Gas Transmission Company.
(61) Measurement facilities are owned, operated, and maintained by Western
Kentucky Gas Company.
(62) Measurement facilities are owned by Egan Hub Partners, L. P., and
operated and maintained by Texas Gas Transmission Corporation.
<PAGE>
EXECUTION COPY
THIRD AMENDMENT dated as of March 2, 1998
(this "Amendment"), among UNION PACIFIC RESOURCES
GROUP INC., a Utah corporation (the "Borrower"), the
undersigned financial institutions party to the
Credit Agreement referred to below (the "Banks"),
CHASE BANK OF TEXAS, N.A., as administrative agent
for the Banks (in such capacity, the "Administrative
Agent"), THE CHASE MANHATTAN BANK, as auction
administration agent (in such capacity, the "Auction
Administration Agent"), BANK OF AMERICA NT&SA, as
documentation agent (in such capacity, the
"Documentation Agent") and NATIONSBANK OF TEXAS,
N.A., as syndication agent (in such capacity, the
"Syndication Agent").
A. Reference is made to the Competitive Advance/Revolving
Credit Agreement dated as of April 16, 1996, as amended (the "Credit
Agreement"), among the Borrower, the Banks, the Administrative Agent, the
Auction Administration Agent, the Documentation Agent and the Syndication Agent.
Capitalized terms used but not otherwise defined herein have the meanings
assigned to them in the Credit Agreement.
B. The Borrower has requested that the Banks amend certain
provisions of the Credit Agreement. The Banks are willing to do so, subject to
the terms and conditions of this Amendment.
Accordingly, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Amendment to Article I. (a) The
following amendments are made to the definitions contained
in Article I of the Credit Agreement:
<PAGE>
2
(i) The definition of "Applicable Margin" is hereby amended
by (A) replacing the reference to "Category 5" with "Category 6" in
clause (i) thereof, (B) replacing Category 5 in its entirety as set
forth below and (C) inserting the following Category 6:
<TABLE>
<CAPTION>
Applicable Applicable
Margin for Margin for
Adjusted Eurodollar Applicable
CD Rate Rate Margin for
Contract Contract Facility
Ratings Borrowings Borrowings Fees
<S> <C> <C> <C>
Category 5
BBB by S&P;
.35% .225% .15%
Baa2 by Moody's
Category 6
Lower than BBB by .425% .30% .15%
S&P;
Lower than Baa2 by
Moody's
</TABLE>
(ii) The definition of "Existing Credit Agreements" is hereby
replaced in its entirety with the following: "Existing Credit
Agreements" means collectively (a) the 364 Day Competitive
Advance/Revolving Credit Agreement, dated as of November 25, 1997 (as
amended, extended, renewed or restated from time to time), among the
Borrower, Texas Commerce Bank National Association, as administrative
agent, The Chase Manhattan Bank, as auction administration agent, Bank
of America NT&SA, as documentation agent, NationsBank of Texas, N.A.,
as syndication agent and the banks party thereto and (b) the 364 Day
Competitive Advance/Revolving Credit Agreement (as amended, extended,
renewed or restated from time to time), to be entered into in March
1998 among the Borrower, The Chase Manhattan Bank, as administrative
agent, Bank of Montreal, as syndication agent and the banks party
thereto.
<PAGE>
3
(b) The following new definitions are hereby added to Article I of the
Credit Agreement in their proper alphabetical order:
(i) "Acquisition Subsidiary" means Union Pacific Resources
Inc., a Canadian corporation and wholly owned Subsidiary of the
Borrower.
(ii) "Designated Subsidiary" has the meaning
specified in Section 5.02(b)(ii).
(iii) "Effective Date" means the closing date under the
Existing Credit Agreement referred to in clause (b) of the definition
of "Existing Credit Agreements".
(iv) "Material Debt" has the meaning specified in
Section 6.01(e).
(v) "Norcen" means Norcen Energy Resources
Limited, a Canadian corporation.
SECTION 2. Amendment to Section 4.01. (a)
Section 4.01(g) of the Credit Agreement is hereby amended by
replacing the reference to "5.02(a)(i)" with "5.02(a)".
(b) Section 4.01 of the Credit Agreement is hereby amended by
inserting the following:
(m) No "Event of Default" under either of the Existing Credit
Agreements or any event or existence of any circumstance which, with
the giving of notice or lapse of time or both, would become an Event of
Default under either of the Existing Credit Agreements exists.
SECTION 3 Amendment to Section 5.02(a)(i). Section 5.02(a)(i)
of the Credit Agreement is hereby amended by (a) inserting immediately after the
reference to "paragraph (i)" therein "(A)" and (b) inserting at the end thereof
"and (B) so long as Norcen's capital stock constitutes margin stock (within the
meaning of Regulation U issued by the Board of Governors of the Federal Reserve
System), such portion (but only such portion) of Norcen's capital stock as it
shall be necessary to exclude from the operation of this paragraph in order to
avoid margin stock constituting more than 25% of the value of all assets subject
to this Section 5.02(a)".
SECTION 4. Amendment to Section 5.02(a)(ii).
Section 5.02(a)(ii) of the Credit Agreement is hereby
<PAGE>
4
amended by (a) deleting the "and" immediately after the ";" in clause (F), (b)
inserting a new clause (G) that reads as follows: "any Liens securing Debt of
Borrower under the Existing Credit Agreements, so long as the Banks are granted
Liens of equal priority upon any property to which such Liens under the Existing
Credit Agreements attach; and", (c) replacing the reference to "(G)" with "(H)"
and (d) replacing the reference to "(E)" in clause (G) with "(G)".
SECTION 5. Amendment to Section 5.02(b). Section 5.02(b) of
the Credit Agreement is hereby replaced in its entirety with the following:
(b) Debt. (i) Create or suffer to exist any Debt if,
immediately after giving effect to such Debt and the receipt and
application of any proceeds thereof, the aggregate amount of Debt of
the Borrower and its consolidated Subsidiaries, on a consolidated
basis, would exceed (A) for the period from the Effective Date through
the date eighteen months thereafter, 75%, and (B) at anytime
thereafter, 65%, of the sum of the total consolidated stockholders'
equity of the Borrower and its Subsidiaries as shown on the most recent
consolidated balance sheet required to be delivered to the Banks
pursuant to Section 5.01(b), and the aggregate amount of Debt of the
Borrower and its consolidated Subsidiaries, on a consolidated basis (it
being understood that for purposes of determining compliance with this
covenant, guarantees by the Borrower of up to $200,000,000 of Debt of
OCI Wyoming shall not constitute Debt of the Borrower);
(ii) not permit the Acquisition Subsidiary, Norcen or any of
their respective Subsidiaries (collectively, the "Designated
Subsidiaries") to incur any Debt which would result in the aggregate
principal amount of Debt (other than Debt to the Borrower or any other
Subsidiary) of all the Designated Subsidiaries, on a consolidated
basis, exceeding US$1,400,000,000; and
(iii) not permit any of its Subsidiaries (other than the
Designated Subsidiaries) to incur any Debt which would result in the
aggregate principal amount of Debt (other than Debt to the Borrower or
any other Subsidiary) of all Subsidiaries (other than the Designated
Subsidiaries), on a consolidated basis, exceeding US$150,000,000.
SECTION 6. Amendment to Section 5.02(e). Section 5.02(e)
of the Credit Agreement is hereby amended by (a)
<PAGE>
5
replacing the reference to "65%" with "(I) 75% during the period from the
Effective Date through the date eighteen months thereafter and (II) 65% at any
time thereafter" and (b) inserting the following sentence at the end thereof:
"For purposes of determining compliance with the above covenant, guarantees by
the Borrower of up to $200,000,000 of Debt of OCI Wyoming shall not constitute
Debt of the Borrower.".
Section 7. Amendment to Section 6.01. (a) Section 6.01(e)
of the Credit Agreement is hereby replaced in its entirety with the following:
(e)(i) the Borrower or any Principal Subsidiary shall fail to
pay any amount of principal or interest when due (or within any
applicable grace period) with respect to any Debt of the Borrower or
any Principal Subsidiary, whether such Debt now exists or shall
hereafter be created, in an aggregate outstanding principal amount
exceeding $50,000,000 ("Material Debt") or (ii) an event of default as
defined in any mortgage, indenture or instrument under which there may
be issued, or by which there may be secured or evidenced, any Debt of
the Borrower or any Principal Subsidiary, whether such Debt now exists
or shall hereafter be created, shall happen and shall result in
Material Debt becoming or being declared due and payable prior to the
date on which it would otherwise become due and payable, and such
declaration shall not be rescinded or annulled; or
(b) Section 6.01 of the Credit Agreement is hereby amended by
(a) inserting an "or" immediately after the ";" in clause (h) and (b) inserting
the following clause immediately after the "or" at the end of clause (h): "(i)
any "Event of Default" described in either of the Existing Credit Agreements
shall occur;".
SECTION 9. Principal Subsidiaries. Schedule II to the
Credit Agreement is hereby replaced in its entirety by the Schedule II
attached hereto.
SECTION 10. Representations, Warranties and Agreements.
The Borrower hereby represents and warrants to and agrees with each Bank, the
Administrative Agent, the Auction Administration Agent, the Documentation
Agent and the Syndication Agent that:
(a) The representations and warranties set forth in
Section 4.01 of the Credit Agreement, as amended
<PAGE>
6
hereby, are true and correct in all material respects with the same
effect as if made on the Amendment Effective Date (as defined herein),
except to the extent such representations and warranties expressly
relate to an earlier date.
(b) The Borrower has the requisite power and authority to
execute, deliver and perform its obligations under this Amendment.
(c) The execution, delivery and performance by the Borrower of
this Amendment (i) have been duly authorized by all requisite action
and (ii) will not (A) violate (x) any provision of law, statute, rule
or regulation, or of the certificate of incorporation, by-laws or other
constitutive documents of the Borrower or any of its Subsidiaries, (y)
any order of any governmental court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign or (z) any provision of any indenture, any agreement for
borrowed money or any other material agreement or instrument to which
the Borrower or any of its Subsidiaries is a party or by which any of
them or any of their property is or may be bound, (B) be in conflict
with, result in a breach of or constitute (alone or with notice or
lapse of time or both) a default under any such indenture, agreement
for borrowed money or other material agreement or instrument or (C)
result in the creation or imposition of any Lien upon or with respect
to any property or assets now owned or hereafter acquired by the
Borrower or any of its Subsidiaries.
(d) This Amendment has been duly executed and delivered by the
Borrower. This Amendment and the Credit Agreement, as amended hereby,
constitutes a legal, valid and binding obligation of the Borrower,
enforceable against the Borrower in accordance with its terms, except
as enforceability may be limited by (i) any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and (ii) general principles
of equity.
(e) As of the Amendment Effective Date, no Event of Default or
any event which, with the giving of notice or the passage of time, or
both, would become an Event of Default has occurred and is continuing.
<PAGE>
7
SECTION 11. Conditions to Effectiveness. This Amendment shall
become effective on the date (the "Amendment Effective Date") that each of the
following conditions has been satisfied:
(a) The Administrative Agent shall have received duly executed
counterparts hereof which, when taken together, bear the authorized
signatures of the Borrower, the Administrative Agent, the Auction
Administration Agent, the Documentation Agent, the Syndication Agent
and the Majority Banks.
(b) The Effective Date occurs.
SECTION 12. Credit Agreement. Except as specifically stated
herein, the Credit Agreement shall continue in full force and effect in
accordance with the provisions thereof. As used therein, the terms "Agreement",
"herein", "hereunder", "hereto", "hereof" and words similar import shall, unless
the context otherwise requires, refer to the Credit Agreement as modified
hereby.
SECTION 13. Applicable Law. THIS AMENDMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 14. Counterparts. This Amendment may be executed
in any number of counterparts, each of which shall be an original but all of
which, when taken together, shall constitute but one instrument.
SECTION 15. Expenses. The Borrower agrees to reimburse the
Administrative Agent for its out-of-pocket expenses in connection with this
Amendment, including the reasonable fees, charges and disbursements of Cravath,
Swaine & Moore, counsel for the Administrative Agent.
<PAGE>
8
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their respective authorized officers as of the
date first above written.
UNION PACIFIC RESOURCES GROUP INC.
by
---------------------------------
Name:
Title:
CHASE BANK OF TEXAS, N.A., as
Administrative Agent and as a Bank
by
---------------------------------
Name:
Title:
NATIONSBANK OF TEXAS, N.A., as
Syndication Agent and as a Bank
by
---------------------------------
Name:
Title:
BANK OF AMERICA NT&SA, as
Documentation Agent and as a Bank
by
---------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as
Auction Administration Agent
by
---------------------------------
Name:
Title:
<PAGE>
9
NATIONAL WESTMINSTER BANK, PLC
NEW YORK BRANCH
by
---------------------------------
Name:
Title:
NASSAU BRANCH
by
---------------------------------
Name:
Title:
ABN AMRO BANK N.V., HOUSTON AGENCY
By: ABN AMRO North America, Inc.,
as Agent
by
---------------------------------
Name:
Title:
by
---------------------------------
Name:
Title:
BANK OF MONTREAL
by
---------------------------------
Name:
Title:
ROYAL BANK OF CANADA
by
---------------------------------
Name:
Title:
<PAGE>
10
CREDIT LYONNAIS NEW YORK BRANCH
by
---------------------------------
Name:
Title:
CREDIT SUISSE FIRST BOSTON
by
---------------------------------
Name:
Title:
by
---------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO
by
---------------------------------
Name:
Title
MELLON BANK, N.A.
by
---------------------------------
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN, LTD.,
NEW YORK BRANCH
by
---------------------------------
Name:
Title:
<PAGE>
11
Schedule II
Principal Subsidiaries
1. Union Pacific Resources Company
2. UP Fuels Marketing and Trading, Inc.
3. Rock Springs Royalty Company
4. Bitter Creek Coal Company
5. Union Pacific Resources Inc.
6. Norcen Energy Resources Limited
<PAGE>
================================================================================
U.S. $300,000,000 Exhibit 10.24
364 DAY COMPETITIVE ADVANCE/REVOLVING CREDIT AGREEMENT
among
UNION PACIFIC RESOURCES GROUP INC.,
as Borrower
and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
as Administrative Agent
and
THE CHASE MANHATTAN BANK,
as Auction Administration Agent
BANK OF AMERICA NT&SA,
as Documentation Agent
NATIONSBANK OF TEXAS, N.A.,
as Syndication Agent
and
THE BANKS NAMED HEREIN,
as Banks
Dated as of November 25, 1997
================================================================================
<PAGE>
364 DAY COMPETITIVE ADVANCE/REVOLVING CREDIT AGREEMENT
This 364 DAY COMPETITIVE ADVANCE/REVOLVING CREDIT AGREEMENT is
entered into as of November 25, 1997, among UNION PACIFIC RESOURCES GROUP INC.,
a Utah corporation (the "Borrower"), the Banks (hereinafter defined), TEXAS
COMMERCE BANK NATIONAL ASSOCIATION, as Administrative Agent (hereinafter
defined), THE CHASE MANHATTAN BANK, as Auction Administration Agent (hereinafter
defined), BANK OF AMERICA NT&SA, as Documentation Agent (as hereinafter
defined), and NATIONSBANK OF TEXAS, N.A., as Syndication Agent (as hereinafter
defined).
ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01 Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):
"Adjusted CD Rate" means, for each Adjusted CD Rate Advance
comprising part of the same Contract Borrowing, an interest rate per annum equal
to the lesser of (i) the Maximum Rate and (ii) the sum of (a) a rate per annum
equal to the product of (i) the Fixed CD Rate in effect for the Interest Period
then applicable to such Advance and (ii) 1.00 plus the Domestic Reserve
Percentage, plus (b) the Assessment Rate. For purposes hereof, the term "Fixed
CD Rate" shall mean the arithmetic average (rounded upwards, if necessary, to
the next 1/100 of 1%) of the prevailing rates per annum bid at or about 10:00
a.m. (New York City time) to Administrative Agent on the first Business Day of
the Interest Period then applicable to such Contract Borrowing by three
negotiable certificate of deposit dealers of recognized standing for the
purchase at face value of negotiable certificates of deposit of Administrative
Agent in a principal amount approximately equal to Administrative Agent's
portion of such Contract Borrowing and with a maturity comparable to such
Interest Period.
"Adjusted CD Rate Advance" means a Contract Advance that bears
interest based on the Adjusted CD Rate.
"Adjusted CD Rate Contract Borrowing" means a Contract
Borrowing that bears interest based on the Adjusted CD Rate.
"Administrative Agent" means Texas Commerce Bank National
Association, and its permitted successor or successors as administrative agent
for the Banks under this Agreement.
"Advance" means any Contract Advance or Competitive Advance.
"Affiliate" of a Person means any other individual or entity
who directly or indirectly controls, is controlled by, or is under common
control with that Person; provided that, for purposes of Sections 4.01(k) and
5.02(g) hereof, the Subsidiaries of Borrower shall not be considered Affiliates
of the Borrower or any Subsidiary (including any Restricted Subsidiary), and
Borrower shall not be considered an "Affiliate" of a Subsidiary (including any
Restricted Subsidiary). For purposes of such definition, "control," "controlled
by," and "under common control with" mean possession, directly or indirectly, of
power to direct or cause the direction of management or policies (whether
through ownership of voting securities or other interests, by contract, or
otherwise).
"Agent" means, collectively, Administrative Agent,
Documentation Agent, Syndication Agent, and Auction Administration Agent.
"Agreement" means this Agreement, as amended, modified and
supplemented from time to time, including, without limitation, any such
supplement in respect of Competitive Advances under Section 2.03.
<PAGE>
"Alternate Base Rate" means, for any day, a rate per annum
equal to the lesser of (i) the Maximum Rate and (ii) the greatest of (a) the
Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day
plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2
of 1%. For purposes hereof, "Prime Rate" shall mean the rate of interest per
annum publicly announced from time to time by the Administrative Agent as its
prime rate in effect at its principal office in Houston, Texas (which prime rate
may not necessarily represent the lowest or best rate actually charged to a
customer); each change in the Prime Rate shall be effective on the date such
change is publicly announced as effective. "Base CD Rate" shall mean the sum of
(a) the product of (i) the Three-Month Secondary CD Rate and (ii) 1.00 plus the
Domestic Reserve Percentage and (b) the Assessment Rate. "Three-Month Secondary
CD Rate" shall mean, for any day, the secondary market rate for three-month
certificates of deposit reported as being in effect on such day (or, if such day
shall not be a Business Day, the next preceding Business Day) by the Board of
Governors of the Federal Reserve System through the public information telephone
line of the Federal Reserve Bank of New York (which rate will, under the current
practices of such Board, be published in Federal Reserve Statistical Release
H.15(519) during the week following such day), or, if such rate shall not be so
reported on such day or such next preceding Business Day, the average (rounded
upwards, if necessary, to the next 1/16 of 1%) of the secondary market
quotations for three-month certificates of deposit of major money center banks
received at approximately 10:00 a.m. (New York City time) on such day (or, if
such day shall not be a Business Day, on the next preceding Business Day) by the
Administrative Agent from three New York City negotiable certificate of deposit
dealers of recognized standing selected by it. "Federal Funds Effective Rate"
shall mean, for any day, the weighted average (rounded upwards, if necessary, to
the next 1/16 of 1%) of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of
Dallas, or, if such rate is not so published for any day which is a Business
Day, the average (rounded upwards, if necessary, to the next 1/16 of 1%) of the
quotations for the day of such transactions received by the Administrative Agent
from three Federal funds brokers of recognized standing selected by it. If for
any reason the Administrative Agent shall have determined (which determination
shall be conclusive absent manifest error) that it is unable to ascertain the
Base CD Rate or the Federal Funds Effective Rate or both for any reason,
including the inability of the Administrative Agent to obtain sufficient
quotations in accordance with the terms hereof, the Alternate Base Rate shall be
determined without regard to clause (b) or (c),or both, of the first sentence of
this definition, as appropriate, until the circumstances giving rise to such
inability no longer exist. Any change in the Alternate Base Rate due to a change
in the Maximum Rate, Prime Rate, the Three-Month Secondary CD Rate or the
Federal Funds Effective Rate shall be effective on the effective date of such
change in the Maximum Rate, Prime Rate, the Three-Month Secondary CD Rate or the
Federal Funds Effective Rate, respectively.
"Alternate Base Rate Advance" means a Contract Advance which
bears interest computed at the Alternate Base Rate.
"Applicable Margin" means, on any date of determination of the
interest rate for any Adjusted CD Rate Contract Borrowing or Eurodollar Rate
Contract Borrowing or of any Facility Fees, the applicable percentage set forth
in the table below for the Type of Borrowing or Facility Fees, as appropriate,
which corresponds to the ratings (or implied ratings) established by both S&P
and Moody's applicable to the Borrower's senior, unsecured, non-credit-enhanced
long term indebtedness for borrowed money ("Index Debt") on such date of
determination:
<TABLE>
<CAPTION>
Applicable Margin Applicable Margin
for Adjusted CD for Eurodollar Applicable
Ratings Rate Contract Rate Contract Margin for
Borrowings Borrowings Facility Fees
===================================== ================== ================= =============
<S> <C> <C> <C>
Category 1
----------
Equal to or higher than A by S&P; .295% .17% .055%
Equal to or higher than A2 by Moody's
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Applicable Margin Applicable Margin
for Adjusted CD for Eurodollar Applicable
Ratings Rate Contract Rate Contract Margin for
Borrowings Borrowings Facility Fees
===================================== ================== ================= =============
<S> <C> <C> <C>
Category 2
----------
A- by S&P; .315% .19% .06%
A3 by Moody's
Category 3
----------
BBB+ by S&P; .35% .225% .075%
Baa1 by Moody's
Category 4
----------
BBB by S&P; .40% .275% .10%
Baa2 by Moody's
Category 5
----------
Lower than BBB by S&P; .425% .30% .15%
Lower than Baa2 by Moody's
</TABLE>
For purposes of the foregoing, (i) if neither Moody's nor S&P shall have in
effect a rating for Index Debt (other than by reason of the circumstances
referred to in the last sentence of this definition), then both such rating
agencies will be deemed to have established ratings for Index Debt in Category
5; (ii) if only one of Moody's or S&P shall have in effect a rating for Index
Debt, the Borrower and the Banks will negotiate in good faith to agree upon
another rating agency to be substituted by an amendment to this Agreement for
the rating agency which shall not have a rating in effect, and in the absence of
such amendment the Applicable Margin will be determined by reference to the
available rating; (iii) if the ratings established by Moody's and S&P shall fall
within different Categories, the Applicable Margin shall be determined by
reference to the numerically lower Category; (for example, if the rating from
S&P is in Category 1 and the rating from Moody's is in Category 2, the
Applicable Margin shall be determined by reference to Category 1); and (iv) if
any rating established by Moody's or S&P shall be changed (other than as a
result of a change in the rating system of either Moody's or S&P), such change
shall be effective as of the date on which such change is first announced by the
rating agency making such change. Each change in the Applicable Margin shall
apply during the period commencing on the effective date of such change and
ending on the date immediately preceding the effective date of the next such
change. If the rating system of either Moody's or S&P shall change prior to the
Maturity Date, the Borrower and the Banks shall negotiate in good faith to amend
the references to specific ratings in this definition to reflect such changed
rating system. If both Moody's and S&P shall cease to be in the business of
rating corporate debt obligations, the Borrower and the Banks shall negotiate in
good faith to agree upon a substitute rating agency and to amend the references
to specific ratings in this definition to reflect the ratings used by such
substitute rating agency.
"Applicable Lending Office" means, with respect to each Bank,
such Bank's Domestic Lending Office in the case of an Alternate Base Rate
Advance, such Bank's CD Lending Office in the case of an Adjusted CD Rate
Advance, such Bank's Eurodollar Lending Office in the case of a Eurodollar Rate
Contract Advance and, in the case of a Competitive Advance, the office or
affiliate of such Bank notified by such Bank to the Borrower and the
Administrative Agent as such Bank's Applicable Lending Office with respect to
such Competitive Advance.
"Applicable Rate" means:
(i) with respect to Adjusted CD Rate
Advances, the Adjusted CD Rate plus the Applicable
Margin for Adjusted CD Rate Contract Borrowings;
3
<PAGE>
(ii) with respect to Alternate Base Rate
Advances, the Alternate Base Rate; and
(iii) with respect to Eurodollar Rate
Contract Advances, the Eurodollar Rate plus the
Applicable Margin for Eurodollar Rate Contract
Borrowings;.
"Assessment Rate" means for any date of determination, the
annual rate (rounded upwards, if necessary, to the next 1/100 of 1%) most
recently estimated by the Administrative Agent as the then current net annual
assessment rate that will be employed in determining amounts payable by the
Administrative Agent to the Federal Deposit Insurance Corporation (or any
successor) for insurance by such Corporation (or such successor) of time
deposits made in dollars at the Administrative Agent's domestic offices.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Bank and an Eligible Assignee, and accepted by the
Administrative Agent, in substantially the form of Exhibit B hereto.
"Auction Administration Agent" means The Chase Manhattan Bank
and its successors as Auction Administration Agent under this Agreement.
"Banks" means the financial institutions named on Schedule I
(as the same may be amended from time to time by Administrative Agent to reflect
assignments made in accordance with Section 8.07 of this Agreement), and any and
all other financial institutions which from time to time become parties to this
Agreement pursuant to the terms and conditions of Section 8.07 of this
Agreement.
"Borrowing" means a Contract Borrowing or a Competitive
Borrowing.
"Business Day" means a day of the year on which banks are not
required or authorized to close in Dallas, Texas, and, if the applicable
Business Day relates to any Eurodollar Rate Advances, on which dealings are
carried on in the London interbank market.
"CD Lending Office" means, with respect to any Bank, the
office or affiliate of such Bank specified as its "CD Lending Office" opposite
its name on Schedule I hereto or in the Assignment and Acceptance pursuant to
which it became a Bank (or, if no such office or affiliate is specified, its
Domestic Lending Office), or such other office or affiliate of such Bank as such
Bank may from time to time specify to the Borrower and the Administrative Agent.
"Closing Date" means the date upon which this Agreement is
executed and delivered and all conditions precedent specified in Section 3.01
have been satisfied or waived.
"Code" means the Internal Revenue Code of 1986, as the same
may be amended from time to time.
"Commitment" has the meaning specified in Section 2.01(a).
"Competitive Advance" means an advance by a Bank to the
Borrower as part of a Competitive Borrowing resulting from the competitive
bidding procedure described in Section 2.03, and refers to a Fixed Rate
Competitive Advance or a Eurodollar Rate Competitive Advance.
"Competitive Borrowing" means a Borrowing consisting of
simultaneous Competitive Advances of the same Type from each of the Banks whose
offer to make a Competitive Advance as part of such Borrowing has been accepted
by the Borrower under the competitive bidding procedure described in Section
2.03.
"Competitive Reduction" means, as to any Bank as at any date,
an amount equal to such Bank's pro rata (in accordance with the Commitments)
share of the aggregate amount of all Competitive Advances outstanding on such
date (giving effect to the payment of any Competitive Advances to be made on
such date).
4
<PAGE>
"Contract Advance" means an advance by a Bank to the Borrower
as part of a Contract Borrowing and refers to an Adjusted CD Rate Advance, an
Alternate Base Rate Advance, or a Eurodollar Rate Contract Advance.
"Contract Borrowing" means a Borrowing consisting of
simultaneous Contract Advances of the same Type made ratably by all of the Banks
pursuant to Section 2.01(a).
"Debt" means (i) indebtedness for borrowed money, (ii)
obligations evidenced by bonds, debentures, notes or other similar instruments,
(iii) obligations to pay the deferred purchase price of property (excluding
obligations under agreements for the purchase of goods in the normal course of
business, but including obligations under agreements relating to the issuance of
performance letters of credit or acceptance financing), (iv) obligations as
lessee under leases which shall have been or should be, in accordance with
generally accepted accounting principles, recorded as capital leases, (v)
obligations as account party under all letters of credit, and without
duplication, all drafts drawn and unpaid thereunder; (vi) obligations under
direct or indirect guaranties in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor
against loss in respect of, indebtedness or obligations of others of the kinds
referred to in clauses (i) through (v) above; and (vii) liabilities in respect
of unfunded vested benefits under Plans covered by Title IV of ERISA; provided
that, "Debt" of the Borrower and its Subsidiaries shall not include (a) any
rental obligations, guaranties, or other lease obligations or financial
assurances existing on the date of this Agreement and relating to the leveraged
lease of the Corpus Christi, Texas, petrochemical complex and refinery, or (b)
any obligations as account party under letters of credit issued in connection
with, or in lieu of, any obligations described in the preceding clause (a)
arising at any time after the date of this Agreement.
"Documentation Agent" means Bank of America NT&SA, and its
permitted successor or successors as documentation agent for the Banks under
this Agreement.
"Domestic Lending Office" means, with respect to any Bank, the
office or affiliate of such Bank specified as its "Domestic Lending Office"
opposite its name on Schedule I hereto or in the Assignment and Acceptance
pursuant to which it became a Bank, or such other office or affiliate of such
Bank as such Bank may from time to time specify to the Borrower and the
Administrative Agent.
"Domestic Reserve Percentage" means, for any Interest Period,
the reserve percentage applicable on the first day of such Interest Period under
regulations issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum reserve
requirement (including, but not limited to, any emergency, supplemental, or
other marginal reserve requirement) for a member bank of the Federal Reserve
System in Dallas, Texas, with deposits exceeding one billion dollars with
respect to liabilities consisting of or including (among other liabilities) U.S.
dollar nonpersonal time deposits in the United States with a maturity equal to
such Interest Period.
"EBITDAX" means with respect to any Person for any period of
calculation the sum of (i) operating income (before adjustments for income
taxes, interest expense, or extraordinary gains or losses) for such period, (ii)
depreciation, depletion, and amortization for such period, and (iii) exploration
expenses for such period all determined in accordance with generally accepted
accounting principles.
"Eligible Assignee" means: (a) any of the following entities,
if approved in writing by the Borrower (if no Event of Default then exists) and
Administrative Agent: (i) a commercial bank organized under the laws of the
United States, or any state thereof, and having total assets in excess of
$3,000,000,000 and a combined capital and surplus of at least $150,000,000; (ii)
a commercial bank organized under the laws of any other country which is a
member of the OECD, or a political subdivision of any such country, and having
total assets in excess of $3,000,000,000 and a combined capital and surplus of
at least $150,000,000, provided that such bank is acting through a branch or
agency located in the United States, in the country in which it is organized or
in another country which is also a member of the OECD; and (iii) the central
bank of any country which is a member of the OECD, or (b) a Bank or an Affiliate
of any Bank.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
5
<PAGE>
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which is a member of a group of which the Borrower is a member and
which is under common control within the meaning of the regulations under
Section 414 of the Code.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve System (or
any successor regulation), as in effect from time to time.
"Eurodollar Lending Office" means, with respect to any Bank,
the office or affiliate of such Bank specified as its "Eurodollar Lending
Office" opposite its name on Schedule I hereto or in the Assignment and
Acceptance pursuant to which it became a Bank (or, if no such office or
affiliate is specified, its Domestic Lending office), or such other office or
affiliate of such Bank as such Bank may from time to time specify to the
Borrower and the Administrative Agent.
"Eurodollar Rate" means, for each Eurodollar Rate Advance
comprising part of the same Borrowing, an interest rate per annum equal to the
lesser of (1) the Maximum Rate and (2) a rate of interest determined on the
basis of at least two offered rates for deposits in United States dollars for a
period equal to the applicable Interest Period commencing on the first day of
such Interest Period, appearing on the Reuters Screen LIBO Page as of 11:00 a.m.
(London time) on the day that is two Business Days prior to the first day of the
Interest Period. If at least two such offered rates appear on the Reuters Screen
LIBO Page, the rate with respect to such Interest Period will be the arithmetic
average (rounded upwards to the next 1/16th of 1%) of such offered rates. If
fewer than two offered rates appear, "Eurodollar Rate" in respect of any
Interest Period will be determined on the basis of the rates at which deposits
in United States dollars are offered by the Administrative Agent at
approximately 11:00 a.m. (London time) on the day that is two Business Days
preceding the first day of such Interest Period to prime banks in the London
interbank market for a period equal to such Interest Period commencing on the
first day of such Interest Period.
"Eurodollar Rate Advance" means any Eurodollar Rate Contract
Advance or Eurodollar Rate Competitive Advance.
"Eurodollar Rate Competitive Advance" means a Competitive
Advance which bears interest based on the Eurodollar Rate.
"Eurodollar Rate Contract Advance" means a Contract Advance
which bears interest based on the Eurodollar Rate.
"Eurodollar Rate Contract Borrowing" means a Contract
Borrowing that bears interest based on the Eurodollar Rate.
"Eurodollar Rate Reserve Percentage" of any Bank for any
Eurodollar Rate Advance means the reserve percentage applicable to such Bank on
(i) in the case of a Contract Advance, the first day of the Interest Period then
applicable to such Contract Advance and (ii) in the case of a Competitive
Advance, the date of such Competitive Advance, under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) for determining the reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve requirement)
under Regulation D promulgated by the Board of Governors of the Federal Reserve
System, or any successor or supplemental regulations, then applicable to such
Bank with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities having a term equal to such Interest Period or the term
of such Competitive Advance, as the case may be.
"Events of Default" has the meaning specified in Section 6.01.
"Existing Credit Agreement" means that certain Competitive
Advance/Revolving Credit Agreement dated as of April 16, 1996 (as amended,
extended, renewed, or restated), by and among Borrower, Texas Commerce Bank
National Association as Administrative Agent, The Chase Manhattan Bank as
Auction Administration Agent, Bank of
6
<PAGE>
America NT&SA as Documentation Agent, NationsBank of Texas, N.A. as Syndication
Agent, and certain other Banks named therein.
"Financial Officer" of any corporation shall mean the chief
financial officer, principal accounting officer, Treasurer, or Controller of
such corporation.
"Fixed Rate" means an interest rate per annum (expressed in
the form of a decimal to no more than four decimal places) specified by a Bank
making a Competitive Advance under the competitive bidding procedure described
in Section 2.03.
"Fixed Rate Competitive Advance" means a Competitive Advance
which bears interest based on the Fixed Rate.
"Index Debt" has the meaning specified in the definition of
"Applicable Margin" in Section 1.01.
"Interest Period" means, (i) for each Contract Advance
comprising part of the same Contract Borrowing, the period commencing on the
date of such Contract Advance or on the last day of the immediately preceding
Interest Period applicable to such Contract Advance, as the case may be, and
ending on the last day of the period selected by the Borrower pursuant to the
provisions below; or (ii) for each Competitive Advance comprising part of the
same Competitive Borrowing, the period commencing on the date of such
Competitive Advance, as the case may be, and ending on the maturity selected by
the Borrower pursuant to the provisions of Section 2.03(a). The duration of each
such Interest Period shall be (a) in the case of an Alternate Base Rate Advance,
until the next succeeding March 31, June 30, September 30, or December 31, (b)
in the case of an Adjusted CD Rate Advance, 30, 60, 90, or 180 days (by notice
to Administrative Agent pursuant to Section 2.02(a)), and (c) in the case of a
Eurodollar Rate Advance, 1 month or 2, 3, or 6 months, as the Borrower may
select (in the case of Contract Advance) by notice to the Administrative Agent
pursuant to Section 2.02(a), and in the case of Competitive Advances, by notice
to Administrative Agent pursuant to Section 2.03(a); provided, however, that:
(i) Interest Periods commencing on the same
date for Contract Advances comprising part of the
same Contract Borrowing shall be of the same
duration;
(ii) whenever the last day of any Interest
Period would otherwise occur on a day other than a
Business Day in both Dallas, Texas and London, the
last day of such Interest Period shall be extended to
occur on the next succeeding Business Day in both
such cities, provided, in the case of any Interest
Period for a Eurodollar Rate Advance, that if such
extension would cause the last day of such Interest
Period to occur in the next following calendar month,
the last day of such Interest Period shall occur on
the next preceding Business Day in both such cities;
and
(iii) no Interest Period shall end on a date
later than the Maturity Date.
"Lien" means any mortgage, pledge, lien, encumbrance, charge,
or security interest of any kind, granted, or created to secure Debt.
"Loan Papers" means (a) this Agreement, certificates delivered
pursuant to this Agreement, and Exhibits and Schedules thereto; and (b) all
renewals, extensions, restatements of, or supplements, or amendments to any of
the foregoing.
"Majority Banks" means at any time Banks that in the aggregate
(a) hold at least 51% of the Commitments, and (b) after the expiry or
termination of the Commitments, hold at least 51% of the aggregate unpaid
principal amount of the Advances.
"Material Plan" means either (i) a Plan under which the
present value of the vested benefits exceeds the fair market value of the assets
of such Plan allocable to such benefits by more than $20,000,000 or (ii) a Plan
whose assets have a market value in excess of $100,000,000.
7
<PAGE>
"Maturity Date" November 23, 1998 (or such later date to which
the Commitments are extended in accordance with Section 2.10).
"Maximum Amount" and "Maximum Rate" means, for each Bank, the
maximum non-usurious amount and the maximum non-usurious rate of interest which,
under applicable law, such Bank is permitted to contract for, charge, take,
reserve, or receive on the Obligation.
"Moody's" means Moody's Investors Service, Inc. or any
successor thereto.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is
making or accruing an obligation to make contributions, or has within any of the
preceding three plan years made or accrued an obligation to make contributions.
"Notice of Contract Borrowing" has the meaning specified in
Section 2.02(a).
"Notice of Competitive Borrowing" has the meaning specified in
Section 2.03(a).
"Obligation" means all present and future indebtedness,
liabilities, and obligations, and all renewals and extensions thereof, or any
part thereof, now or hereafter owed to Administrative Agent or any Bank by the
Borrower arising from, by virtue of, or pursuant to any Loan Paper, together
with all interest accruing thereon, fees, costs, and expenses payable under the
Loan Papers.
"OECD" means the Organization for Economic Cooperation and
Development.
"Participating Bank" has the meaning specified in Section
2.03(a)(v).
"PBGC" means the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust, unincorporated
association, joint venture or other entity, or a government or any political
subdivision or agency thereof.
"Plan" means an employee benefit plan (other than a
Multiemployer Plan) maintained for employees of the Borrower or any ERISA
Affiliate and covered by Title IV of ERISA.
"Principal Property" means (i) any property owned or leased by
the Borrower or any Subsidiary, or any interest of the Borrower or any
Subsidiary in property, which is considered by the Borrower to be capable of
producing oil, gas, or minerals in commercial quantities, (ii) any refinery,
smelter, processing, or manufacturing plant owned or leased by the Borrower or
any Subsidiary, (iii) all present and future oil, gas, other liquid and gaseous
hydrocarbons, and other minerals now or hereafter produced from any other
Principal Property or to which the Borrower or its Subsidiaries may be entitled
as a result of its ownership of any Principal Property, and (iv) all real and
personal assets owned or leased by Borrower or any Subsidiary used in the
drilling, gathering, processing, transportation, or marketing of any oil, gas,
other liquid and gaseous hydrocarbons, or minerals, except (a) any such real or
personal assets related thereto employed in transportation, distribution, or
marketing or (b) any refinery, smelter, processing, or manufacturing plant, or
portion thereof, which property described in clauses (a) or (b) hereof, in the
opinion of the Board of Directors of the Borrower, is not a principal plant or
principal facility in relation to the activities of the Borrower and its
Restricted Subsidiaries taken as a whole.
"Principal Subsidiaries" means those Subsidiaries listed on
Schedule II hereto, as such Schedule may be amended and supplemented from time
to time.
"Register" has the meaning specified in Section 8.07(c).
8
<PAGE>
"Reportable Event" means an event described in Section 4043(b)
of ERISA with respect to which the 30-day notice requirement has not been waived
by the PBGC.
"Restricted Subsidiary" means any Subsidiary which owns or
leases (as lessor or lessee) a Principal Property, but does not include any
Subsidiary the principal business of which is leasing machinery, equipment,
vehicles, or other properties none of which is a Principal Property, or
financing accounts receivable, or engaging in ownership and development of any
real property which is not a Principal Property.
"S&P" means Standard and Poor's Rating Group, a division of
McGraw Hill, Inc., a New York corporation, or any successor thereto.
"Subsidiary" of a Person means any corporation or other
similar entity of which more than 50% of the outstanding capital stock having
ordinary voting power to elect a majority of the Board of Directors of such
corporation or entity (irrespective of whether or not at the time capital stock
of any other class or classes of such corporation or entity shall or might have
voting power upon the occurrence of any contingency) is at the time directly or
indirectly owned by such Person, by such Person and one or more other
Subsidiaries of such Person, or by one or more other Subsidiaries of such
Person.
"Syndication Agent" means NationsBank of Texas, N.A., and its
permitted successor or successors as Syndication Agent under this Agreement.
"Termination Date" means the Maturity Date or the earlier date
of termination in whole of the Commitments pursuant to Section 2.06 or 6.01.
"Termination Event" means (i) a "Reportable Event" described
in Section 4043 of ERISA and the regulations issued thereunder (other than a
"Reportable Event" not subject to the provision for 30-day notice to the PBGC
under such regulations), or (ii) the withdrawal of the Borrower or any of its
ERISA Affiliates from a Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA, or (iii) the filing of a
notice of intent to terminate a Plan or the treatment of a Plan amendment as a
termination under Section 4041 of ERISA, or (iv) the institution of proceedings
to terminate a Plan by the PBGC, or (v) any other event or condition which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan.
"Type", when used in respect of any Advance or Borrowing,
refers to the Rate by reference to which interest on such Advance or on the
Advances comprising such Borrowing is determined. For purposes hereof, "Rate"
shall include the Eurodollar Rate, the Adjusted CD Rate, the Alternate Base
Rate, and the Fixed Rate.
SECTION 1.02 Computation of Time Periods. In this Agreement in
the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each means "to but excluding".
SECTION 1.03 Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles from time to time in effect, and all accounting
principles shall be applied on a consistent basis so that the accounting
principles in a current period are comparable in all respects to those applied
during the preceding comparable period.
SECTION 1.04 Number and Gender of Words. Whenever in any Loan
Papers the singular number is used, the same shall include the plural, where
appropriate, and vice versa, and words of any gender shall include each other
gender, where appropriate.
9
<PAGE>
ARTICLE II. AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01 The Contract Advances.
(a) Each Bank severally agrees, on the terms and
conditions hereinafter set forth, to make Contract Advances to the Borrower from
time to time on any Business Day during the period from the Closing Date until
the Termination Date in an aggregate amount not to exceed at any time
outstanding the amount set opposite such Bank's name on Schedule I, as such
amount may be reduced pursuant to Section 2.06 or increased pursuant to Section
2.17 or reduced or increased by Section 8.07 (such Bank's obligation to make
such Contract Advances being hereinafter referred to as such Bank's
"Commitment"); provided, however, that at no time shall the aggregate
outstanding principal amount of Contract Advances and Competitive Advances
exceed the aggregate amount of the Commitments. Each Contract Borrowing shall be
in an aggregate amount of not less than $10,000,000 (subject to the terms of
this Section 2.01(a)) or an integral multiple of $1,000,000 in excess thereof
and shall consist of Contract Advances of the same Type made on the same day by
the Banks ratably accordingly to their respective Commitments.
(b) Within the limits and on the conditions set forth
in this Section 2.01, the Borrower may from time to time borrow under this
Section 2.01, prepay under Section 2.07(c), and reborrow under this Section
2.01.
SECTION 2.02 Making the Contract Advances.
(a) Each Contract Borrowing shall be made on notice,
given (i) in the case of a Borrowing consisting of Alternate Base Rate Advances,
not later than 10:30 a.m. (New York City time) on the day of the proposed
Borrowing; (ii) in the case of a Borrowing consisting of Adjusted CD Rate
Advances, not later than 10:30 a.m. (New York City time) on the second Business
Day prior to the day of the proposed Borrowing; and (iii) in the case of a
Borrowing consisting of Eurodollar Rate Contract Advances, not later than 10:30
a.m. (New York City time) on the third Business Day prior to the date of the
proposed Contract Borrowing, by the Borrower to the Administrative Agent, which
shall give to each Bank prompt notice thereof by cable or telecopy. Each such
notice of a Contract Borrowing (a "Notice of Contract Borrowing") shall be in
substantially the form of Exhibit A-1 hereto, specifying therein the requested
(i) date of such Contract Borrowing, (ii) Type of Contract Advances comprising
such Contract Borrowing, (iii) aggregate amount of such Contract Borrowing and
(iv) Interest Period. Each Bank shall, before 12:00 noon (New York City time) on
the date of any such Contract Borrowing, make available for the account of its
Applicable Lending Office to the Administrative Agent at its address referred to
in Section 8.02, in same day funds, such Bank's ratable portion of such Contract
Borrowing. Upon the Administrative Agent's receipt of such funds and upon
fulfillment of the applicable conditions set forth in Article III, the
Administrative Agent will make such funds available to the Borrower at the
Administrative Agent's aforesaid address.
(b) Each Notice of Contract Borrowing shall be
irrevocable and binding on the Borrower. In the case of any Contract Borrowing
which the related Notice of Contract Borrowing specifies is to be comprised of
Eurodollar Rate Contract Advances or Adjusted CD Rate Advances, the Borrower
shall indemnify each Bank against any loss, cost, or expense incurred by such
Bank as a result of any failure by the Borrower to complete such Borrowing
(whether or not due to a failure to fulfill on or before the date specified in
such Notice of Contract Borrowing the applicable conditions set forth in Article
III), such losses, costs, and expenses to include, without limitation, any loss
(including loss of anticipated profits), cost, or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such Bank
to fund the Contract Advance to be made by such Bank as part of such Contract
Borrowing when such Contract Advance, as a result of such failure, is not made
on such date.
(c) Unless the Administrative Agent shall have
received notice from a Bank prior to the date of any Contract Borrowing that
such Bank will not make available to the Administrative Agent such Bank's
ratable portion of such Contract Borrowing, the Administrative Agent may assume
that such Bank has made such portion available to the Administrative Agent on
the date of such Contract Borrowing in accordance with Section 2.02(a) and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower on such date a corresponding amount. If and to the extent that such
Bank shall not have so made such ratable portion available to
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the Administrative Agent, such Bank and the Borrower severally agree to repay to
the Administrative Agent forthwith on demand such corresponding amount, together
with interest thereon, for each day from the date such amount is made available
to the Borrower until the date such amount is repaid to the Administrative
Agent, at (i) in the case of the Borrower, the interest rate applicable at the
time to Contract Advances comprising such Contract Borrowing and (ii) in the
case of such Bank, an interest rate equal at all times to the Federal Funds
Effective Rate. If such Bank shall repay to the Administrative Agent such
corresponding amount, such amount so repaid shall constitute such Bank's
Contract Advance as part of such Contract Borrowing for purposes of this
Agreement.
(d) The failure of any Bank to make the Contract
Advance to be made by it as part of any Contract Borrowing shall not relieve any
other Bank of its obligation, if any, hereunder to make its Contract Advance on
the date of such Contract Borrowing, but no Bank shall be responsible for the
failure of any other Bank to make the Contract Advance to be made by such other
Bank on the date of any Contract Borrowing.
SECTION 2.03 The Competitive Advances.
(a) Each Bank severally agrees that the Borrower may
make Competitive Borrowings under this Section 2.03 from time to time on any
Business Day during the period from the Closing Date until the Termination Date,
in each case on the terms and conditions hereinafter set forth; provided,
however, that at no time shall the aggregate amount of Contract Advances and
Competitive Advances outstanding exceed the aggregate amount of the Commitments.
Each Competitive Borrowing shall consist of Competitive Advances of the same
Type made on the same day.
(i) The Borrower may request a Competitive
Borrowing under this Section 2.03 by delivering to
the Administrative Agent and Auction Administration
Agent, (A) in the case of a Borrowing consisting of
Fixed Rate Competitive Advances, by not later than
10:30 a.m. (New York City time) one Business Day
prior to the day of the proposed Competitive
Borrowing, and (B) in the case of a Borrowing
consisting of Eurodollar Rate Competitive Advances,
by not later than 10:30 a.m. (New York City time) on
the fourth Business Day prior to the date of the
proposed Competitive Borrowing, a notice of a
Competitive Borrowing (a "Notice of Competitive
Borrowing"), in substantially the form of Exhibit A-2
hereto, specifying the proposed (1) date of such
Competitive Borrowing, (2) Type of Competitive
Advances comprising such Competitive Borrowing, (3)
aggregate amount, which shall not be less than
$10,000,000 or an integral multiple of $1,000,000 in
excess thereof) of such Competitive Borrowing, (4)
maturity date for repayment of each Competitive
Advance to be made as part of such Competitive
Borrowing (which maturity date shall be, in the case
of a Fixed Rate Competitive Borrowing, not earlier
than seven days after the date of such Borrowing,
and, in the case of a Eurodollar Rate Competitive
Borrowing, not later than 1 month or 2, 3 or 6 months
after the date of such Borrowing, as the Borrower
shall elect) and (5) any other terms to be applicable
to such Competitive Borrowing. The Auction
Administration Agent shall in turn promptly deliver
(by cable or telecopy) to each Bank a notice of
competitive bid request, in substantially the form of
Exhibit A-3, notifying the Banks of each request for
a Competitive Borrowing received by it from the
Borrower and of the terms contained in such Notice of
Competitive Borrowing.
(ii) Each Bank shall, if, in its sole
discretion, it elects to do so, irrevocably offer to
make one or more Competitive Advances to the Borrower
as part of such proposed Competitive Borrowing at a
rate or rates of interest specified by such Bank in
its sole discretion, by notifying (by telecopy, cable
or telephone [in the case of telephone, immediately
confirmed by telecopy]) the Auction Administration
Agent (which shall give prompt notice thereof to the
Borrower), (A) in the case of a Fixed Rate
Competitive Borrowing, before 10:00 a.m. (New York
City time) on the date of such proposed Competitive
Borrowing specified in the Notice of Competitive
Borrowing delivered with respect thereto, and (B) in
the case of a Eurodollar Rate Competitive Borrowing,
before 10:00 a.m. (New York City time) on the third
Business Day prior to the date of such proposed
Competitive Borrowing specified in the Notice of
Competitive Borrowing delivered with respect thereto,
of the maximum amount of each Competitive Advance
which such Bank would be
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willing to make as part of such proposed Competitive
Borrowing (which amount may, subject to the proviso
to the first sentence of this Section 2.03(a), exceed
such Bank's Commitment), the rate or rates of
interest therefor (and whether reserves are included
therein) and such Bank's Applicable Lending Office
with respect to each such Competitive Advance and any
other terms and conditions required by such Bank;
provided that, if Auction Administration Agent in its
capacity as a Bank shall, in its sole discretion,
elect to make any such offer, it shall notify the
Borrower of such offer before 9:45 a.m. (New York
City time) on the date specified herein for notice of
offers by the other Banks. Each competitive bid shall
be submitted by a Bank to the Auction Administration
Agent on a competitive bid form substantially similar
to Exhibit A-4. If any Bank shall fail to notify the
Auction Administration Agent, before the time
specified herein for notice of offers, that it elects
to make such an offer, such Bank shall be deemed to
have elected not to make such an offer, and such Bank
shall not be obligated or entitled to, and shall not,
make any Competitive Advance as part of such
Competitive Borrowing. If any Bank shall provide
telephonic notice to the Auction Administration Agent
of its election to make an offer, but such telephonic
notice has not been confirmed by telecopy to the
Auction Administration Agent at or before the time
specified herein for notice of offers, the Auction
Administration Agent may, in its sole discretion and
without liability to such Bank or the Borrower, elect
whether or not to provide notice thereof to the
Borrower.
(iii) The Borrower shall, in turn, (A) in
the case of a Fixed Rate Competitive Borrowing,
before 11:00 a.m. (New York City time) on the date of
such proposed Competitive Borrowing specified in the
Notice of Competitive Borrowing delivered with
respect thereto, and (B) in the case of a Eurodollar
Rate Competitive Borrowing, before 11:00 a.m. (New
York City time) on the third Business Day prior to
the date of such proposed Competitive Borrowing
specified in the Notice of Competitive Borrowing
delivered with respect thereto, either:
(A) cancel such proposed
Competitive Borrowing by giving the Auction
Administration Agent notice to that effect,
or
(B) accept one or more of the
offers made by any Bank or Banks pursuant to
paragraph (ii) above, in its sole
discretion, by giving notice to the Auction
Administration Agent of the amount of each
Competitive Advance (which amount shall be
equal to or greater than $1,000,000, and
equal to or less than the maximum amount
offered by such Bank, notified to the
Borrower by the Auction Administration Agent
on behalf of such Bank for such Competitive
Advance pursuant to paragraph (ii) above) to
be made by each Bank as part of such
Competitive Borrowing, and reject any
remaining offers made by Banks pursuant to
paragraph (ii) above, by giving the Auction
Administration Agent notice to that effect;
provided, however, that the aggregate amount
of such offers accepted by the Borrower
shall be equal at least to $10,000,000 or an
integral multiple of $1,000,000 in excess
thereof. Each such notice of competitive bid
acceptance/rejection from the Borrower shall
be in a form substantially similar to
Exhibit A-5.
(iv) If the Borrower notifies the Auction
Administration Agent that such Competitive Borrowing
is canceled pursuant to paragraph (iii)(A) above, the
Auction Administration Agent shall give prompt notice
(by cable or telecopy) thereof to the Banks, and such
Competitive Borrowing shall not be made.
(v) If the Borrower accepts one or more of
the offers made by any Bank or Banks pursuant to
paragraph (iii)(B) above, such offer or offers and
the Notice of Competitive Borrowing in respect
thereof shall constitute a supplement to this
Agreement in respect of such Competitive Borrowing
and the Competitive Advances made pursuant thereto,
and the Auction Administration Agent shall in turn
promptly notify (A) each Bank that has made an offer
as described in paragraph (ii) above of the date and
aggregate amount of such Competitive Borrowing, the
interest rate thereon, and whether or not any offer
or offers made by such Bank pursuant to paragraph
(ii) above
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have been accepted by the Borrower, and (B) each Bank
that is to make a Competitive Advance as part of such
Competitive Borrowing (a "Participating Bank" as to
such Competitive Borrowing) of the amount of each
Competitive Advance to be made by such Bank as part
of such Competitive Borrowing and the maturity date
for the repayment of each such Competitive Advance
(together with a confirmation of the Auction
Administration Agent's understanding of the interest
rate and any other terms applicable to each such
Competitive Advance; the Auction Administration Agent
shall assume, unless notified by such Bank to the
contrary, that its understanding of such information
is correct). Each such Participating Bank shall,
before 12:00 noon (New York City time) on the date of
such Competitive Borrowing specified in the notice
received from the Auction Administration Agent
pursuant to clause (A) of the preceding sentence,
make available for the account of its Applicable
Lending Office to the Administrative Agent (at its
address referred to in Section 8.02) such Bank's
portion of such Competitive Borrowing, in same-day
funds. Upon fulfillment of the applicable conditions
set forth in Article III and after receipt by the
Administrative Agent of such funds, the
Administrative Agent will make such funds available
to the Borrower at the Administrative Agent's
aforesaid address. Promptly after each Competitive
Borrowing, the Auction Administration Agent will
notify each Bank of the amount of the Competitive
Borrowing, such Bank's Competitive Reduction
resulting therefrom, and the date upon which such
Competitive Reduction commenced and is anticipated to
terminate.
(b) Within the limits and on the conditions set forth
in this Section 2.03, the Borrower may from time to time borrow under this
Section 2.03, repay pursuant to Section 2.07(b), prepay under Section 2.07(c),
and reborrow under this Section 2.03.
SECTION 2.04 Conversion and Continuation of Contract
Borrowings. The Borrower shall have the right at any time upon prior irrevocable
notice to the Administrative Agent (i) not later than 12:00 noon (New York City
time), one Business Day prior to conversion, to convert any Borrowing consisting
of Eurodollar Rate Contract Advances or Adjusted CD Rate Advances into a
Borrowing consisting of Alternate Base Rate Advances, (ii) not later than 10:00
a.m. (New York City time), two Business Days prior to conversion or
continuation, to convert any Borrowing consisting of Eurodollar Rate Contract
Advances or Alternate Base Rate Advances into a Borrowing consisting of Adjusted
CD Rate Advances or to continue any Borrowing consisting of Adjusted CD Rate
Advances for an additional Interest Period, (iii) not later than 10:00 a.m. (New
York City time), three Business Days prior to conversion or continuation, to
convert any Borrowing consisting of Alternate Base Rate Advances or Adjusted CD
Rate Advances into a Borrowing consisting of Eurodollar Rate Contract Advances
or to continue any Borrowing consisting of Eurodollar Contract Advances for an
additional Interest Period, (iv) not later than 10:00 a.m. (New York City time),
three Business Days prior to conversion, to convert the Interest Period with
respect to any Borrowing consisting of Eurodollar Rate Contract Advances to
another permissible Interest Period, and (v) not later than 10:00 a.m. (New York
City time), two Business Days prior to conversion, to convert the Interest
Period with respect to any Borrowing consisting of Adjusted CD Rate Advances to
another permissible Interest Period, subject in each case to the following:
(a) each conversion or continuation shall be made pro
rata among the Banks in accordance with the respective principal amounts of the
Advances comprising the converted or continued Contract Borrowing;
(b) if less than all the outstanding principal amount
of any Contract Borrowing shall be converted or continued, the aggregate
principal amount of such Contract Borrowing converted or continued shall be an
amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof;
(c) accrued interest on an Advance (or portion
thereof) being converted shall be paid by the Borrower at the time of
conversion;
(d) if any Borrowing consisting of Eurodollar Rate
Contract Advances or Adjusted CD Rate Advances is converted at a time other than
the end of the Interest Period applicable thereto, the Borrower shall pay, upon
demand, any amounts due to the Banks pursuant to Section 8.04(b) as a result of
such conversion;
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(e) any portion of a Contract Borrowing maturing or
required to be repaid in less than one month may not be converted into or
continued as a Borrowing consisting of Eurodollar Rate Contract Advances;
(f) any portion of a Borrowing maturing or required
to be repaid in less than 30 days may not be converted into or continued as a
Borrowing consisting of Adjusted CD Rate Advances;
(g) any portion of a Borrowing consisting of
Eurodollar Rate Contract Advances or Adjusted CD Rate Advances which cannot be
converted into or continued as such by reason of clauses (e) and (f) above shall
be automatically converted at the end of the Interest Period in effect for such
Borrowing into a Borrowing consisting of Alternate Base Rate Advances; and
(h) no Interest Period may be selected for any
Borrowing consisting of Eurodollar Rate Contract Advances or Adjusted CD Rate
Advances that would end later than the Maturity Date.
Each notice pursuant to this Section 2.04 shall be irrevocable
and shall refer to this Agreement and specify (i) the identity and amount of the
Contract Borrowing that the Borrower requests be converted or continued, (ii)
whether such Contract Borrowing is to be converted to or continued as a
Borrowing consisting of Eurodollar Rate Contract Advances, Adjusted CD Rate
Advances, or Alternate Base Rate Advances, (iii) if such notice requests a
conversion, the date of such conversion (which shall be a Business Day), and
(iv) if such Contract Borrowing is to be converted to or continued as a
Borrowing consisting of Eurodollar Rate Contract Advances or Adjusted CD Rate
Advances, the Interest Period with respect thereto. If no Interest Period is
specified in any such notice with respect to any conversion to or continuation
as a Borrowing consisting of Eurodollar Rate Contract Advances or Adjusted CD
Rate Advances, the Borrower shall be deemed to have selected an Interest Period
of one month's duration, in the case of a Borrowing consisting of Eurodollar
Rate Contract Advances, or 30 days' duration, in the case of a Borrowing
consisting of Adjusted CD Rate Advances. The Administrative Agent shall advise
the other Banks of any notice given pursuant to this Section 2.04 and of each
Bank's portion of any converted or continued Contract Borrowing. If the Borrower
shall not have given notice in accordance with this Section 2.04 to continue any
Contract Borrowing into a subsequent Interest Period (and shall not otherwise
have given notice in accordance with this Section 2.04 to convert such Contract
Borrowing), such Contract Borrowing shall, at the end of the Interest Period
applicable thereto (unless repaid pursuant to the terms hereof), automatically
be continued into a new Interest Period as a Borrowing consisting of Alternate
Base Rate Advances.
SECTION 2.05 Fees.
(a) Facility Fees. Borrower shall pay to each Bank,
through the Administrative Agent, a facility fee on the average daily amount of
the Commitment of such Bank (whether used or unused) for the period from and
including the Closing Date, up to but excluding the Termination Date at a rate
per annum equal to the Applicable Margin for Facility Fees. Accrued facility
fees shall be payable in arrears, commencing on the last day of the calendar
quarter in which the Closing Date occurs, and thereafter, quarterly on the last
day of each March, June, September, and December and on the Termination Date.
(b) Fees of Administrative Agent and Chase Securities
Inc. Borrower shall pay to Administrative Agent and Chase Securities Inc.,
solely for their own respective accounts, the fees described in the separate
letter agreement dated November 5, 1997, among the Borrower, Administrative
Agent, and Chase Securities Inc. on the dates specified therein.
SECTION 2.06 Optional Reduction of the Commitments. The
Borrower shall have the right, upon at least two Business Days' irrevocable
notice to the Administrative Agent, to terminate in whole or reduce ratably in
part the respective Commitments of the Banks; provided, however, that (i) each
partial reduction shall be in the aggregate amount of $10,000,000 or in an
integral multiple of $1,000,000 in excess thereof, and (ii) no such
termination or reduction shall be made which would reduce the Commitments to an
amount less than the aggregate outstanding principal amount of the Advances. The
Administrative Agent shall promptly thereafter notify each Bank of such
termination or reduction.
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SECTION 2.07 Repayment of Advances; Prepayment.
(a) The Borrower shall repay to the Administrative
Agent for the account of each Bank the principal amount of each Contract Advance
made by each Bank on the Maturity Date.
(b) The Borrower shall repay to the Administrative
Agent, for the account of each Participating Bank which has made a Competitive
Advance, on the maturity date of each Competitive Advance (such maturity date
being that specified by the Borrower for repayment of such Competitive Advance
in the Notice of Competitive Borrowing delivered with respect thereto) the then
unpaid principal amount of such Competitive Advance.
(c) The Borrower may, on notice given to the
Administrative Agent (i) in the case of Alternate Base Rate Advances, not later
than 10:30 a.m. (New York City time) on the day of the proposed prepayment, and
(ii) in the case of Adjusted CD Rate Advances and Eurodollar Rate Contract
Advances, not later than 10:30 a.m. (New York City time) on the second Business
Day prior to the day of the proposed prepayment, stating the proposed date and
aggregate principal amount of the prepayment, and if such notice is given, the
Borrower shall, prepay the outstanding principal amounts of the Contract
Advances constituting part of the same Contract Borrowing in whole or ratably in
part; provided, however, that any such partial prepayment shall be in an
aggregate principal amount not less than $10,000,000, or in an integral multiple
of $1,000,000 in excess thereof, and provided further, that any such prepayment
of Adjusted CD Rate Advances or Eurodollar Rate Contract Advances shall be
subject to the provisions of Section 8.04(b) hereof. The Borrower may not prepay
any principal amount of any Competitive Advance unless the Participating Bank
making such Competitive Advance shall have expressly agreed thereto. The
Administrative Agent shall promptly notify each Bank of any prepayments pursuant
to this Section 2.07(c) promptly after any such prepayment. The Borrower shall
have no right to prepay any principal amount of any Advance except as expressly
set forth in this Section 2.07(c).
SECTION 2.08 Interest. The Borrower shall pay interest on each
Advance made by each Bank from the date of such Advance until paid in full, at
the following rates per annum:
(i) Contract Advances. If such Advance is a
Contract Advance, the Applicable Rate from time to
time for such Contract Advance from the date of such
Advance until the last day of the last Interest
Period therefor, payable on the last day of each
Interest Period and, in the case of any Interest
Period longer than 90 days (in the case of Adjusted
CD Rate Advances) or three months (in the case of
Eurodollar Rate Contract Advances), on such 90th day
or the last day of such three-month period, as the
case may be.
(ii) Competitive Advances. If such Advance
is a Competitive Advance, a rate per annum equal at
all times from the date of such Advance until the
maturity thereof to the rate of interest for such
Competitive Advance specified by the Participating
Bank making such Competitive Advance in its notice
with respect thereto delivered pursuant to Section
2.03 (a)(ii) above, payable on the proposed maturity
date specified by the Borrower for such Competitive
Advance in the related Notice of Competitive
Borrowing delivered pursuant to Section 2.03 (a)(i)
above; provided, that in the case of Advances with
maturities of greater than three months, interest
shall be payable at the end of each three-month
period for such Advance.
(iii) Default Amounts. In the case of any
past-due amounts of the principal of, or (to the
fullest extent permitted by law) interest on, any
Advance, from the date such amount becomes due until
paid in full, payable on demand, a rate per annum
equal at all times to 2% above the Alternate Base
Rate in effect from time to time.
SECTION 2.09 Alternate Rate of Interest. If Banks having more
than 66-2/3% of the Commitments shall, at least one Business Day before the date
of any requested Borrowing, notify the Administrative Agent that the Eurodollar
Rate for any Eurodollar Rate Advances or the Adjusted CD Rate for any Adjusted
CD Rate Advances comprising such Borrowing will not adequately reflect the cost
to such Banks of making or funding their respective
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Advances for such Borrowing, the right of the Borrower to select Advances of
such Type for such Borrowing or any subsequent Borrowing shall be suspended
until the Administrative Agent shall notify the Borrower and the Banks that the
circumstances causing such suspension no longer exist, and (i) any request by
the Borrower for a Eurodollar Rate Competitive Advance shall be of no force and
effect and shall be denied by the Administrative Agent and (ii) any request by
the Borrower for a Eurodollar Rate Contract Advance or an Adjusted CD Rate
Advance shall be deemed to be a request for an Alternate Base Rate Advance.
SECTION 2.10 Optional Renewal of Commitments.
(a) Optional Renewal Procedures. Borrower may request
that the Maturity Date be extended for all or a portion of the Commitments to a
date which is no later than the 364th day after the then-current Maturity Date;
provided that, any such extension request shall be made in writing (an
"Extension Request") by Borrower and delivered to Administrative Agent no more
than 30 days prior to (but no later than 20 days prior to) the then-current
Maturity Date. Promptly upon receipt of an Extension Request, Administrative
Agent shall notify Banks of such request.
(i) Banks' Response to Extension Request.
The Banks may, at their option, accept or reject such
Extension Request by giving written notice to
Administrative Agent delivered no earlier than 20
days prior to (but no later than 10 days prior to)
the then-effective Maturity Date (the "Response
Date"). If any Bank shall fail to give such notice to
Administrative Agent by the Response Date, such Bank
shall be deemed to have rejected the requested
extension. If the Extension Request is not consented
to by Banks holding at least 51% of the Commitments
by the Response Date, the Extension Request will be
rejected, and the Commitments will terminate on the
then-current Maturity Date. If the Banks holding at
least 51% of the Commitments consent to the Extension
Request by the Response Date, the Maturity Date for
those Banks consenting to the extension (for purposes
of this Section 2.10(a), the "Accepting Banks") shall
be automatically extended to the date which is the
364th day after the then-current Maturity Date.
(ii) Additional Procedures to Extend the
Rejected Amount. If the Extension Request is
consented to by Banks holding not less than 51% of
the Commitments, but fewer than all Banks (any Bank
not consenting to the Extension Request being
referred to in this Section 2.10(a) as a "Rejecting
Bank"), then Administrative Agent shall, within 48
hours of making such determination, notify the
Accepting Banks and Borrower of the aggregate
Commitments held by the Rejecting Banks (as used in
this Section 2.10(a), the "Rejected Amount"). Each
Accepting Bank shall have the right, but not the
obligation, to elect to increase its respective
Commitments by an amount not to exceed the Rejected
Amount, which election shall be made by notice from
each Accepting Bank to the Administrative Agent given
not later than five days after the date notified by
Administrative Agent, specifying the amount of such
proposed increase in such Accepting Bank's
Commitment. If the aggregate amount of the proposed
increases in the Commitments of all Accepting Banks
making such an election does not equal or exceed the
Rejected Amount, then Borrower shall have the right
to add one or more financial institutions (which are
not Rejecting Banks and which are Eligible Assignees)
as Banks (as used in this Section 2.10(a), a
"Purchasing Bank") to replace such Rejecting Banks,
which Purchasing Banks shall have aggregate
Commitments not greater than those of the Rejecting
Banks (less any increases in the Commitments of
Accepting Banks, as described in the following clause
(iii)). The transfer of Commitments and outstanding
Borrowings from Rejecting Banks to Purchasing Banks
or Accepting Banks shall take place on the effective
date of, and pursuant to the execution, delivery, and
acceptance of, an Assignment and Acceptance in
accordance with the procedures set forth in Section
8.07.
(iii) Adjustments to, and Terminations of,
Commitments.
(A) If less than 100% of the
Commitments are extended (whether by virtue
of Borrower's failure to request an
extension of the total Commitments or by
virtue of any Bank not consenting to any
Extension Request), then the Commitments
shall automatically
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be reduced on the Maturity Date on which the
applicable approved extension is effective
by an amount equal to (as the case may be)
(i) the portion of the Commitments not
requested to be extended by Borrower in its
Extension Request or (ii) the amount of the
Rejected Amount (to the extent not replaced
by Accepting Banks or Purchasing Banks
pursuant to the procedures set forth in the
foregoing Section 2.10(a)(ii)). Each
Rejecting Bank shall have no further
obligation or Commitment following the
Maturity Date on which the applicable
approved extension is effective, other than
any obligation accruing prior to such date
as provided herein.
(B) If the aggregate amount of the
proposed increases in the Commitments of all
Accepting Banks making an election to
increase their respective Commitments is in
excess of the Rejected Amount, then (i) the
Rejected Amount shall be allocated pro rata
among such Accepting Banks based on the
respective amounts of the proposed increases
to Commitments elected by such Accepting
Banks; and (ii) the respective Commitments
of each such Accepting Bank shall be
increased by the respective amount allocated
pursuant to clause (i) of this Section
2.10(a)(iii)(B), such that, after giving
effect to the approved extensions and all
such terminations and increases, no
reduction will occur in the aggregate amount
of the Commitments.
(C) If the aggregate amount of the
proposed increases to the Commitments of all
Accepting Banks making such an election to
so increase their respective Commitments
equals the Rejected Amount, then the
respective Commitments of such Accepting
Banks shall be increased by the respective
amounts of their proposed increases, such
that, after giving effect to the approved
extensions and all such terminations and
increases, no reduction will occur in the
aggregate amount of the Commitments.
(D) If the aggregate amount of the
proposed increases to the Commitments of all
Accepting Banks making such an election is
less than the Rejected Amount, then (i) the
respective Commitments of each such
Accepting Bank shall be increased by the
respective amount of its proposed increase;
and (ii) the amount of the Commitments shall
be reduced by the amount of the Rejected
Amount (to the extent not replaced by the
Accepting Banks or the Purchasing Banks, if
any).
(b) Acknowledgments Regarding Obligation to Renew.
Borrower acknowledges that (i) neither Administrative Agent nor any Bank has
made any representations to Borrower regarding its intent to agree to any
extensions set forth in this Section, (ii) neither Administrative Agent nor any
Bank shall have any obligation to extend the Commitments (or any portion
thereof), and (iii) Administrative Agent's and Banks' agreement to one or more
extensions shall not commit Administrative Agent or the Banks to any additional
extensions.
(c) Payment to Rejecting Banks. If, after giving
effect to any transfer of a Rejecting Bank's Commitments to an Accepting Bank or
a Purchasing Bank under Section 2.10(a)(ii) above, there are any amounts owed by
Borrower to such Rejecting Bank under the Loan Papers, then such amount is due
and payable by Borrower to such Rejecting Bank on the Maturity Date prior to
giving effect to the approved extension under Section 2.10(a)(i) above.
SECTION 2.11 Increased Costs; Increased Capital.
(a) If due to either (i) the introduction of or any
change after the date hereof (other than any change by way of imposition or
increase of reserve requirements, in the case of Adjusted CD Rate Advances,
included in the Domestic Reserve Percentage or, in the case of Eurodollar Rate
Advances, included in the Eurodollar Rate Reserve Percentage) in or in the
interpretation of any law or regulation or (ii) the compliance with any
guideline or request received from any central bank or other governmental
authority after the date hereof (whether or not having the force of law), there
shall be any increase in the cost to any Bank of agreeing to make or making,
funding, or maintaining Adjusted CD Rate Advances or Eurodollar Rate Advances,
then the Borrower shall from time to time,
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upon demand by such Bank (with a copy of such demand to the Administrative
Agent), pay to the Administrative Agent for the account of such Bank additional
amounts sufficient to compensate such Bank for such increased cost. Increased
costs shall not include income, stamp, or other taxes, imposts, duties, charges,
fees, deductions, or withholdings imposed, levied, collected, withheld, or
assessed by the United States of America or any political subdivision or taxing
authority thereof or therein (including Puerto Rico) or of the country in which
any Bank's principal office or Applicable Lending office may be located or any
political subdivision or taxing authority thereof or therein. Each Bank agrees
that, upon the occurrence of any event giving rise to a demand under this
Section 2.11(a) with respect to the Eurodollar Lending Office or the CD Lending
Office of such Bank, it will, if requested by the Borrower and to the extent
permitted by law or the relevant governmental authority, endeavor in good faith
and consistent with its internal policies to avoid or minimize the increase in
costs resulting from such event by endeavoring to change its Eurodollar Lending
Office or CD Lending Office, as appropriate; provided, however, that such
avoidance or minimization can be made in such a manner that such Bank, in its
sole determination, suffers no economic, legal, or regulatory disadvantage. A
certificate as to the amount of and specifying in reasonable detail the basis
for such increased cost, submitted to the Borrower and the Administrative Agent
by such Bank, shall constitute such demand and shall, in the absence of manifest
error, be conclusive and binding for all purposes.
(b) If either (i) the introduction after the date
hereof of, or any change after the date hereof in or in the interpretation of,
any law or regulation or (ii) the compliance by any Bank with any guideline or
request received from any central bank or other governmental authority after the
date hereof (whether or not having the force of law), affects or would affect
the amount of capital required or expected to be maintained by such Bank or any
corporation controlling such Bank and such Bank determines that the amount of
such capital is increased by or based upon the existence of its Advances or
Commitment, then the Borrower shall, from time to time, upon demand by such Bank
(with a copy of such demand to the Administrative Agent), immediately pay to the
Administrative Agent for the account of such Bank additional amounts sufficient
to compensate such Bank to the extent that such Bank determined such increase in
capital to be allocable to the existence of such Bank's Advances or Commitment.
A certificate as to the amount of such increased capital and specifying in
reasonable detail the basis therefor, submitted to the Borrower and the
Administrative Agent by such Bank, shall constitute such demand and shall, in
the absence of manifest error, be conclusive and binding for all purposes. Each
Bank shall use all reasonable efforts to mitigate the effect upon the Borrower
of any such increased capital requirement and shall assess any cost related to
such increased capital on a nondiscriminatory basis among the Borrower and other
borrowers of such Bank to which it applies and such Bank shall not be entitled
to demand or be compensated for any increased capital requirement unless it is,
as a result of such law, regulation, guideline, or request, such Bank's policy
generally to seek to exercise such rights, where available, against other
borrowers of such Bank.
(c) Notwithstanding the foregoing provisions of this
Section 2.11, (i) the Borrower shall not be required to reimburse any Bank for
any increased costs incurred more than three months prior to the date that such
Bank notifies the Borrower in writing thereof and (ii) in the event any Bank
grants a participation in an Advance pursuant to Section 8.07, the Borrower
shall not be obligated to reimburse for increased costs with respect to such
Advance to the extent that the aggregate amount thereof exceeds the aggregate
amount for which the Borrower would have been obligated if such Bank had not
made such participation.
SECTION 2.12 Additional Interest on Eurodollar Rate Advances.
The Borrower shall pay to the Administrative Agent for the account of each Bank
any costs which such Bank determines are attributable to such Bank's compliance
with regulations of the Board of Governors of the Federal Reserve System
requiring the maintenance of reserves with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities. Such costs shall be paid to
the Administrative Agent for the account of such Bank in the form of additional
interest on the unpaid principal amount of each Eurodollar Rate Advance of such
Bank, from the date of such Advance until such principal amount is paid in full,
at an interest rate per annum equal at all times to the remainder obtained by
subtracting (i) the Eurodollar Rate for the applicable period for such Advance
from (ii) the rate obtained by dividing such Eurodollar Rate by a percentage
equal to 100% minus the Eurodollar Rate Reserve Percentage of such Bank for such
period, payable on each date on which interest is payable on such Advance. Such
additional interest shall be determined by such Bank and notified to the
Borrower and the Administrative Agent. A certificate setting forth the amount of
such additional interest, submitted to the Borrower and the Administrative Agent
by such Bank, shall be conclusive and binding for all purposes, absent manifest
error.
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SECTION 2.13 Change in Legality. If any Bank shall, at least
three Business Days before the date of any requested Borrowing consisting of
Eurodollar Rate Advances or at least two Business Days before the date of any
requested Borrowing consisting of Adjusted CD Rate Advances, notify the
Administrative Agent that the introduction of or any change in or in the
interpretation of any law or regulation makes it unlawful, or that any central
bank or other governmental authority asserts that it is unlawful, for such Bank
or its Applicable Lending Office to perform its obligations hereunder to make,
fund, or maintain Eurodollar Rate Advances or Adjusted CD Rate Advances
hereunder, the right of the Borrower to select Advances of such Type from such
Bank for such Borrowing or any subsequent Borrowing shall be suspended until
such Bank shall notify the Administrative Agent that the circumstances causing
such suspension no longer exist; and during the period when such obligation of
such Bank is suspended, any Borrowing consisting of Eurodollar Rate Advances or
Adjusted CD Rate Advances, as the case may be, shall not exceed the Commitments
of the other Banks less the aggregate amount of any Competitive Advances then
outstanding, and shall be made by the other Banks pro rata according to their
respective Commitments.
SECTION 2.14 Payments and Computations.
(a) The Borrower shall make each payment hereunder
from a bank account of the Borrower located in the United States not later than
11:00 a.m. (New York City time) on the day when due in U.S. dollars to the
Administrative Agent at its address referred to in Section 8.02 in same-day
funds. The Administrative Agent will promptly thereafter cause to be distributed
like funds to the Banks entitled thereto for the account of their respective
Applicable Lending Offices, in each case to be applied in accordance with the
terms of this Agreement.
(b) All computations of interest based on the
Alternate Base Rate shall be made by the Administrative Agent on the basis of a
year of 365 or 366 days, as the case may be, when determined by reference to the
Prime Rate and on the basis of a year of 360 days at all other times; and all
computations of fees and of interest based on the Adjusted CD Rate, the
Eurodollar Rate, or the Fixed Rate shall be made by the Administrative Agent on
the basis of a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest or fees are payable. Each determination by the
Administrative Agent of an interest rate hereunder shall be conclusive and
binding for all purposes, absent manifest error.
(c) Whenever any payment hereunder shall be stated to
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall be included in
the computation of payment of interest or fees, as the case may be; provided,
however, that, if such extension would cause payment of interest on or principal
of Eurodollar Rate Advances to be made in the next following calendar month,
such payment shall be made on the next preceding Business Day.
(d) Unless the Administrative Agent shall have
received notice from the Borrower prior to the date on which any payment is due
to the Banks hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Bank on such due
date an amount equal to the amount then due such Bank. If and to the extent the
Borrower shall not have so made such payment in full to the Administrative
Agent, each Bank shall repay to the Administrative Agent forthwith on demand
such amount distributed to such Bank together with interest thereon, for each
day from the date such amount is distributed to such Bank until the date such
Bank repays such amount to the Administrative Agent, at the Federal Funds
Effective Rate.
(e) Each Bank shall maintain on its books a loan
account in the name of the Borrower in which shall be recorded all Advances made
by such Bank to the Borrower, the interest rate, and the maturity date of each
such Advance and all payments of principal and interest made by the Borrower
with respect to such Advances. The obligation of the Borrower to repay the
Advances made by each Bank and to pay interest thereon shall be evidenced by the
entries from time to time made in the loan account of such Bank maintained
pursuant to this Section 2.14(e); provided that, the failure to make an entry
with respect to an Advance shall not affect the obligations of the Borrower
hereunder with respect to such Advance. In case of any dispute, action, or
proceeding relating to any Advance, the
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entries in such loan account shall be prima facie evidence of the amount of
such Advance and of any amounts paid or payable with respect thereto.
(f) The Administrative Agent shall maintain on its
books a set of accounts in which shall be recorded all Advances made by the
Banks to the Borrower, the interest rates, and maturity dates of such Advances
and all payments of principal and interest made thereon. In case of any
discrepancy between the entries in the Administrative Agent's books and the
entries in any Bank's books, such Bank's records shall be considered correct, in
the absence of manifest error.
SECTION 2.15 Taxes on Payments.
(a) All payments made by the Borrower under this
Agreement shall be made free and clear of, and without reduction for or on
account of, any income, stamp, or other taxes, imposts, duties, charges, fees,
deductions, or withholdings, imposed, levied, collected, withheld, or assessed
by the United States of America (or by any political subdivision or taxing
authority thereof or therein) as a result of (i) the introduction after the date
hereof of any law, regulation, treaty, directive, or guideline (whether or not
having the force of law), or (ii) any change after the date hereof in any law,
regulation, treaty, directive, or guideline (whether or not having the force of
law), or (iii) any change after the date hereof in the interpretation or
application of any law, regulation, treaty, directive, or guideline (whether or
not having the force of law), or (iv) any such taxes, imposts, duties, charges,
fees, deductions, or withholdings being imposed, levied, collected, withheld, or
assessed at a greater rate than the rate that would have been applicable had
such an introduction or change not been made, but only to the extent of the
increase in such rate ("Withholding Taxes"). If any Withholding Taxes are
required to be withheld from any amounts payable to or for the account of any
Bank hereunder, the amounts so payable to or for the account of such Bank shall
be increased to the extent necessary to yield to such Bank (after payment of all
Withholding Taxes) interest or any such other amounts payable hereunder at the
rates or in the amounts payable to or for the account of such Bank under this
Agreement prior to such introduction or change. Whenever any Withholding Tax is
payable by the Borrower, as promptly as possible thereafter, the Borrower shall
send to the Administrative Agent, for the account of such Bank, a certified copy
of an original official receipt showing payment thereof. If the Borrower fails
to pay any Withholding Taxes when due to the appropriate taxing authority or
fails to remit to the Administrative Agent, for the account of any Bank the
required receipts or other required documentary evidence, the Borrower shall
indemnify such Bank or the Administrative Agent for any incremental taxes,
interest, or penalties that may become payable by such Bank or the
Administrative Agent as a result of any such failure.
(b) At least four Business Days prior to the first
Borrowing or, if the first Borrowing does not occur within thirty days after the
date of execution of this Agreement, by the end of such thirty day period, each
Bank that is organized outside the United States agrees that it will deliver to
the Borrower and the Administrative Agent two duly completed copies of United
States Internal Revenue Service Form 1001 (or such other documentation or
information as may, under applicable United States federal income tax statutes
or regulations, be required in order to claim an exemption or reduction from
United States income tax withholding by reason of an applicable treaty with the
United States, such documentation or other information being hereafter referred
to as "Form 1001") or Form 4224 (or such other documentation or information as
may, under applicable United States federal income tax statutes or regulations,
be required in order to claim an exemption from United States income tax
withholding for income that is effectively connected with the conduct of a trade
or business within the United States, such documentation or other information
being hereafter referred to as "Form 4224"), as the case may. be, indicating in
each case that such Bank is either entitled to receive payments under this
Agreement without deduction or withholding of any United States federal income
taxes or, as the case may be, is subject to such limited deduction or
withholding as it is capable of recovering in full from a source other than the
Borrower. Each Bank which delivers to the Borrower and the Administrative Agent
a Form 1001 or Form 4224 pursuant to the next preceding sentence further
undertakes to deliver to the Borrower and the Administrative Agent two further
copies of the said Form 1001 or 4224, or successor applicable form or
certificate, as the case may be, as and when the previous form filed by it
hereunder shall expire or shall become incomplete or inaccurate in any respect,
unless in any of such cases an event has occurred prior to the date on which any
such delivery would otherwise be required which renders such form inapplicable.
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(c) If at any time any Bank by reason of payment by
the Borrower of any Withholding Taxes obtains a credit against, or return or
reduction of, any tax payable by it, or any other currently realized tax
benefit, which it would not have enjoyed but for such payment ("Tax Benefit"),
such Bank shall thereupon pay to the Borrower the amount which such Bank shall
certify to be the amount that, after payment, will leave such Bank in the same
economic position it would have been in had it received no such Tax Benefit
("Equalization Amount"); provided, however, that if such Bank shall subsequently
determine that it has lost the benefit of all or a portion of such Tax Benefit,
the Borrower shall promptly remit to such Bank the amount certified by such Bank
to be the amount necessary to restore such Bank to the position it would have
been in if no payment had been made pursuant to this Section 2.15(c); provided,
further, however, that if such Bank shall be prevented by applicable law from
paying the Borrower all or any portion of the Equalization Amount owing to the
Borrower such payment need not be made to the extent such Bank is so prevented
and the amount not paid shall be credited to the extent lawful against future
payment owing to such Bank; provided, further, however, that the aggregate of
all Equalization Amounts paid by any Bank shall in no event exceed the aggregate
of all amounts paid by the Borrower to such Bank in respect of Withholding Taxes
plus, in the case of a Tax Benefit that occurs by reason of a refund interest
actually received from the relevant taxing authority with respect to such
refund. A certificate submitted in good faith by the Bank pursuant to this
Section 2.15(c) shall be deemed conclusive absent manifest error.
(d) In the event a Bank shall become aware that the
Borrower is required to pay any additional amount to it pursuant to Section
2.15(a), such Bank shall promptly notify the Administrative Agent and the
Borrower of such fact and shall use reasonable efforts, consistent with legal
and regulatory restrictions, to change the jurisdiction of its Applicable
Lending Office if the making of such change (i) would avoid the need for, or
reduce the amount of, any such additional amounts that may thereafter accrue,
(ii) would not, in the good faith determination of such Bank, be disadvantageous
for regulatory or competitive reasons to such Bank, and (iii) would not require
such Bank to incur any cost or forego any economic advantage for which the
Borrower shall not have agreed to reimburse and indemnify such Bank.
(e) Notwithstanding the foregoing provisions of this
Section 2.15, in the event any Bank grants a participation in any Advance
pursuant to Section 8.07, the Borrower shall not be obligated to pay any taxes,
imposts, duties, charges, fees, deductions, or withholdings to the extent that
the aggregate amount thereof exceeds the aggregate amount for which the Borrower
would have been obligated if such Bank had not granted such participation.
SECTION 2.16 Sharing of Payments, Etc. If any Bank shall
obtain any payment (whether voluntary, involuntary, through the exercise of any
right of setoff or otherwise) on account of the Contract Advances made by it
(other than pursuant to Sections 2.11, 2.15, 2.17, 8.04, or 8.07(g) hereof) in
excess of its ratable share of payments on account of the Contract Advances
obtained by all the Banks, then such Bank shall forthwith purchase from the
other Banks through the Administrative Agent such participations in the Contract
Advances made by them as shall be necessary to cause such purchasing Bank to
share the excess payment ratably with each of them; provided, however, that, if
all or any portion of such excess payment is thereafter recovered from such
purchasing Bank, such purchase from each Bank shall be rescinded, and such Bank
shall repay to the purchasing Bank the purchase price to the extent of such
recovery, together with an amount equal to such Bank's ratable share (according
to the proportion that the (i) the amount of such Bank's required repayment
bears to (ii) the total amount so recovered from the purchasing Bank) of any
interest or other amount paid or payable by the purchasing Bank in respect of
the total amount so recovered. The Borrower agrees that any Bank so purchasing a
participation from another Bank pursuant to this Section 2.16 may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of setoff) with respect to such participation as fully as if such Bank
were the direct creditor of the Borrower in the amount of such participation.
SECTION 2.17 Removal of a Bank. The Borrower shall have the
right, by giving at least 15 Business Days' prior notice in writing to the
affected Bank and the Administrative Agent, at any time when no Event of Default
and no event which with the passage of time or the giving of notice or both
would become an Event of Default has occurred and is then continuing, to remove
as a party hereto any Bank having a credit rating of C/D (or its equivalent) or
lower by Thomson BankWatch, Inc. (or any successor thereto), such removal to be
effective as of the date specified in such notice from the Borrower (a "Removal
Date"), which date, for any Adjusted CD Rate Advance or any Eurodollar Rate
Contract Advance, shall be the last day of an Interest Period and, for any
Competitive Advance, shall
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be the maturity date of such Competitive Advance. On any Removal Date, the
Borrower shall repay all the outstanding Advances of the affected Bank
applicable to such Removal Date, together with all accrued interest, fees, and
all other amounts owing hereunder to such Bank. Upon each such Removal Date and
receipt of the related payment referred to above, the Commitment relating to the
Advances so paid on such Removal Date, together with all unused Commitment, of
such affected Bank shall terminate, and such Bank shall cease thereafter to
constitute a Bank hereunder. The Borrower shall have the right to offer to one
or more Banks the right to increase their Commitments up to, in the aggregate
for all such increases, the Commitment of any Bank which is removed pursuant to
the foregoing provisions of this Section 2.17 (such Commitment being herein
called an "Unallocated Commitment") effective on the relevant Removal Date, it
being understood that no Bank shall be obligated to increase its Commitment in
response to any such offer. The Borrower shall also have the right to offer all
or any portion of an Unallocated Commitment to one or more Eligible Assignees
not parties hereto having a credit rating higher than C/D (or its equivalent) by
Thomson BankWatch, Inc. (or any successor thereto), and, upon each such bank's
acceptance of such offer and execution and delivery of an instrument agreeing to
the terms and conditions hereof (including, without limitation, the provisions
of Section 8.07 regarding Bank assignments), each such bank shall become a Bank
hereunder with a Commitment in an amount specified in such instrument. The
obligations of the Borrower described in Sections 2.11, 8.04, and 8.15 shall
survive for the benefit of any Bank removed pursuant to this Section 2.17
notwithstanding such removal.
ARTICLE III. CONDITIONS OF LENDING
SECTION 3.01 Conditions Precedent to Closing. The obligation
of each Bank to make an Advance on the occasion of the initial Borrowing is
subject to the conditions precedent that the Administrative Agent shall have
received, on or before the Closing Date (unless otherwise indicated), the
following, each dated the same day (unless otherwise indicated), in form and
substance satisfactory to the Administrative Agent and in sufficient copies for
each Bank:
(a) Certified copies of the resolutions of the Board
of Directors of the Borrower, approving this Agreement and of all documents
evidencing other necessary corporate action and governmental approvals, if any,
with respect to this Agreement.
(b) A certificate of the Secretary or an Assistant
Secretary of the Borrower, certifying the names and true signatures of the
officers of the Borrower authorized to sign this Agreement and the other
documents to be delivered hereunder.
(c) Copies of the currently-effective articles or
certificates of incorporation of the Borrower, and all amendments thereto,
accompanied by certificates that such copies are correct and complete, one dated
a date not more than 60 days prior to the date of the initial Borrowing, issued
by the appropriate governmental authority of the State of Utah and one dated the
date of the initial Borrowing, executed by the President, a Vice President, the
Secretary, or an Assistant Secretary of the Borrower.
(d) Copies of the currently-effective Bylaws, and all
amendments thereto, of the Borrower, accompanied by a certificate dated the date
of the initial Borrowing, certifying that such copy is correct and complete,
executed by the President, a Vice President, the Secretary, or Assistant
Secretary of the Borrower.
(e) Favorable opinions of counsel of the Borrower and
special New York counsel to the Borrower, substantially in the forms of Exhibit
C-1 and C-2 respectively, hereto and as to such other matters as any Bank
through the Administrative Agent may reasonably request.
(f) A favorable opinion of Haynes and Boone, L.L.P.,
counsel for the Administrative Agent, substantially in the form of Exhibit D
hereto.
(g) Executed copies of this Agreement and all other
Loan Papers contemplated hereby.
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(h) Evidence that all fees payable on or prior to the
date of the initial Borrowing have been paid to Administrative Agent and Chase
Securities Inc. as provided for in Section 2.05, and to the extent not
previously paid, reimbursement to Administrative Agent for all reasonable fees
and expenses incurred in connection with the negotiation, preparation, and
closing of the transactions evidenced by the Loan Papers (including, without
limitation, reasonable attorneys' fees and expenses).
SECTION 3.02 Conditions Precedent to Each Borrowing. The
obligation of each Bank to make an Advance in connection with any Borrowing
(including without limitation, the initial Borrowing) shall be subject to the
further conditions precedent that on the date of such Borrowing, (i)
Administrative Agent shall have received a Notice of Contract Borrowing or
Notice of Competitive Borrowing, executed and completed by a Financial Officer
of the Borrower, and (ii) the following statements shall be true (and each of
the giving of the applicable Notice of Contract Borrowing or Notice of
Competitive Borrowing and the acceptance by the Borrower of the proceeds of such
Borrowing shall constitute a representation and warranty by the Borrower that on
the date of such Borrowing such statements are true):
(a) the representations and warranties contained in
Section 4.01 (excluding for all Borrowings, other than the
initial Borrowings, those contained in subsections (f), (j),
(k), and (l) thereof) are correct on and as of the date of
such Borrowing, before and after giving effect to such
Borrowing and to the application of the proceeds therefrom, as
though made on and as of such date; and
(b) no event has occurred and is continuing, or would
result from such Borrowing or from the application of the
proceeds therefrom, which constitutes an Event of Default.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Representations and Warranties of the Borrower.
The Borrower represents and warrants as follows:
(a) The Borrower is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Utah.
(b) The execution, delivery and performance by the
Borrower of this Agreement are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, and do not contravene (i) the
Borrower's charter or by-laws or (ii) any law or any contractual restriction
binding on or affecting the Borrower.
(c) No authorization or approval or other action by,
and no notice to or filing with, any governmental authority, regulatory body, or
other Person is required for the due execution, delivery, and performance by the
Borrower of this Agreement except such as has been duly obtained or made and are
in full force and effect.
(d) This Agreement is the legal, valid, and binding
obligation of the Borrower enforceable against the Borrower in accordance with
its terms.
(e) (i) The statement of consolidated financial
position of the Borrower and its consolidated Subsidiaries as of December 31,
1996, and the related statements of consolidated income and consolidated changes
in common stockholders' equity of the Borrower and its consolidated Subsidiaries
for the fiscal year then ended, copies of which have been furnished to each
Bank, fairly present the financial condition of the Borrower and its
consolidated Subsidiaries as at such date and present the financial condition of
the Borrower and its consolidated Subsidiaries for the period ended on such
date, all in accordance with generally accepted accounting principles
consistently applied.
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(ii) The statement of consolidated financial
position of the Borrower and its consolidated Subsidiaries as of June 30, 1997,
and the related statements of consolidated income and consolidated changes in
common stockholders' equity of the Borrower and its consolidated Subsidiaries
for the fiscal quarter then ended, copies of which have been furnished to each
Bank, fairly present the financial condition of the Borrower and its
consolidated Subsidiaries as at such date and present the financial condition of
the Borrower and its consolidated Subsidiaries for the period ended on such
date, all in accordance with generally accepted accounting principles
consistently applied, and since June 30, 1997, there has been no material
adverse change in such condition or operations.
(f) There is no pending or threatened action or
proceeding affecting the Borrower or any of its consolidated Subsidiaries before
any court, governmental agency, or arbitrator, (i) which purports to affect the
legality, validity or enforceability of this Agreement or (ii) except as set
forth in public documents filed with the Securities and Exchange Commission or
otherwise disclosed publicly on or prior to the date of the initial Borrowing,
which may be reasonably expected to materially adversely affect the financial
condition or operations of the Borrower or any of its Subsidiaries, taken as a
whole.
(g) After applying the proceeds of each Advance, not
more than 25% of the value of the assets of the Borrower and its Subsidiaries
(as determined in good faith by the Borrower) that are subject to Section
5.02(a)(i) will consist of or be represented by margin stock (within the meaning
of Regulation U issued by the Board of Governors of the Federal Reserve System).
(h) The Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U issued by the Board of Governors of the Federal
Reserve System), and no proceeds of any Advance will be used for any purpose
which violates the provisions of the regulations of said Board. If requested by
any Bank or the Administrative Agent, the Borrower will furnish to the
Administrative Agent and each Bank a statement in conformity with the
requirements of Federal Reserve Form U-1 referred to in said Regulation U, the
statements made in which shall be such, in the opinion of each Bank, as to
permit the transactions contemplated hereby in accordance with said Regulation
U.
(i) No Termination Event has occurred nor is
reasonably expected to occur with respect to any Plan which may materially
adversely affect the financial condition or operations of the Borrower and its
Subsidiaries, taken as a whole. Neither the Borrower nor any of its ERISA
Affiliates has incurred nor reasonably expects to incur any withdrawal liability
under ERISA to any Multiemployer Plan which may reasonably be expected to
materially adversely affect the financial condition or operations of the
Borrower and its Subsidiaries, taken as a whole. Schedule B (Actuarial
Information) to the 1994 annual report (Form 5500 Series) with respect to each
Plan, copies of which have been filed with the Internal Revenue Service and
furnished to each Bank, is complete and accurate in all material respects and in
all material respects fairly presents the funding status of each Plan. No
Reportable Event has occurred and is continuing with respect to any Plan which
may materially adversely affect the financial condition or operations of the
Borrower and its Subsidiaries, taken as a whole.
(j) On the date of the initial Borrowing (and after
giving effect to the transactions contemplated by the Loan Papers), Borrower is
Solvent. For purposes hereof, "Solvent" means, as to a Person, that (a) the
aggregate fair market value of such Person's assets exceeds its liabilities
(whether contingent, subordinated, unmatured, unliquidated, or otherwise), (b)
such Person has sufficient cash flow to enable it to pay its Debts as they
mature, and (c) such Person does not have unreasonably small capital to conduct
such Person's business. In computing the amount of contingent liabilities at any
time; for purposes of determining solvency, it is intended that such liabilities
will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
(k) Except as disclosed in public documents filed
with the Securities and Exchange Commission or otherwise disclosed publicly on
or prior to the date of the initial Borrowing, neither Borrower nor any
Restricted Subsidiary is a party to a material transaction with any of its
Affiliates, other than transactions in the ordinary course of business and upon
fair and reasonable terms not materially less favorable than the Borrower or
such Restricted
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Subsidiary could obtain or could become entitled to in an arm's-length
transaction with a Person that was not its Affiliate.
(l) The proportion that the combined EBITDAX of the
Principal Subsidiaries bears to the consolidated EBITDAX for the Borrower and
its Subsidiaries is not less than 80%.
(m) No Event of Default under the Existing Credit
Agreement or any event or existence of any circumstance which, with the giving
of notice or lapse of time or both, would become an Event of Default under the
Existing Credit Agreement exists.
ARTICLE V. COVENANTS OF THE BORROWER
SECTION 5.01 Affirmative Covenants. So long as any Advance
shall remain unpaid or any Bank shall have any Commitment hereunder, the
Borrower will, and, in the case of Section 5.01(a), will cause its Subsidiaries
to, unless the Majority Banks shall otherwise consent in writing:
(a) Keep Books; Corporate Existence; Maintenance of
Properties; Compliance with Laws; Insurance.
(i) keep proper books of record and account,
all in accordance with generally accepted accounting
principles;
(ii) preserve and keep in full force and
effect its existence, and preserve and keep in full
force and effect its licenses, rights, and franchises
to the extent it deems necessary to carry on its
business;
(iii) maintain and keep, or cause to be
maintained and kept, its properties in good repair,
working order, and condition, and from time to time
make or cause to be made all needful and proper
repairs, renewals, replacements, and improvements, in
each case to the extent it deems necessary to carry
on its business;
(iv) use its reasonable efforts to comply in
all material respects with all material applicable
statutes, regulations, and orders of, and all
material applicable restrictions imposed by, any
governmental agency in respect of the conduct of its
business and the ownership of its properties, to the
extent it deems necessary to carry on its business,
except such as are being contested in good faith by
appropriate proceedings;
(v) insure and keep insured its properties
in such amounts (and with such self insurance and
deductibles) as it deems necessary to carry on its
business and to the extent available on premiums and
other terms which the Borrower or any Subsidiary, as
the case may be, deems appropriate. Any of such
insurance may be carried by, through, or with any
captive or affiliated insurance company or by way of
self-insurance as the Borrower or any Subsidiary, as
the case may be, deems appropriate; and
(vi) use the proceeds of Advances for
general corporate purposes and to repurchase or
refinance, from time to time, commercial paper issued
by the Borrower.
Nothing in this subsection shall prohibit the Borrower or any of its
Subsidiaries from discontinuing any business, forfeiting any license, right, or
franchise or discontinuing the operation or maintenance of any of its properties
to the extent it deems appropriate in the conduct of its business.
(b) Reporting Requirements. Furnish to the Banks:
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(i) as soon as available and in any event
within 60 days after the end of each of the first
three quarters of each fiscal year of the Borrower, a
statement of the consolidated financial condition of
the Borrower and its consolidated Subsidiaries as at
the end of such quarter and the related statements of
income and retained earnings of the Borrower and its
consolidated Subsidiaries for the period commencing
at the end of the previous fiscal year and ending
with the end of such quarter, certified by a
principal financial or accounting officer of the
Borrower; provided, however, that the Borrower may
deliver, in lieu of the foregoing, the quarterly
report of the Borrower for such fiscal quarter on
Form 10-Q filed with the Securities and Exchange
Commission or any governmental authority succeeding
to the functions of such Commission, but only so long
as the financial statements contained in such
quarterly report on Form 10-Q relate to the same
companies and are substantially the same in content
as the financial statements referred to in the
preceding provisions of this clause (i);
(ii) as soon as available and in any event
within 90 days after the end of each fiscal year of
the Borrower, a copy of the annual report for such
year for the Borrower and its Subsidiaries,
containing the audited consolidated financial
statements of the Borrower and its consolidated
Subsidiaries for such year and accompanied by an
auditors' report of Deloitte & Touche or other
independent public accountants of nationally
recognized standing that such financial statements
were prepared in accordance with generally accepted
accounting standards and present fairly the
consolidated financial condition of the Borrower and
its consolidated Subsidiaries and results of
operations of the Borrower and its consolidated
Subsidiaries;
(iii) promptly after the sending or filing
thereof, copies of all reports which the Borrower
sends to its stockholders generally, and copies of
all reports and registration statements (without
exhibits) which the Borrower files with the
Securities and Exchange Commission or any national
securities exchange (other than registration
statements relating to employee benefit plans);
(iv) promptly after the filing or receiving
thereof, copies of any notices of any of the events
set forth in Section 4043(b) of ERISA or the
regulations thereunder which the Borrower or any
Subsidiary files with the PBGC, or which the Borrower
or any Subsidiary receives from the PBGC to the
effect that proceedings or other action by the PBGC
is to be instituted;
(v) such other information respecting the
condition or operations, financial or otherwise, of
the Borrower or any of its Subsidiaries as any Bank
through the Administrative Agent may from time to
time reasonably request; and
(vi) at any time the Borrower is not a
publicly-reporting company, upon the request of
Administration Agent (and in a form acceptable to
Administrative Agent), such information respecting
the condition or operations, financial or otherwise,
of the Borrower or any of its Subsidiaries as the
Borrower would have included in any reports filed
with the Securities and Exchange Commission if it had
continued to be a publicly-reporting company.
(c) Notices. Promptly give notice to the
Administrative Agent and each Bank:
(i) of the occurrence of any Event of
Default or any event which, with the giving of notice
or the passage of time, or both, would become an
Event of Default; and
(ii) of the commencement of any litigation,
investigation, or proceeding affecting the Borrower
or any of its Subsidiaries before any court,
governmental authority, or arbitrator which, in the
reasonable judgment of the Borrower, could have a
material adverse effect on the business, operations,
property, or financial or other condition of the
Borrower and its Subsidiaries, taken as a whole.
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Each notice pursuant to this subsection shall be accompanied
by a statement of the Borrower, setting forth details of the
occurrence referred to therein and stating what action the
Borrower proposes to take with respect thereto.
(d) Certificates. Furnish to the Banks:
(i) concurrently with the delivery of the
financial statements referred to in Section
5.01(b)(ii), a letter signed by the independent
public accountants, certifying such financial
statements to the effect that, in the course of the
examination upon which their report for such fiscal
year was based (but without any special or additional
audit procedures for that purpose other than review
of the terms and provisions of this Agreement), they
did not become aware of any Event of Default
involving financial or accounting matters or any
condition or event which, after notice or lapse of
time, or both, would constitute such an Event of
Default, or, if such accountants became aware of any
such Event of Default or other condition or event,
specifying the nature thereof; and
(ii) concurrently with the delivery of the
financial statements or Form 10-Q referred to in
Sections 5.01(b)(i) and (ii), a certificate of a
Financial Officer of the Borrower, stating that, to
the best of such officer's knowledge, the Borrower
during such period has observed or performed, all of
its covenants and other agreements, and satisfied
every condition, contained in this Agreement to be
observed, performed, or satisfied by it, and that
such officer has obtained no knowledge of any Event
of Default or any event which, with notice or lapse
of time, or both, would become an Event of Default,
except as specified in such certificate.
SECTION 5.02 Negative Covenants. So long as any Advance shall
remain unpaid or any Bank shall have any Commitment hereunder, the Borrower will
not, without the written consent of the Majority Banks:
(a) Liens, Etc.
(i) Create, assume, incur, or suffer to
exist, or permit any Subsidiary to create, assume,
incur, or suffer to exist, any Lien upon any stock or
indebtedness, whether now owned or hereafter
acquired, of any Subsidiary, to secure any Debt of
the Borrower or any other Person (other than the
Advances made hereunder), without in any such case
making effective provision whereby all of the
Advances made hereunder shall be directly secured
equally and ratably with such Debt, excluding,
however, from the operation of the foregoing
provisions of this paragraph (i) any Lien upon stock
or indebtedness of any corporation existing at the
time such corporation becomes a Subsidiary, or
existing upon stock or indebtedness of a Subsidiary
at the time of acquisition of such stock or
indebtedness, and any extension, renewal, or
replacement (or successive extensions, renewals, or
replacements) in whole or in part of any such Lien;
provided, however, that the principal amount of Debt
secured thereby shall not exceed the principal amount
of Debt so secured at the time of such extension,
renewal, or replacement; and provided further, that
such Lien shall be limited to all or such part of the
stock or indebtedness which secured the Lien so
extended, renewed, or replaced;
(ii) Create, assume, incur, or suffer to
exist, or permit any Restricted Subsidiary to create,
assume, incur or suffer to exist, any Lien upon any
Principal Property, whether owned or leased on the
date hereof or hereafter acquired, to secure any Debt
of the Borrower or any other Person (other than the
Advances made hereunder), without in any such case
making effective provision whereby all of the
Advances made hereunder shall be directly secured
equally and ratably with such Debt, excluding,
however, from the operation of the foregoing
provisions of this paragraph (ii):
(A) any Lien upon property owned or
leased by any corporation existing at the
time such corporation becomes a Restricted
Subsidiary, so long as such Lien covers
either (x) the assets so encumbered
immediately prior to an acquisition of the
Restricted
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Subsidiary or (y) assets substituted for any
assets described in clause (x) preceding
(the "acquired assets"), so long as the
approximate fair market value of the
substituted assets does not exceed the
approximate fair market value of the
acquired assets for which the substitution
is being made;
(B) any Lien upon property existing
at the time of acquisition thereof or to
secure the payment of all or any part of the
purchase price thereof or to secure any Debt
incurred prior to, at the time of, or within
180 days after, the acquisition of such
property for the purpose of financing all or
any part of the purchase price thereof, so
long as such Lien is limited to the property
so acquired;
(C) any Lien upon property to
secure all or any part of the cost of
exploration, drilling, development,
construction, alteration, repair, or
improvement of all or any part of such
property, or Debt incurred prior to, at the
time of, or within 180 days after, the
completion of such exploration, drilling,
development, construction, alteration,
repair, or improvement for the purpose of
financing all or any part of such cost;
(D) any Lien securing Debt of a
Restricted Subsidiary owing to the Borrower
or to another Restricted Subsidiary;
(E) any Lien existing on the date
of execution of this Agreement and set forth
on Schedule III hereto;
(F) Liens created in favor of Banks
to secure the Obligation;
(G) Any Liens securing Debt of
Borrower under the Existing Credit
Agreement, so long as the Banks are granted
Liens of equal priority upon any property to
which such Liens under the Existing Credit
Agreement attach; and
(H) any extension, renewal, or
replacement (or successive extensions,
renewals, or replacements) in whole or in
part of any Lien referred to in the
foregoing clauses (A) to (G), inclusive;
provided, however, that the principal amount
of Debt secured thereby shall not exceed the
principal amount of Debt so secured at the
time of such extension, renewal, or
replacement; and provided further, that such
Lien shall be limited to all or such part of
the property which secured the Lien so
extended, renewed, or replaced (plus
improvements on such property).
Notwithstanding the foregoing provisions of this
paragraph (ii), the Borrower may, and may permit any
Restricted Subsidiary to, create, assume, incur, or
suffer to exist any Lien upon any Principal Property
which is not excepted by clauses (A) through (F),
above, without equally and ratably securing the
Advances; provided that the aggregate amount of Debt
then outstanding secured by such Lien and all similar
Liens does not exceed the greater of (i)
$150,000,000.00, and (ii) 10% of the total
consolidated stockholders' equity of the Borrower as
shown on the most recently audited consolidated
balance sheet required to be delivered to the Banks
pursuant to Section 5.01(b). For the purpose of this
paragraph (ii), the following types of transactions
shall not be deemed to create a Lien to secure any
Debt:
(A) the sale or other transfer of
(y) any oil, gas, or minerals in place for a
period of time until, or in an amount such
that, the purchaser will realize therefrom a
specified amount of money (however
determined) or a specified amount of such
oil, gas, or minerals, or (z) any other
interest in property of the character
commonly referred to as a "production
payment";
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(B) any Lien in favor of the United
States of America or any state thereof, or
any other country, or any political
subdivision of any of the foregoing, to
secure partial, progress, advance, or other
payments pursuant to the provisions of any
contract or statute, or any Lien upon
property of the Borrower or a Restricted
Subsidiary intended to be used primarily for
the purpose of, or in connection with, air
or water pollution control; provided that no
such Lien shall extend to any other property
of the Borrower or a Restricted Subsidiary.
(b) Debt. (i) Create or suffer to exist any Debt if,
immediately after giving effect to such Debt and the receipt and application of
any proceeds thereof, the aggregate amount of Debt of the Borrower and its
consolidated Subsidiaries, on a consolidated basis, would exceed 65% of the sum
of the total consolidated stockholders' equity of the Borrower and its
Subsidiaries as shown on the most recently consolidated balance sheet required
to be delivered to the Banks pursuant to Section 5.01(b), and the aggregate
amount of Debt of the Borrower and its consolidated Subsidiaries; and (ii) not
permit any of its Subsidiaries to incur any Debt which, in the aggregate for all
such Subsidiaries, would exceed the greater of (A) $150,000,000.00 and (B) 10%
of the total consolidated stockholder's equity of the Borrower as shown on the
most recently consolidated balance sheet required to be delivered to the Banks
pursuant to Section 5.01(b).
(c) Restriction on Fundamental Changes of the
Borrower. Enter into any transaction of merger or consolidation, or convey,
transfer, or lease its properties and assets substantially as an entirety to any
Person, unless:
(i) either (A) Borrower (in any merger or
consolidation involving Borrower) is the surviving
entity, or (B) the corporation formed by such
consolidation or into which the Borrower is merged or
the Person which acquires by conveyance or transfer,
or which leases, the properties and assets of the
Borrower substantially as an entirety (the "Successor
Corporation") shall either (x) immediately after
giving effect to such merger, consolidation,
conveyance, transfer, or lease, have then-effective
ratings (or implied ratings) published by Moody's and
S&P applicable to such Successor Corporation's
senior, unsecured, non-credit-enhanced, long term
indebtedness for borrowed money, which ratings shall
be Baa3 or higher (if assigned by Moody's) or BBB- or
higher (if assigned by S&P), or (y) be acceptable to
Majority Banks in their reasonable determination;
(ii) any Successor Corporation shall be a
corporation organized and existing under the laws of
the United States of America, any state thereof or
the District of Columbia, and shall expressly assume,
by amendment to this Agreement executed by the
Borrower and such Successor Corporation and delivered
to the Administrative Agent, the due and punctual
payment of the principal of, and interest on, the
Advances made hereunder and another amounts payable
under this Agreement and the performance or
observance of every covenant hereof on the part of
the Borrower or such Principal Subsidiary to be
performed or observed;
(iii) immediately after giving effect to
such transaction, no Event of Default and no event
which, with notice or lapse of time, or both, would
become an Event of Default, shall have occurred and
be continuing;
(iv) if, as a result of any such
consolidation or merger or such conveyance, transfer
or lease, properties or assets of the Borrower or any
Principal Subsidiary would become subject to a Lien
which would not be permitted by Section 5.02(a), the
Borrower, the Principal Subsidiary, or the Successor
Corporation, as the case may be, shall take such
steps as shall be necessary effectively to secure the
Advances made hereunder equally and ratably with (or
prior to) all indebtedness secured thereby; and
(v) the Borrower shall have delivered to the
Administrative Agent a certificate signed by an
executive officer of the Borrower and a written
opinion of counsel satisfactory to the Administrative
Agent (who may be counsel to the Borrower), each
stating that such transaction and
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such amendment to this Agreement comply with this
Section 5.02(c) and that all conditions precedent
herein provided for relating to such transaction have
been satisfied.
(d) Prohibition on Sale of UPRC Stock and Fundamental
Changes of UPRC. (i) Convey, sell, assign, or otherwise transfer (or permit any
Subsidiary to so convey, sell, assign, or transfer) all or any of the shares of
capital stock of Union Pacific Resources Company ("UPRC") or any Successor
Subsidiary (as hereinafter defined) now owned or hereafter acquired by the
Borrower or any Subsidiary, and (ii) permit UPRC or any Successor Subsidiary (as
hereinafter defined) to enter into any transaction of merger or consolidation
with, or to convey, transfer, or lease its properties substantially as an
entirety to, any Person, other than, mergers or consolidations with, or
conveyances, transfers, or leases to, Borrower or any other Subsidiary. For
purposes of this subsection, "Successor Subsidiary" shall mean any Subsidiary
which is formed by any merger or consolidation of UPRC or which acquires by
conveyance, transfer, or lease substantially all the properties of UPRC or any
Successor Subsidiary.
(e) Ratio of Maximum Total Debt to Total Capital.
Permit the ratio (expressed as a percentage and as calculated at the end of each
fiscal quarter of the Borrower) that (a) the aggregate amount of the
consolidated Debt of Borrower and its consolidated Subsidiaries bears to (b) the
sum of (i) the total consolidated stockholder's equity of Borrower and its
Subsidiaries plus the consolidated Debt of Borrower and its consolidated
Subsidiaries to be more than 65%.
(f) Compliance with ERISA. To the extent that any
event or action set forth in clauses (i) through (iv) below would subject the
Borrower and its Subsidiaries taken as a whole to any material liability to the
PBGC or otherwise, (i) terminate, or permit any Subsidiary to terminate, any
Plan; (ii) engage in, or permit any Subsidiary to engage in, any "prohibited
transaction" (as defined in Section 4975 of the Code) involving any Plan; (iii)
incur or suffer to exist, or permit any Subsidiary to incur or suffer to exist,
any "accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, involving any Plan; or (iv) allow or suffer to exist, or
permit any Subsidiary to allow or suffer to exist, any event or condition which
presents a risk of incurring a liability to the PBGC by reason of termination of
any Plan.
(g) Affiliate Transactions. Enter into (or permit any
Restricted Subsidiary to enter into) any material transaction with any of its
Affiliates, other than any transaction described in public documents filed with
the Securities and Exchange Commission or otherwise disclosed publicly prior to
the date of the initial Borrowing under this Agreement, or any transaction in
the ordinary course of business and upon fair and reasonable terms not
materially less favorable than Borrower or such Restricted Subsidiary could
obtain or could be entitled to in an arm's-length transaction with a Person that
was not its Affiliate.
(h) Principal Subsidiaries. Permit the combined
EBITDAX of the Principal Subsidiaries to be less than 80% of the consolidated
EBITDAX of the Borrower and its Subsidiaries as shown on the most recent
consolidated balance sheet required to be delivered to the Banks pursuant to
Section 5.01(c).
ARTICLE VI. EVENTS OF DEFAULT
SECTION 6.01 Events of Default. If any of the
following events ("Events of Default") shall occur and be continuing:
(a) the Borrower shall fail to pay any principal of
any Advance when the same becomes due and payable; provided, that if any such
failure shall result from the malfunctioning or shutdown of any wire transfer or
other payment system employed by the Borrower to make such payment or from an
inadvertent error of a technical or clerical nature by the Borrower or any bank
or other entity employed by the Borrower to make such payment, no Event of
Default shall result under this paragraph (a) during the period (not in excess
of two Business Days) required by the Borrower to make alternate payment
arrangements; or
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(b) the Borrower shall fail to pay any interest on
any Advance or any fee payable hereunder or under any agreement executed in
connection herewith when the same becomes due and payable and such failure shall
remain unremedied for ten days; or
(c) any representation or warranty made by the
Borrower herein or by the Borrower (or any of its officers) in connection with
this Agreement (including, without limitation, any representation or warranty
deemed made by the Borrower at the time of any Advance pursuant to Article III)
shall prove to have been incorrect in any material respect when made or deemed
made; or
(d) the Borrower shall fail to perform or observe any
other term, covenant, or agreement contained in this Agreement on its part to be
performed or observed if such failure shall remain unremedied for 30 days after
written notice thereof shall have been given to the Borrower by the
Administrative Agent or any Bank; or
(e) an event of default as defined in any mortgage,
indenture, or instrument under which there may be issued, or by which there may
be secured or evidenced, any Debt of the Borrower or any Principal Subsidiary,
whether such Debt now exists or shall hereafter be created, shall happen and
shall result in Debt of the Borrower in excess of $25,000,000 principal amount
becoming or being declared due and payable prior to the date on which it would
otherwise become due and payable, and such declaration shall not be rescinded or
annulled; or
(f) (i) the Borrower or any Principal Subsidiary
shall commence any case, proceeding, or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition, or other relief with respect to it or its
debts, or (B) seeking appointment of a receiver, trustee, custodian, or other
similar official for it or for all or any substantial part of its assets, or the
Borrower or any Principal Subsidiary shall make a general assignment for the
benefit of its creditors; or (ii) there shall be commenced against the Borrower
or any Principal Subsidiary any case, proceeding or other action of a nature
referred to in clause (i) above which (A) results in the entry of an order for
relief or any such adjudication or appointment or (B) remains undismissed,
undischarged, or unbonded for a period of 60 days; or (iii) there shall be
commenced against the Borrower or any Principal Subsidiary any case, proceeding,
or other action seeking issuance of a warrant of attachment, execution,
distraint, or similar process against all or any substantial part of its assets
which results in the entry of an order for any such relief which shall not have
been vacated, discharged, or stayed or bonded pending appeal within 60 days from
the entry thereof; or (iv) the Borrower or any Principal Subsidiary shall take
any action in furtherance of or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above;
or (v) the Borrower or any Principal Subsidiary shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as they
become due;
(g) a Material Plan shall fail to maintain the
minimum funding standards required by Section 412 of the Code for any plan year
or a waiver of such standard is sought or granted under Section 412(d), or a
Material Plan is, shall have been, or will be terminated or the subject of
termination proceedings under ERISA, or the Borrower or any of its Subsidiaries
or any ERISA Affiliate has incurred or will incur a liability to or on account
of a Material Plan under Sections 4062, 4063, or 4064 of ERISA, and there shall
result from any such event either a liability or a material risk of incurring a
liability to the PBGC or a Material Plan (or a related trust) which will have a
material adverse effect upon the business, operations or the condition
(financial or otherwise) of the Borrower and its Subsidiaries, taken as a whole;
(h) the Borrower or any ERISA Affiliate shall have
been notified by the sponsor of a Multiemployer Plan that it has incurred
withdrawal liability to such Multiemployer Plan in an amount which, when
aggregated with all other amounts required to be paid to Multiemployer Plans in
connection with withdrawal liabilities (determined as of the date of such
notification), will have a material adverse effect upon the business,
operations, or the condition (financial or otherwise) of the Borrower and its
Subsidiaries, taken as a whole; or
(i) any Event of Default described in the Existing
Credit Agreement shall occur;
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then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of Majority Banks, by notice to the Borrower, declare
the obligation of each Bank to make Advances to be terminated, whereupon the
same shall forthwith terminate, (ii) shall at the request, or may with the
consent, of Banks owed at least 51% of the then aggregate unpaid principal
amount of the Advances owing to Banks, by notice to the Borrower, declare the
Advances, all interest thereon and all other amounts payable under this
Agreement to be forthwith due and payable, whereupon the Advances, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest, notice of intention to accelerate, notice
of acceleration, or further notice of any kind, all of which are hereby
expressly waived by the Borrower; and (iii) shall at the request of, or may with
the consent of Majority Banks, exercise any and all other legal and equitable
rights afforded by the Loan Papers, applicable law, or in equity, including, but
not limited to, the right to bring suit or other proceedings for specific
performance or otherwise in aid of any right granted to Administrative Agent or
any Bank hereunder; provided, however, that in the event of an actual or deemed
entry of an order for relief with respect to the Borrower or any of its
Subsidiaries under the Federal Bankruptcy Code, (A) the obligation of each Bank
to make Advances shall automatically be terminated and (B) the Advances, all
such interest and all such amounts shall automatically become and be due and
payable, without presentment, demand, protest, or any notice of any kind, all of
which are hereby expressly waived by the Borrower.
ARTICLE VII. THE ADMINISTRATIVE AGENT
SECTION 7.01 Authorization and Action. Each Bank hereby
appoints and authorizes the Administrative Agent to take such action as
administrative agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Administrative Agent by the terms hereof,
together with such powers as are reasonably incidental thereto. As to any
matters not expressly provided for by this Agreement (including, without
limitation, enforcement or collection of the amounts due hereunder), the
Administrative Agent shall not be required to exercise any discretion or take
any action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Majority Banks, and such instructions shall be binding upon all Banks and
all holders of Advances; provided, however, that the Administrative Agent shall
not be required to take any action which exposes the Administrative Agent to
personal liability or which is contrary to this Agreement or applicable law. The
Administrative Agent agrees to give to each Bank prompt notice of each notice
given to it by the Borrower pursuant to the terms of this Agreement.
SECTION 7.02 Administrative Agent's Reliance, Etc. Neither the
Administrative Agent nor any of its directors, officers, agents, or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement, except for its or their own gross
negligence or wilful misconduct. Without limitation of the generality of the
foregoing, the Administrative Agent: (i) may consult with legal counsel
(including counsel for the Borrower), independent public accountants, and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants, or experts; (ii) makes no warranty or representation to any Bank
and shall not be responsible to any Bank for any statements, warranties, or
representations made in or in connection with this Agreement; (iii) shall not
have any duty to ascertain or to inquire as to the performance or observance of
any of the terms, covenants, or conditions of this Agreement on the part of the
Borrower or to inspect the property (including the books and records) of the
Borrower; (iv) shall not be responsible to any Bank for the due execution,
legality, validity, enforceability, genuineness, sufficiency, or value of this
Agreement or any other instrument or document furnished pursuant hereto; and (v)
shall incur no liability under or in respect of this Agreement by acting upon
any notice, consent, certificate, or other instrument or writing (which may be
by telecopy, telegram or cable) believed by it to be genuine and signed or sent
by the proper party or parties.
SECTION 7.03 Administrative Agent and Affiliates. With respect
to its Commitment, Texas Commerce Bank National Association shall have the same
rights and powers under this Agreement as any other Bank and may exercise the
same as though it were not the Administrative Agent; and the term "Bank" or
"Banks" shall, unless otherwise expressly indicated, include Texas Commerce Bank
National Association in its individual capacity. Texas Commerce Bank National
Association and its affiliates may accept deposits from, lend money to, act as
trustee under indentures of, and generally engage in any kind of business with,
the Borrower, any of its subsidiaries, and any Person
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who may do business with or own securities of the Borrower or any such
subsidiary, all as if Texas Commerce Bank National Association were not the
Administrative Agent and without any duty to account therefor to the Banks.
SECTION 7.04 Bank Credit Decision. Each Bank acknowledges that
it has, independently and without reliance upon the Administrative Agent or any
other Bank and based on the financial statements referred to in Section 4.01 and
such other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement.
SECTION 7.05 Indemnification. The Banks agree to indemnify
each Agent, acting in their respective agency capacities, (to the extent not
reimbursed by the Borrower), ratably as computed as set forth below 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 such
Agent in any way relating to, or arising out of, this Agreement or any action
taken or omitted by such Agent under this Agreement; provided that no Bank shall
be liable to any Agent for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses, or disbursements
resulting from such Agent's gross negligence or wilful misconduct. Without
limitation of the foregoing, each Bank agrees to reimburse the Administrative
Agent promptly upon demand for its ratable share of any out-of-pocket expenses
(including counsel fees) incurred by the Administrative Agent in connection with
the preparation, execution, delivery, administration, modification, amendment,
or enforcement (whether through negotiations, legal proceedings, or otherwise)
of, or legal advice in respect of rights or responsibilities under, this
Agreement, to the extent that the Administrative Agent is not reimbursed for
such expenses by the Borrower. For purposes of this Section 7.05, ratable
allocations among the Banks shall be made (i) in respect of any demand by the
Administrative Agent prior to a declaration made pursuant to clause (ii) of
Section 6.01, according to the respective amounts of their Commitments and (ii)
thereafter according to the respective principal amounts of the Advances then
outstanding to them.
SECTION 7.06 Successor Administrative Agent. The
Administrative Agent may resign at any time by giving written notice thereof to
the Banks and the Borrower and may be removed at any time with or without cause
by the Majority Banks. Upon any such resignation or removal, the Majority Banks
shall have the right to appoint a successor Administrative Agent with the
consent of the Borrower (which consent shall not be required if at the time of
such appointment any Event of Default or an event which with the passage of time
or the giving of notice or both would become an Event of Default has occurred
and is continuing). If no successor Administrative Agent shall have been so
appointed by the Majority Banks, and shall have accepted such appointment,
within 30 days after the retiring Administrative Agent's giving of notice of
resignation or the Majority Banks' removal of the retiring Administrative Agent,
then the retiring Administrative Agent may, on behalf of the Banks, appoint a
successor Administrative Agent, which shall be a commercial bank organized or
licensed under the laws of the United States of America or of any state thereof
and having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges, and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations under this Agreement. After
any retiring Administrative Agent's resignation or removal hereunder as
Administrative Agent, the provisions of this Article VII shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement.
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ARTICLE VIII. MISCELLANEOUS
SECTION 8.01 Amendments, Etc. No amendment or waiver of any
provision of this Agreement, nor consent to any departure by the Borrower
therefrom, shall in any event be effective, unless the same shall be in writing
and signed by the Majority Banks, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no amendment, waiver, or consent shall, unless in
writing and signed by all the Banks, do any of the following: (a) waive any of
the conditions specified in Section 3.01 or 3.02 (if and to the extent that the
Borrowing which is the subject of such waiver would involve an increase in the
aggregate outstanding amount of Advances over the aggregate amount of Advances
outstanding immediately prior to such Borrowing), (b) increase the Commitments
of the Banks or subject the Banks to any additional obligations, (c) reduce the
principal of, or interest on, the Advances or any fees or other amounts payable
hereunder, (d) postpone any date fixed for any payment of principal of, or
interest on, the Advances or any fees or other amounts payable hereunder, (e)
make any change which would alter the percentage of the Commitments or of the
aggregate unpaid principal amount of the Advances, or the number of Banks, which
shall otherwise be required for the Banks or any of them to take any action
hereunder, or (f) amend this Section 8.01; and provided further, that no
amendment, waiver, or consent shall, unless in writing and signed by the
Administrative Agent in addition to the Banks required above to take such
action, affect the rights or duties of the Administrative Agent under this
Agreement.
SECTION 8.02 Notices, Etc. All notices and other
communications provided for hereunder shall be in writing (including telecopy,
telegraphic, or cable communication and telecopied, mailed, telegraphed, cabled,
or delivered, if to the Borrower, at its address at P.O. Box 7, 801 Cherry
Street, Fort Worth, Texas 76101; if to any Bank listed on Schedule I hereto, at
its Notice Address specified opposite its name on Schedule I hereto; if to any
other Bank, at its Domestic Lending office specified in the Assignment and
Acceptance pursuant to which it became a Bank; if to the Administrative Agent,
at its address at Texas Commerce Tower, Energy Department, 2200 Ross Avenue, 3rd
Floor, Dallas, Texas 75201, Attention: Lee Beckelman; and if to Auction
Administration Agent, c/o the Loan and Agency Services Group, at its address at
One Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention:
Sandra Miklave; or, as to the Borrower, any Bank, or the Administrative Agent,
at such other address as shall be designated by such party in a written notice
to the other parties and, as to each other party, at such other address as shall
be designated by such party in a written notice to the Borrower and the
Administrative Agent. All such notices and communications shall, when
telecopied, mailed, telegraphed, or cabled, be effective when sent by telecopy,
deposited in the mails, delivered to the telegraph company, or delivered to the
cable company, respectively, except that notices and communications to the
Administrative Agent pursuant to Article II or VII shall not be effective until
received by the Administrative Agent. The Administrative Agent shall be entitled
to rely on any oral notice made pursuant to Section 2.03(a)(v) believed by it to
be genuine and made by the proper party or parties, and the Borrower and the
Banks, as the case may be, agree to be conclusively bound by the Administrative
Agent's records in respect of any such notice.
SECTION 8.03 No Waiver; Remedies. No failure on the part of
any Bank or the Administrative Agent to exercise, and no delay in exercising,
any right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 8.04 Costs, Expenses and Taxes
(a) The Borrower agrees to pay on demand all costs
and expenses in connection with the preparation, execution, delivery,
administration, modification, and amendment of this Agreement, the Loan Papers,
and the other documents to be delivered hereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Administrative Agent with respect thereto and with respect to advising the
Administrative Agent as to its rights and responsibilities under this Agreement,
and all costs and expenses, if any (including, without limitation, reasonable
counsel fees and expenses), incurred by the Administrative Agent or any Bank in
connection with the enforcement (whether through negotiations, legal
proceedings, or otherwise) of this Agreement and the other documents to be
delivered hereunder. In addition, the Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes,
charges, or similar levies which arise from the execution
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and delivery of this Agreement and agrees to save the Administrative Agent and
each Bank harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes.
(b) If any payment of principal of any Adjusted CD
Rate Advance, Eurodollar Rate Contract Advance, or Competitive Advance is made
by the Borrower to or for the account of a Bank other than on the last day of
the Interest Period for such Contract Advance, or on the maturity date of such
Competitive Advance, as the case may be, or as a result of a payment pursuant to
Section 2.07(c), or as a result of acceleration of the maturity of the Advances
pursuant to Section 6.01, or for any other reason, or by an Eligible Assignee to
a Bank other than on the last day of the Interest Period (or the final maturity
date in the case of a Competitive Advance) for such Advance upon an assignment
of rights and obligations under this Agreement pursuant to Section 8.07 as a
result of a demand by the Borrower pursuant to Section 8.07(a), or an assignment
of rights and obligations under this Agreement pursuant to Section 2.17 as a
result of a demand by the Borrower, or if the Borrower fails to convert or
continue any Contract Advance hereunder after irrevocable notice of such
conversion or continuation has been given pursuant to Section 2.04, the Borrower
shall, upon demand by such Bank (with a copy of such demand to the
Administrative Agent), pay to the Administrative Agent for the account of such
Bank any amounts required to compensate such Bank for any additional losses,
costs, or expenses which it may reasonably incur as a result of such payment or
failure, including, without limitation, any loss (including loss of anticipated
profits), cost, or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by such Bank to fund or maintain such
Advance. A certificate of such Bank setting forth the amount demanded hereunder
and the basis therefor shall, in the absence of manifest error, be conclusive
and binding for all purposes.
SECTION 8.05 Right of Set-off. Upon (i) the occurrence and
during the continuance of any Event of Default and (ii) the making of the
request or the granting of the consent specified by Section 6.01 to authorize
the Administrative Agent to declare the Advances due and payable pursuant to the
provisions of Section 6.01, each Bank is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set-off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Bank to or for
the credit or the account of the Borrower against any and all of the Obligation
of the Borrower now or hereafter existing under this Agreement and the Advances
made by such Bank, irrespective of whether or not such Bank shall have made any
demand under this Agreement and although such obligations may be unmatured. Each
Bank agrees promptly to notify the Borrower and the Administrative Agent after
any such set-off and application made by such Bank; provided that the failure to
give such notice shall not affect the validity of such set-off and application.
The rights of each Bank under this Section 8.05 are in addition to other rights
and remedies (including, without limitation, other rights of set-off) which such
Bank may have.
SECTION 8.06. Binding Effect. This Agreement shall become
effective when it shall have been executed by the Borrower and the
Administrative Agent and when the Administrative Agent shall have been notified
by each Bank that such Bank has executed it and thereafter shall be binding upon
and inure to the benefit of the Borrower, the Administrative Agent, and each
Bank and their respective successors and assigns.
SECTION 8.07 Assignments and Participations.
(a) Each Bank may and, if demanded by the Borrower
pursuant to subsection (g) hereof, shall assign to one or more banks or other
entities all or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Commitment and the
Advances owing to it); provided, however, that (i) each such assignment shall be
of a constant, and not a varying, percentage of all of the rights and
obligations of the Banks under this Agreement, (ii) the amount of the Commitment
of the assigning Bank being assigned pursuant to each such assignment
(determined as of the date of the Assignment and Acceptance with respect to such
assignment) shall in no event be less than $10,000,000 and shall be an integral
multiple of $1,000,000, (iii) each such assignment shall be to an Eligible
Assignee, and (iv) the parties to each such assignment shall execute and deliver
to the Administrative Agent, for its acceptance and recording in the Register
(as defined in Section 8.07(c)), an Assignment and Acceptance, together with a
processing fee of $2,500. Upon such execution, delivery, acceptance, and
recording, from and after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least three Business Days after the
execution thereof, (x) the assignee thereunder shall be a party hereto and, to
the extent that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, have the
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rights and obligations of a Bank hereunder, and (y) the Bank assignor thereunder
shall, to the extent that rights and obligations hereunder have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Bank's rights and obligations under this Agreement, such Bank shall cease to be
a party hereto). Notwithstanding the foregoing (unless such assignment is being
made on demand of the Borrower pursuant to subsection (g)), any Bank assigning
its rights and obligations under this Agreement may retain any Competitive
Advances made by it outstanding at such time, and in such case shall retain its
rights hereunder in respect of any Advances so retained until such Advances have
been repaid in full in accordance with this Agreement.
(b) By executing and delivering an Assignment and
Acceptance, the Bank assignor thereunder and the assignee thereunder confirm to
and agree with each other and the other parties hereto as follows: (i) other
than as provided in such Assignment and Acceptance, such assigning Bank makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties, or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency, or value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Bank makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Borrower or the performance or observance by the Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 4.01(e) and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Administrative Agent, such assigning Bank or any other Bank
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement; (v) such assignee confirms that it is an Eligible
Assignee, except for any required consent of the Borrower and Administrative
Agent; (vi) such assignee appoints and authorizes the Administrative Agent to
take such action as administrative agent on its behalf and to exercise such
powers under this Agreement as are delegated to the Administrative Agent by the
terms hereof, together with such powers as are reasonably incidental thereto;
and (vii) such assignee agrees that it will perform in accordance with their
terms all of the obligations which by the terms of this Agreement are required
to be performed by it as a Bank.
(c) The Administrative Agent shall maintain at its
address referred to in Section 8.02 a copy of each Assignment and Acceptance
delivered to and accepted by it and a register for the recordation of the names
and addresses of the Banks and the Commitment of, and principal amount of the
Advances owing to, each Bank from time to time (the "Register"). The entries in
the Register shall be conclusive and binding for all purposes, absent manifest
error, and the Borrower, the Administrative Agent, and the Banks may treat each
Person whose name is recorded in the Register as a Bank hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower or any Bank at any reasonable time and from time to time upon
reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance
executed by an assigning Bank and an assignee that it is an Eligible Assignee,
the Administrative Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of Exhibit B hereto, and if the
processing fees required by Section 8.07 have been paid to Administrative Agent,
(i) accept such Assignment and Acceptance, (ii) record the information contained
therein in the Register, (iii) give prompt notice thereof to the Borrower, and
(iv) send a copy thereof to the Borrower.
(e) Each Bank may sell participations to one or more
banks or other entities in or to all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Commitment and the Advances owing to it); provided, however, that (i) such
Bank's obligations under this Agreement (including, without limitation, its
Commitment to the Borrower hereunder) shall remain unchanged, (ii) such Bank
shall remain solely responsible to the other parties hereto for the performance
of such obligations, and (iii) the Borrower, the Administrative Agent, and the
other Banks shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Agreement; and
provided further, however, that such Bank shall not agree with any such bank or
other financial institution to permit such bank or other financial institution
to enforce the obligations of the Borrower relating to the Advances or to
approve of any amendment, modification,
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or waiver of any provision of this Agreement (other than amendments,
modifications, or waivers with respect to any decrease in any fees payable
hereunder or the amount of principal or rate of interest which is payable in
respect of such Advances or any extension of the dates fixed for the payment
thereof).
(f) Any Bank may, in connection with any assignment
or participation or proposed assignment or participation pursuant to this
Section 8.07, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower furnished to such Bank by
or on behalf of the Borrower; provided that, prior to any such disclosure, the
assignee or participant or proposed assignee or participant, if not an Eligible
Assignee, shall agree to preserve the confidentiality of any confidential
information relating to the Borrower received by it from such Bank.
(g) If any Bank shall make demand for payment under
or shall notify the Borrower that it is affected by an event described in
Section 2.11 or 2.15 hereunder or shall notify the Administrative Agent pursuant
to Section 2.13 hereunder, then within 15 days after such demand or such notice,
the Borrower may (i) demand that such Bank assign in accordance with this
Section 8.07 to one or more Eligible Assignees designated by the Borrower all
(but not less than all) of such Bank's Commitment and the Advances owing to it
within the next succeeding 30 days; provided that, if any such Eligible Assignee
designated by the Borrower shall fail to consummate such assignment on terms
acceptable to such Bank, or if the Borrower shall fail to designate any such
Eligible Assignees for all or part of such Bank's Commitment or Advances, then
such Bank may assign such Commitment or Advances to any other Eligible Assignee
in accordance with this Section 8.07 during such 30-day period or (ii) terminate
all (but not less than all) of such Bank's Commitment and repay all (but not
less than all) of such Bank's Advances not so assigned on or before such 30th
day in accordance with Sections 2.06 and 2.07(c) hereof (but without the
requirements stated therein for ratable treatment of the Banks). Nothing in this
Section 8.07(g) shall relieve the Borrower of its obligations for payment under
Section 2.11 or 2.15 arising prior to an assignment or termination pursuant
hereto.
(h) Any Bank may at any time assign all or any
portion of its rights under this Agreement to a Federal Reserve Bank; provided
that no such assignment shall release a Bank from any of its obligations
hereunder. In connection with any such assignment or proposed assignment, the
Borrower will, promptly upon the request of any Bank, execute and deliver to
such Bank a note evidencing the Borrower's obligations hereunder, in a form
mutually satisfactory to the Borrower and such Bank.
(i) This Section 8.07 sets forth the exclusive manner
by which a Bank may assign its rights and obligations hereunder or sell
participations in or to its rights and obligations hereunder.
(j) Each Bank agrees to notify the Borrower of any
assignment of or grant of a participating interest in any Advance, and of the
identity of the assignee or participant.
(k) The Borrower may not assign or delegate any
rights or obligations hereunder without the prior written consent of each Bank.
SECTION 8.08 Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York.
SECTION 8.09 Exceptions to Covenants. The Borrower may not
take or fail to take any action that is permitted as an exception to any of the
covenants contained in any Loan Paper if that action or omission would result in
the breach of any other covenant contained in any Loan Paper.
SECTION 8.10 Survival. All covenants, agreements,
undertakings, representations, and warranties made in any of the Loan Papers
survive all closings under the Loan Papers until payment in full of the
Obligation and termination of this Agreement, except that Sections 2.11, 2.12,
2.15, 7.05, 8.04, and 8.15 (together with any other provisions in the Loan
Papers which expressly provides that it shall survive termination of this
Agreement) shall survive termination of this Agreement; and such covenants,
agreements, undertakings, representations, and warranties, except as otherwise
indicated, are not affected by any investigation made by any party.
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SECTION 8.11 Invalid Provisions. Any provision in any Loan
Paper held to be illegal, invalid, or unenforceable is fully severable; the
appropriate Loan Paper shall be construed and enforced as if that provision had
never been included; and the remaining provisions shall remain in full force and
effect and shall not be affected by the severed provision. Administrative Agent,
Banks, and the Borrower party to the affected Loan Paper agree to negotiate, in
good faith, the terms of a replacement provision as similar to the severed
provision as may be possible and be legal, valid, and enforceable.
SECTION 8.12 Maximum Rate. Regardless of any provision
contained in any Loan Paper, no Bank shall ever be entitled to contract for,
charge, take, reserve, receive, or apply, as interest on the Obligation, or any
part thereof, any amount in excess of the Maximum Rate, and, if Banks ever do
so, then any excess shall be deemed a partial prepayment of principal and
treated hereunder as such and any remaining excess shall be refunded to the
Borrower. In determining if the interest paid or payable exceeds the Maximum
Rate, the Borrower and Banks shall, to the maximum extent permitted under
applicable law, (a) treat all Borrowings as but a single extension of credit
(and Lenders and Borrower agree that such is the case and that provision herein
for multiple Borrowings is for convenience only), (b) characterize any
nonprincipal payment as an expense, fee, or premium rather than as interest, (c)
exclude voluntary prepayments and the effects thereof, and (d) amortize,
prorate, allocate, and spread the total amount of interest throughout the entire
contemplated term of the Obligation; provided that if the Obligation is paid and
performed in full prior to the end of the full contemplated term thereof, and if
the interest received for its actual period of existence thereof exceeds the
Maximum Amount, Banks shall refund any excess (and Banks shall not, to the
extent permitted by law, be subject to any penalties provided by any laws for
contracting for, charging, taking, reserving, or receiving interest in excess of
the Maximum Amount).
SECTION 8.13 Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
SECTION 8.14 Not in Control. Nothing in any Loan Paper gives
or may be deemed to give to Administrative Agent or any Bank the right to
exercise control over the Borrower or any Subsidiary's Principal Property, other
assets, affairs, or management or to preclude or interfere with the Borrower or
any Subsidiary's compliance with any law or require any act or omission by the
Borrower or any Subsidiary that may be harmful to Persons or property. Any
materiality or substantiality qualifier of any representation, warranty,
covenant, agreement, or other provision of any Loan Paper is included for credit
documentation purposes only and does not imply, and shall not be deemed to mean,
that Administrative Agent or any Bank acquiesces in any non-compliance by the
Borrower or any Subsidiary with any law, document, or otherwise or does not
expect the Borrower or any Subsidiary to promptly, diligently, and continuously
carry out all appropriate removal, remediation, compliance, closure, or other
activities required or appropriate in accordance with all Environmental Laws.
SECTION 8.15 INDEMNIFICATION. THE BORROWER SHALL INDEMNIFY,
PROTECT, AND HOLD AGENTS, CHASE SECURITIES INC., EACH BANK, AND THEIR RESPECTIVE
AFFILIATES, PARENTS, AND SUBSIDIARIES, AND EACH OF THE FOREGOING PARTIES'
RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, REPRESENTATIVES, AGENTS, SUCCESSORS,
ASSIGNS, AND ATTORNEYS (COLLECTIVELY, THE "INDEMNIFIED PARTIES") HARMLESS FROM
AND AGAINST ANY AND ALL PRESENT AND FUTURE, KNOWN AND UNKNOWN, FIXED AND
CONTINGENT, LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, CLAIMS, AND PROCEEDINGS AND ALL REASONABLE AND NECESSARY
COSTS, EXPENSES (INCLUDING, WITHOUT LIMITATION, ALL REASONABLE ATTORNEYS' FEES
AND LEGAL EXPENSES, AND AMOUNTS PAID IN SETTLEMENT WHETHER OR NOT SUIT IS
BROUGHT), AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER (THE "INDEMNIFIED
LIABILITIES") WHICH MAY AT ANY TIME BE IMPOSED ON, INCURRED BY, OR ASSERTED
AGAINST THE INDEMNIFIED PARTIES, IN ANY WAY RELATING TO OR ARISING OUT OF (A)
ANY LOAN PAPERS OR TRANSACTION CONTEMPLATED BY ANY LOAN PAPER, OR (B) ANY
INDEMNIFIED PARTY'S SOLE OR CONCURRENT ORDINARY NEGLIGENCE ARISING IN CONNECTION
WITH ANY LOAN PAPER OR ANY TRANSACTION CONTEMPLATED BY ANY LOAN PAPER, TO THE
EXTENT THAT ANY OF THE INDEMNIFIED LIABILITIES AS TO ANY INDEMNIFIED PARTY
RESULTS, DIRECTLY OR INDIRECTLY, FROM ANY CLAIM MADE, OR ACTION, SUIT, OR
PROCEEDING COMMENCED BY OR ON BEHALF OF ANY PERSON OTHER THAN BY SUCH
INDEMNIFIED PARTY; (PROVIDED THAT, THE BORROWER SHALL HAVE NO OBLIGATION
HEREUNDER TO ANY INDEMNIFIED PARTY WITH RESPECT TO ANY INDEMNIFIED LIABILITY
ARISING FROM THE FRAUD, GROSS NEGLIGENCE, OR WILFUL MISCONDUCT OF SUCH
INDEMNIFIED PARTY OR
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ANY ASSOCIATED PERSON OF SUCH INDEMNIFIED PARTY. AS USED IN THIS PARAGRAPH, THE
TERM "ASSOCIATED PERSON" MEANS, WITH RESPECT TO ANY PERSON, THE AFFILIATES,
PARENTS, SUBSIDIARIES, DIRECTORS, OFFICERS, EMPLOYEES, REPRESENTATIVES, AGENTS,
SUCCESSORS, ASSIGNS, AND ATTORNEYS OF SUCH PERSON, OR OF ANOTHER PERSON OF WHICH
SUCH PERSON IS ALSO AN ASSOCIATED PERSON. THE PROVISIONS OF AND UNDERTAKINGS AND
INDEMNIFICATION SET FORTH IN THIS SECTION SHALL SURVIVE THE SATISFACTION AND
PAYMENT OF THE OBLIGATION AND TERMINATION OF THIS AGREEMENT. THE BORROWER MAY,
AT ITS OWN COST AND EXPENSE, PARTICIPATE IN THE DEFENSE IN ANY PROCEEDING
INVOLVING ANY INDEMNIFIED LIABILITY. IF NO EVENT OF DEFAULT EXISTS, THE BORROWER
MAY ASSUME THE DEFENSE IN THAT PROCEEDING ON BEHALF OF THE APPLICABLE
INDEMNIFIED PARTIES, INCLUDING THE EMPLOYMENT OF COUNSEL IF FIRST APPROVED
(WHICH APPROVAL MAY NOT BE UNREASONABLY WITHHELD) BY THE APPLICABLE INDEMNIFIED
PARTIES. IF THE BORROWER ASSUMES ANY DEFENSE, IT SHALL KEEP THE APPLICABLE
INDEMNIFIED PARTIES FULLY ADVISED OF THE STATUS OF, AND SHALL CONSULT WITH THOSE
INDEMNIFIED PARTIES BEFORE TAKING ANY MATERIAL POSITION IN RESPECT OF, THAT
PROCEEDING. IF THE BORROWER CONSENTS OR IF ANY INDEMNIFIED PARTY REASONABLY
DETERMINES THAT AN ACTUAL CONFLICT OF INTEREST EXISTS BETWEEN THE BORROWER AND
THAT INDEMNIFIED PARTY WITH RESPECT TO THE SUBJECT MATTER OF THE PROCEEDING OR
THAT THE BORROWER IS NOT DILIGENTLY PURSUING THE DEFENSE, THEN (I) THAT
INDEMNIFIED PARTY MAY, AT THE BORROWER'S EXPENSE, EMPLOY COUNSEL TO REPRESENT
INDEMNIFIED PARTY THAT IS SEPARATE FROM COUNSEL FOR THE BORROWER OR ANY OTHER
PERSON IN THAT PROCEEDING AND (II) THE BORROWER IS NO LONGER ENTITLED TO ASSUME
THE DEFENSE ON BEHALF OF THAT INDEMNIFIED PARTY. THE BORROWER MAY NOT AGREE TO
THE SETTLEMENT OF ANY INDEMNIFIED LIABILITY WITHOUT THE PRIOR WRITTEN CONSENT OF
THE APPLICABLE INDEMNIFIED PARTIES UNLESS THAT SETTLEMENT FULLY RELIEVES THOSE
INDEMNIFIED PARTIES OF ANY LIABILITY WHATSOEVER FOR THAT INDEMNIFIED LIABILITY.
SECTION 8.16 Certain Agents. Neither the Syndication Agent nor
the Documentation Agent shall have any rights, powers, obligations, liabilities,
responsibilities, or duties under this Agreement other than those applicable to
all Banks as such.
SECTION 8.17 Entirety. THE LOAN PAPERS REPRESENT THE
FINAL AGREEMENT BETWEEN THE BORROWER, BANKS, AND ADMINISTRATIVE AGENT AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS BY SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN SUCH
PARTIES.
[Remainder of Page Intentionally Blank. Signature Pages Follow.]
39
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
UNION PACIFIC RESOURCES GROUP INC.,
as Borrower
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, as Administrative Agent and
as a Bank
By:
--------------------------------
Lee Beckelman
Vice President
<PAGE>
Signature Page to that certain $300,000,000.00 364 Day
Competitive Advance/Revolving Credit Agreement dated as of November 25, 1997,
among Union Pacific Resources Group Inc., as Borrower, Texas Commerce Bank
National Association, as Administrative Agent, The Chase Manhattan Bank, as
Auction Administration Agent, Bank of America NT&SA, as Documentation Agent,
NationsBank of Texas, N.A., as Syndication Agent, and the Banks named therein,
including the undersigned.
NATIONSBANK OF TEXAS, N.A.,
as Syndication Agent and as a Bank
By:
-------------------------------
J. Scott Fowler
Vice President
<PAGE>
Signature Page to that certain $300,000,000.00 364 Day
Competitive Advance/Revolving Credit Agreement dated as of November 25, 1997,
among Union Pacific Resources Group Inc., as Borrower, Texas Commerce Bank
National Association, as Administrative Agent, The Chase Manhattan Bank, as
Auction Administration Agent, Bank of America NT&SA, as Documentation Agent,
NationsBank of Texas, N.A., as Syndication Agent, and the Banks named therein,
including the undersigned.
BANK OF AMERICA NT&SA,
as Documentation Agent and as a Bank
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE>
Signature Page to that certain $300,000,000.00 364 Day
Competitive Advance/Revolving Credit Agreement dated as of November 25, 1997
among Union Pacific Resources Group Inc., as Borrower, Texas Commerce Bank
National Association, as Administrative Agent, The Chase Manhattan Bank, as
Auction Administration Agent, Bank of America NT&SA, as Documentation Agent,
NationsBank of Texas, N.A., as Syndication Agent, and the Banks named therein,
including the undersigned.
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION, as a Bank
By:
------------------------------
Name:
-------------------------
Title:
------------------------
<PAGE>
Signature Page to that certain $300,000,000.00 364 Day
Competitive Advance/Revolving Credit Agreement dated as of November 25, 1997
among Union Pacific Resources Group Inc., as Borrower, Texas Commerce Bank
National Association, as Administrative Agent, The Chase Manhattan Bank, as
Auction Administration Agent, Bank of America NT&SA, as Documentation Agent,
NationsBank of Texas, N.A., as Syndication Agent, and the Banks named therein,
including the undersigned.
BANK OF AMERICA NT&SA, as a Bank
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
<PAGE>
Signature Page to that certain $300,000,000.00 364 Day
Competitive Advance/Revolving Credit Agreement dated as of November 25, 1997
among Union Pacific Resources Group Inc., as Borrower, Texas Commerce Bank
National Association, as Administrative Agent, The Chase Manhattan Bank, as
Auction Administration Agent, Bank of America NT&SA, as Documentation Agent,
NationsBank of Texas, N.A., as Syndication Agent, and the Banks named therein,
including the undersigned.
CREDIT SUISSE FIRST BOSTON, as a Bank
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE>
Signature Page to that certain $300,000,000.00 364 Day
Competitive Advance/Revolving Credit Agreement dated as of November 25, 1997
among Union Pacific Resources Group Inc., as Borrower, Texas Commerce Bank
National Association, as Administrative Agent, The Chase Manhattan Bank, as
Auction Administration Agent, Bank of America NT&SA, as Documentation Agent,
NationsBank of Texas, N.A., as Syndication Agent, and the Banks named therein,
including the undersigned.
ROYAL BANK OF CANADA, as a Bank
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE>
Signature Page to that certain $300,000,000.00 364 Day
Competitive Advance/Revolving Credit Agreement dated as of November 25, 1997
among Union Pacific Resources Group Inc., as Borrower, Texas Commerce Bank
National Association, as Administrative Agent, The Chase Manhattan Bank, as
Auction Administration Agent, Bank of America NT&SA, as Documentation Agent,
NationsBank of Texas, N.A., as Syndication Agent, and the Banks named therein,
including the undersigned.
ABN AMRO BANK N.V., HOUSTON AGENCY
By: ABN AMRO North America, Inc., as
a Bank
By:
----------------------------------
H. Greg Shiels
Vice President and Director
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE>
Signature Page to that certain $300,000,000.00 364 Day
Competitive Advance/Revolving Credit Agreement dated as of November 25, 1997
among Union Pacific Resources Group Inc., as Borrower, Texas Commerce Bank
National Association, as Administrative Agent, The Chase Manhattan Bank, as
Auction Administration Agent, Bank of America NT&SA, as Documentation Agent,
NationsBank of Texas, N.A., as Syndication Agent, and the Banks named therein,
including the undersigned.
BANK OF MONTREAL, as a Bank
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE>
Signature Page to that certain $300,000,000.00 364 Day
Competitive Advance/Revolving Credit Agreement dated as of November 25, 1997
among Union Pacific Resources Group Inc., as Borrower, Texas Commerce Bank
National Association, as Administrative Agent, The Chase Manhattan Bank, as
Auction Administration Agent, Bank of America NT&SA, as Documentation Agent,
NationsBank of Texas, N.A., as Syndication Agent, and the Banks named therein,
including the undersigned.
THE FIRST NATIONAL BANK
OF CHICAGO, as a Bank
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE>
Signature Page to that certain $300,000,000.00 364 Day
Competitive Advance/Revolving Credit Agreement dated as of November 25, 1997
among Union Pacific Resources Group Inc., as Borrower, Texas Commerce Bank
National Association, as Administrative Agent, The Chase Manhattan Bank, as
Auction Administration Agent, Bank of America NT&SA, as Documentation Agent,
NationsBank of Texas, N.A., as Syndication Agent, and the Banks named therein,
including the undersigned.
MELLON BANK, N.A., as a Bank
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE>
Signature Page to that certain $300,000,000.00 364 Day
Competitive Advance/Revolving Credit Agreement dated as of November 25, 1997
among Union Pacific Resources Group Inc., as Borrower, Texas Commerce Bank
National Association, as Administrative Agent, The Chase Manhattan Bank, as
Auction Administration Agent, Bank of America NT&SA, as Documentation Agent,
NationsBank of Texas, N.A., as Syndication Agent, and the Banks named therein,
including the undersigned.
THE INDUSTRIAL BANK OF JAPAN, LTD.,
NEW YORK BRANCH, as a Bank
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE>
Signature Page to that certain $300,000,000.00 364 Day
Competitive Advance/Revolving Credit Agreement dated as of November 25, 1997
among Union Pacific Resources Group Inc., as Borrower, Texas Commerce Bank
National Association, as Administrative Agent, The Chase Manhattan Bank, as
Auction Administration Agent, Bank of America NT&SA, as Documentation Agent,
NationsBank of Texas, N.A., as Syndication Agent, and the Banks named therein,
including the undersigned.
WELLS FARGO BANK (TEXAS), N.A., as
a Bank
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE>
Signature Page to that certain $300,000,000.00 364 Day
Competitive Advance/Revolving Credit Agreement dated as of November 25, 1997
among Union Pacific Resources Group Inc., as Borrower, Texas Commerce Bank
National Association, as Administrative Agent, The Chase Manhattan Bank, as
Auction Administration Agent, Bank of America NT&SA, as Documentation Agent,
NationsBank of Texas, N.A., as Syndication Agent, and the Banks named therein,
including the undersigned.
BANQUE NATIONALE DE PARIS,
HOUSTON AGENCY, as a Bank
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE>
Signature Page to that certain $300,000,000.00 364 Day
Competitive Advance/Revolving Credit Agreement dated as of November 25, 1997
among Union Pacific Resources Group Inc., as Borrower, Texas Commerce Bank
National Association, as Administrative Agent, The Chase Manhattan Bank, as
Auction Administration Agent, Bank of America NT&SA, as Documentation Agent,
NationsBank of Texas, N.A., as Syndication Agent, and the Banks named therein,
including the undersigned.
THE BANK OF NEW YORK, as a Bank
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE>
Signature Page to that certain $300,000,000.00 364 Day
Competitive Advance/Revolving Credit Agreement dated as of November 25, 1997
among Union Pacific Resources Group Inc., as Borrower, Texas Commerce Bank
National Association, as Administrative Agent, The Chase Manhattan Bank, as
Auction Administration Agent, Bank of America NT&SA, as Documentation Agent,
NationsBank of Texas, N.A., as Syndication Agent, and the Banks named therein,
including the undersigned.
THE NORTHERN TRUST COMPANY, as a Bank
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE>
SCHEDULE I
----------
Banks, Lending Offices, and Commitments
---------------------------------------
<TABLE>
<CAPTION>
NOTICE ADDRESS
BANK (Other than Notices of DOMESTIC CD
Borrowing) LENDING OFFICE LENDING OFFICE
<S> <C> <C> <C>
Texas Commerce Bank Texas Commerce Tower Texas Commerce Tower Texas Commerce Tower
National Association 2200 Ross Avenue, 2200 Ross Avenue, 2200 Ross Avenue,
3rd Floor 3rd Floor 3rd Floor
Dallas, TX 75201 Dallas, TX 75201 Dallas, TX 75201
Attn: Lee Beckelman Attn: Richard Sink Attn: Richard Sink
Vice President
Bank of America Bank of America, NT&SA Bank of America, NT&SA Bank of America, NT&SA
NT&SA 333 Clay 333 Clay 333 Clay
Suite 4550 Suite 4550 Suite 4550
Houston, TX 77002 Houston, TX 77002 Houston, TX 77002
Attn: Ron McKaig Attn: Loans Administrator Attn: Loans Administrator
NationsBank of Texas, NationsBank of Texas, N.A. NationsBank of Texas, N.A. NationsBank of Texas, N.A.
N.A. 901 Main Street 901 Main Street 901 Main Street
64th Floor 14th Floor 14th Floor
Dallas, TX 75202 Dallas, TX 75202 Dallas, TX 75202
Attn: J. Scott Fowler Attn: Ken Brookshire Attn: Ken Brookshire
Vice President
Credit Suisse First Credit Suisse First Boston Credit Suisse First Boston Credit Suisse First Boston
Boston 11 Madison Avenue 11 Madison Avenue 11 Madison Avenue
New York, NY 10010-3692 New York, NY 10010-3692 New York, NY 10010-3692
Attn: Eric Eckholdt Attn: David Meckler, Attn: David Meckler,
Client Services Client Services
Royal Bank of Canada Royal Bank of Canada Royal Bank of Canada Royal Bank of Canada
12450 Greenspoint Drive 1 Financial Square 1 Financial Square
Suite 1450 23rd Floor 23rd Floor
Houston, TX 76060 New York, NY 10005-3531 New York, NY 10005-3531
Attn: Linda M. Stephens, Attn: Loans Administrator Attn: Loans Administrator
Manager
ABN-AMRO Bank, ABN-AMRO Bank, N.V. ABN-AMRO Bank, N.V. ABN-AMRO Bank, N.V.
N.V. Three Riverway Three Riverway Three Riverway
Suite 1700 Suite 1700 Suite 1700
Houston, TX 77056 Houston, TX 77056 Houston, TX 77056
Attn: H. Gene Shiels Attn: Josephine Zozobrado Attn: Josephine Zozobrado
Vice President and Director
Bank of Montreal Bank of Montreal Bank of Montreal Bank of Montreal
700 Louisiana Street 700 Louisiana Street 700 Louisiana Street
Suite 4400 Suite 4400 Suite 4400
Houston, TX 77002 Houston, TX 77002 Houston, TX 77002
Attn: Robert L. Roberts Attn: Jane M. Wiley Attn: Jane M. Wiley
Director Senior Officer, Senior Officer,
Client Services Client Services
The First National Bank Royal Bank of Canada Royal Bank of Canada Royal Bank of Canada
of Chicago 1100 Louisiana Street 1 First National Plaza 1 First National Plaza
Suite 3200 10th Floor 10th Floor
Houston, TX 77002 Chicago, IL 60670 Chicago, IL 60670
Attn: Susan Stiernberg Attn: Bill Laird Attn: Bill Laird
Vice President
</TABLE>
<TABLE>
<CAPTION>
BANK EURODOLLAR LENDING COMMITMENT
OFFICE (In U.S. Dollars)
<S> <C> <C>
Texas Commerce Bank Texas Commerce Tower
National Association 2200 Ross Avenue,
3rd Floor
Dallas, TX 75201 $27,000,000
Attn: Richard Sink
Bank of America Bank of America, NT&SA
NT&SA 333 Clay
Suite 4550 $27,000,000
Houston, TX 77002
Attn: Loans Administrator
NationsBank of Texas, NationsBank of Texas, N.A.
N.A. 901 Main Street
14th Floor
Dallas, TX 75202 $27,000,000
Attn: Ken Brookshire
Credit Suisse First Credit Suisse First Boston
Boston 11 Madison Avenue
New York, NY 10010-3692 $24,000,000
Attn: David Meckler,
Client Services
Royal Bank of Canada Royal Bank of Canada
1 Financial Square
23rd Floor
New York, NY 10005-3531 $24,000,000
Attn: Loans Administrator
ABN-AMRO Bank, ABN-AMRO Bank, N.V.
N.V. Three Riverway
Suite 1700
Houston, TX 77056 $19,000,000
Attn: Josephine Zozobrado
Bank of Montreal 700 Louisiana Street
Suite 4400
Houston, TX 77002
Attn: Jane M. Wiley $19,000,000
Senior Officer,
Client Services
The First National Bank Royal Bank of Canada
of Chicago 1 First National Plaza
10th Floor
Chicago, IL 60670 $19,000,000
Attn: Bill Laird
</TABLE>
SCHEDULE I
----------
<PAGE>
<TABLE>
<CAPTION>
NOTICE ADDRESS
BANK (Other than Notices of DOMESTIC CD
Borrowing) LENDING OFFICE LENDING OFFICE
<S> <C> <C> <C>
Mellon Bank, N.A. Mellon Bank, N.A. Mellon Bank, N.A. Mellon Bank, N.A.
Three Mellon Bank Center Three Mellon Bank Center Three Mellon Bank Center
Room 2304 Room 2304 Room 2304
Pittsburgh, PA 15259 Pittsburgh, PA 15259 Pittsburgh, PA 15259
Attn: Andrew Plonsky Attn: Andrew Plonsky Attn: Andrew Plonsky
The Industrial Bank The Industrial Bank of Japan, The Industrial Bank of Japan, The Industrial Bank of Japan,
of Japan, Ltd., Ltd., New York Branch Ltd., New York Branch Ltd., New York Branch
New York Branch Three Allen Center 1251 Avenue of the Americas 1251 Avenue of the Americas
Suite 4850 New York, NY 10020-1104 New York, NY 10020-1104
333 Clay Street Attn: Mr. Atsushi Kawai Attn: Mr. Atsushi Kawai
Houston, TX 77002 Credit Administration Credit Administration
Attn: W. Lynn Williford
For Bid Notices:
The Industrial Bank of Japan,
Ltd., New York Branch
Three Allen Center
Suite 4850
333 Clay Street
Houston, TX 77002
Attn: Ms. Jessica Cowan
Client Representative
Wells Fargo Bank Wells Fargo Bank (Texas), Wells Fargo Bank (Texas), Wells Fargo Bank (Texas),
(Texas), N.A. N.A. N.A. N.A.
1445 Ross Avenue 1445 Ross Avenue 1445 Ross Avenue
Suite 400 Suite 400 Suite 400
Dallas, TX 75202-2812 Dallas, TX 75202-2812 Dallas, TX 75202-2812
Attn: Chad Kirkham Attn: Chad Kirkham Attn: Chad Kirkham
Banque Nationale de Banque Nationale de Paris, Banque Nationale de Paris, Banque Nationale de Paris,
Paris, Houston Agency Houston Agency Houston Agency Houston Agency
717 North Harwood 333 Clay, Suite 3400 333 Clay, Suite 3400
Suite 2630 Houston, TX 77002 Houston, TX 77002
Dallas, TX 75201 Attn: Donna Rose Attn: Donna Rose
Attn: David Camp
The Bank of New York The Bank of New York The Bank of New York The Bank of New York
One Wall Street, 19th Fl. One Wall Street One Wall Street, 19th Fl.
New York, NY 10286 19th Floor New York, NY 10286
Attn: Raymond J. Palmer, New York, NY 10286 Attn: Raymond J. Palmer,
Vice President Attn: Raymond J. Palmer, Vice President
Vice President
The Northern Trust The Northern Trust Company The Northern Trust Company The Northern Trust Company
Company 50 South LaSalle Street 50 South LaSalle Street 50 South LaSalle Street
9th Floor 12th Floor 12th Floor
Chicago, IL 60675 Chicago, IL 60675 Chicago, IL 60675
Attn: David Love Attn: Linda Honda Attn: Linda Honda
</TABLE>
<TABLE>
<CAPTION>
BANK EURODOLLAR LENDING COMMITMENT
OFFICE (In U.S. Dollars)
<S> <C> <C>
Mellon Bank, N.A. Mellon Bank, N.A.
Three Mellon Bank Center
Room 2304 $19,000,000
Pittsburgh, PA 15259
Attn: Andrew Plonsky
The Industrial Bank The Industrial Bank of Japan,
of Japan, Ltd., Ltd., New York Branch
New York Branch 1251 Avenue of the Americas
New York, NY 10020-1104
Attn: Mr. Atsushi Kawai
Credit Administration
$19,000,000
Wells Fargo Bank Wells Fargo Bank (Texas),
(Texas), N.A. N.A.
1445 Ross Avenue
Suite 400 $19,000,000
Dallas, TX 75202-2812
Attn: Chad Kirkham
Banque Nationale de Banque Nationale de Paris,
Paris, Houston Agency Houston Agency
333 Clay, Suite 3400
Houston, TX 77002 $19,000,000
Attn: Donna Rose
The Bank of New York The Bank of New York
One Wall Street
19th Floor
New York, NY 10286 $19,000,000
Attn: Raymond J. Palmer,
Vice President
The Northern Trust The Northern Trust Company
Company 50 South LaSalle Street
12th Floor $19,000,000
Chicago, IL 60675
Attn: Linda Honda
Total: $300,000,000.00
</TABLE>
SCHEDULE I
----------
<PAGE>
SCHEDULE II
-----------
Principal Subsidiaries
----------------------
1. Union Pacific Resources Company
2. UP Fuels Marketing and Trading, Inc.
3. Rock Springs Royalty Company
4. Bitter Creek Coal Company
SCHEDULE II
-----------
<PAGE>
SCHEDULE III
------------
Existing Liens
--------------
None.
SCHEDULE III
------------
<PAGE>
EXHIBIT A-1
-----------
Notice of Contract Borrowing
----------------------------
[Date]
------------------------------
Texas Commerce Bank National Association,
as Administrative Agent
Texas Commerce Tower
Energy Department
2200 Ross Avenue, 3rd Floor
Dallas, Texas 75201
Attn: Lee Beckelman
Vice President
Gentlemen:
The undersigned, Union Pacific Resources Group Inc., refers to
the $300,000,000 364 Day Competitive Advance/Revolving Credit Agreement, dated
as of November 25, 1997 (the "Credit Agreement", the terms defined therein being
used herein as therein defined), among the undersigned, certain Banks parties
thereto, Texas Commerce Bank National Association, as Administrative Agent for
said Banks, The Chase Manhattan Bank, as Auction Administration Agent, Bank of
America NT&SA, as Documentation Agent, and NationsBank of Texas, as Syndication
Agent, and hereby gives you notice, irrevocably, pursuant to Section 2.02 of the
Credit Agreement that the undersigned hereby requests a Contract Borrowing under
the Credit Agreement, and in that connection sets forth below the information
relating to such Contract Borrowing (the "Proposed Contract Borrowing") as
required by Section 2.02(a) of the Credit Agreement:
(i) The Business Day of the Proposed Contract Borrowing is
_________________________, 19__.
(ii) The Type of Contract Advances comprising the Proposed
Contract Borrowing is [Adjusted CD Rate Advances] [Alternate Base Rate Advances]
[Eurodollar Rate Contract Advances].
(iii) The aggregate amount of the Proposed Contract Borrowing
is $ .
(iv) The Interest Period for each Contract Advance made as
part of the Proposed Contract Borrowing is [ days] [ months[s]].
Very truly yours,
UNION PACIFIC RESOURCES GROUP INC.
By:
------------------------------
Name:
-----------------------------
Title:
----------------------------
EXHIBIT A-1
-----------
<PAGE>
EXHIBIT A-2
-----------
Notice of Competitive Borrowing
-------------------------------
[Date]
-----------------------
Texas Commerce Bank National Association, The Chase Manhattan Bank,
as Administrative Agent as Auction Administration Agent
Texas Commerce Tower c/o The Loan and Agency Services Group
Energy Department One Chase Manhattan Plaza, 8th Floor
2200 Ross Avenue, 3rd Floor Energy Department
Dallas, Texas 75201 New York, New York 10081
Attn: Lee Beckelman Attn: Sandra Miklave
Vice President Fax: (212) 552-5658
Gentlemen:
The undersigned, Union Pacific Resources Group Inc., refers to
the $300,000,000 364 Day Competitive Advance/Revolving Credit Agreement, dated
as of November 25, 1997 (the "Credit Agreement", the terms defined therein being
used herein as therein defined), among the undersigned, certain Banks parties
thereto, Texas Commerce Bank National Association, as Administrative Agent, The
Chase Manhattan Bank, as Auction Administration Agent, Bank of America NT&SA, as
Documentation Agent, and NationsBank of Texas, N.A., as Syndication Agent, and
hereby gives you notice pursuant to Section 2.03 of the Credit Agreement that
the undersigned hereby requests a Competitive Borrowing under the Credit
Agreement, and in that connection sets forth the terms on which Competitive
Borrowing (the "Proposed Competitive Borrowing") is requested to be made:
1. Date of Competitive Borrowing
(which is a Business Day)
--------------------
2. Type of Competitive Advances
comprising the Proposed
Competitive Borrowing(1)
--------------------
3. Amount of Competitive Borrowing(2)
--------------------
4. Maturity Date(3)
--------------------
5. Other Provisions, if any
--------------------
--------------------
Very truly yours,
UNION PACIFIC RESOURCES GROUP INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
- --------
(1) Eurodollar Rate Competitive Advance or Fixed Rate
Competitive Advance.
(2) Not less than $10,000,000 or greater than the annual
aggregate Commitment of the Bank and in integral multiples of $1,000,000.
(3) (i)In the case of a Eurodollar Rate Competitive Borrowing,
1, 2, 3, or 6 months and (ii) in the case of a Fixed Rate Competitive Advance of
not less than seven calendar days, and which in either case shall not end later
than the Termination Date.
EXHIBIT A-2
-----------
<PAGE>
EXHIBIT A-2
-----------
<PAGE>
EXHIBIT A-3
-----------
FORM OF NOTICE TO BANKS OF COMPETITIVE BID REQUEST
[Name of Bank]
[Address of Bank]
[Date]
Attention:
Dear Sirs:
Reference is made to the 364 Day Competitive Advance/Revolving
Credit Agreement (the "Credit Agreement") dated as of November 25, 1997, among
Union Pacific Resources Group Inc. ("Borrower"), the Banks named therein, Texas
Commerce Bank National Association, as Administrative Agent, NationsBank of
Texas, N.A., as Syndication Agent, and Bank of America NT&SA, as Documentation
Agent, and The Chase Manhattan Bank, as Auction Administration Agent.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Credit Agreement. The Borrower delivered
a Notice of Competitive Borrowing requesting a Competitive Bid on _____________,
19__ pursuant to Section 2.03(a) of the Credit Agreement, and in that connection
you are invited to submit a Competitive Bid by [Date] / [Time] .(1) Your
Competitive Bid must comply with Section 2.03(b) of the Credit Agreement and the
terms set forth below on which the Notice of Competitive Borrowing was made:
(A) Date of Competitive Borrowing
----------------------------------------
(B) Aggregate Principal Amount of
Competitive Borrowing
----------------------------------------
(C) Interest Rate Basis
----------------------------------------
(D) Interest Period and the Last Day
Thereof
----------------------------------------
Very truly yours,
THE CHASE MANHATTAN BANK, as Auction
Administration Agent
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
- --------
(1) The Competitive Bid must be received by the Auction
Administration Agent (i) in the case of Eurodollar Rate Competitive Advances,
not later than 10:00 a.m., New York City time, three Business Days before a
proposed Competitive Borrowing, and (ii) in the case of Fixed Rate Competitive
Advances, not later than 10:00 a.m., New York City time, on the date of a
proposed Competitive Borrowing.
EXHIBIT A-3
-----------
<PAGE>
EXHIBIT A-4
-----------
FORM OF COMPETITIVE BID
The Chase Manhattan Bank, as Auction Administration
Agent for the Banks referred to below
c/o The Loan and Agency Services Group
One Chase Manhattan Plaza, 8th Floor
New York, New York 10081
[Date]
Attention: Sandra Miklave
Fax (212) 552-5658
Dear Sirs:
The undersigned, [Name of Bank], refers to the 364 Day
Competitive Advance/Revolving Credit Agreement dated as of November 25, 1997
(the "Credit Agreement"), among Union Pacific Resources Group Inc. (the
"Borrower"), the Banks named therein, Texas Commerce Bank National Association,
as Administrative Agent, NationsBank of Texas, N.A., as Syndication Agent, and
Bank of America NT&SA, as Documentation Agent, and The Chase Manhattan Bank, as
Auction Administration Agent. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in the Credit
Agreement. The undersigned hereby makes a Competitive Bid pursuant to Section
2.03(a)(ii) of the Credit Agreement, in response to the Notice of Competitive
Borrowing made by the Borrower on ________, 19 _______, and in that connection
sets forth below the terms on which such Competitive Bid is made:
(A) Principal Amount(1)
------------------------------------------
(B) Competitive Bid Rate(2)
------------------------------------------
(C) Interest Period and the Last
Day Thereof(3)
------------------------------------------
The undersigned hereby confirms that it is prepared to extend
credit to the Company upon acceptance by the Company of this bid in accordance
with Section 2.03(a)(v) of the Credit Agreement.
Very truly yours,
[NAME OF BANK]
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
- --------
(1) Not less than $10,000,000 or greater than the available
Total Commitment and in integral multiples of $1,000,000. Multiple bids will be
accepted by the Auction Administration Agent.
(2) i.e., Eurodollar Rate + or - ____%, in the case of
Eurodollar Rate Advances, or ____%, in the case of Fixed Rate Competitive
Advances (in each case, expressed in the form of a decimal to no more than four
decimal places).
(3) The Interest Period must be the Interest Period specified
in the Notice of Competitive Borrowing.
EXHIBIT A-4
-----------
<PAGE>
EXHIBIT A-5
-----------
FORM OF COMPETITIVE BID ACCEPT/REJECT LETTER
[Date]
The Chase Manhattan Bank, as Auction Administration
Agent under the Credit Agreement referred to below
The Loan and Agency Services Group
One Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attention: Sandra Miklave
Fax: (212) 552-5658
Dear Sirs:
Reference is made to the 364 Day Competitive Bid/Revolving
Credit Agreement dated as of November 25, 1997 (the "Credit Agreement"), among
the Union Pacific Resources Group Inc. (the "Borrower"), the Banks named
therein, Texas Commerce Bank National Association, as Administrative Agent,
NationsBank of Texas, N.A., as Syndication Agent, and Bank of America NT&SA, as
Documentation Agent, and The Chase Manhattan Bank, as Auction Administration
Agent. Capitalized terms used herein and not otherwise defined herein shall have
the meanings assigned to such terms in the Credit Agreement.
In accordance with Section 2.03(a)(ii), the Borrower has
received a notice of bids in connection with its Competitive Bid Request dated
[insert date] and in accordance with Section 2.03(a)(iii) of the Credit
Agreement, the undersigned hereby accepts the following bids for maturity on
[insert date]:
Principal Amount Fixed Rate/Margin Bank
- ---------------- ----------------- ----
$ [%] / [+/-, . %]
-------------------- -----
$ [%] / [+/-, . %]
-------------------- -----
The undersigned hereby rejects the following bids:
Principal Amount Fixed Rate/Margin Bank
- ---------------- ----------------- ----
$ [%] / [+/-, . %]
-------------------- -----
$ [%] / [+/-, . %]
-------------------- -----
The $_____________________ should be deposited in Texas
Commerce Bank National Association account number [insert number] on [insert
date] [or] [wire transferred to [Name of Bank] account number [insert number]
[other wire instructions] on [date]].
Very truly yours,
UNION PACIFIC RESOURCES GROUP INC.
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
EXHIBIT A-5
-----------
<PAGE>
EXHIBIT B
---------
Assignment and Acceptance Agreement
-----------------------------------
Dated __________, 19____
Reference is made to the $300,000,000 364 Day Competitive
Advance/Revolving Credit Agreement, dated as of November 25, 1997 (the "Credit
Agreement") among Union Pacific Resources Group Inc., a Utah corporation (the
"Borrower"), the Banks (as defined in the Credit Agreement), and Texas Commerce
Bank National Association, as Administrative Agent for the Banks (the
"Administrative Agent"), The Chase Manhattan Bank, as Auction Administration
Agent, Bank of America NT&SA, as Documentation Agent, and NationsBank of Texas,
as Syndication Agent. Terms defined in the Credit Agreement are used herein with
the same meaning.
_________________________ (the "Assignor") and
________________________________ (the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee,
without recourse and without any representations and warranties of the Assignor
except as specifically set forth below, and the Assignee hereby purchases and
assumes from the Assignor, a portion of the Assignor's rights and obligations
under the Credit Agreement as of the Assignment Date (as defined below) equal to
a ________________________%(1) interest in and to all of the rights and
obligations of the Banks under the Credit Agreement (including, without
limitation, such percentage interest in the Commitments as in effect on the
Assignment Date and the Advances, if any, outstanding on the Assignment Date).
2. The Assignor (i) represents and warrants that as of the
date hereof its Commitment (without giving effect to assignments thereof which
have not yet become effective) is $_________________ and the aggregate
outstanding principal amount of Advances owing to it (without giving effect to
assignments thereof which have not yet become effective) is $_______________ ;
(ii) represents and warrants that it is the legal and beneficial owner of the
interest being assigned by it hereunder and that such interest is free and clear
of any adverse claim; (iii) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties, or representations
made in or in connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or any other instrument or document furnished pursuant thereto; (iv)
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of the Borrower or the performance or observance by
the Borrower of any of its obligations under the Credit Agreement or any other
instrument or document furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of
the Credit Agreement, together with copies of the financial statements referred
to in Section 4.01(e) thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon the Administrative Agent, the Assignor or any other Bank
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Administrative Agent to take such action as
administrative agent on its behalf and to exercise such powers as are reasonably
incidental thereto; (v) agrees that it will perform in accordance with their
terms all of the obligations which by the terms of the Credit Agreement are
required to be performed by it as a Bank; and (vi) specifies as its CD Lending
Office, Domestic Lending Office (and address for notices), and Eurodollar
Lending Office the offices set forth beneath its name on the signature pages
hereof.
- --------
(1) Specify percentage to no more than four decimal points.
EXHIBIT B
---------
<PAGE>
4. The effective date for this Agreement and Acceptance shall
be ______________ (the "Assignment Date"). Following the execution of this
Agreement and Acceptance, it will be delivered to the Administrative Agent for
acceptance and recording by the Administrative Agent.
5. Upon such acceptance and recording, as of the Assignment
Date, (i) the Assignee shall be a party to the Credit Agreement and, to the
extent provided in this Assignment and Acceptance, have the rights and
obligations of a Bank thereunder, and (ii) the Assignor shall, to the extent
provided in this Agreement and Acceptance, relinquish its rights and be released
from its obligations under the Credit Agreement.
6. Upon such acceptance and recording, from and after the
Assignment Date, the Administrative Agent shall make all payments under the
Credit Agreement in respect of the interest assigned hereby (including, without
limitation, all payments of principal, interest and fees with respect thereto)
to the Assignee. The Assignor and Assignee shall make all appropriate
adjustments in payments under the Credit Agreement for periods prior to the
Assignment Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of New York.
[NAME OF ASSIGNOR]
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
[NAME OF ASSIGNEE]
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Domestic Lending Office (and address for
notices):
[Address]
CD Lending Office:
[Address]
Eurodollar Lending Office:
[Address]
Accepted this _____ day
of _______________, 19__
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, as Administrative Agent
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
- --------
(2) See Section 8.07(a) of the Credit Agreement; such date
shall be at least three Business Days after the execution of this Assignment and
Acceptance.
EXHIBIT B
---------
<PAGE>
EXHIBIT C-1
-----------
Opinion of Borrower's Counsel
-----------------------------
_______________, 1997
To each of the Banks party to the
$300,000,000 364 Day Competitive Advance/
Revolving Credit Agreement, dated as of
November 25, 1997 among Union Pacific
Resources Group Inc., the Banks party
thereto, and Texas Commerce Bank National
Association, as Administrative Agent for
said Banks
Union Pacific Resources Group Inc.
----------------------------------
Ladies and Gentlemen:
I am the General Attorney of Union Pacific Resources Group
Inc., a Utah corporation (the "Borrower"), and have acted in such capacity in
connection with the execution and delivery of the $300,000,000 364 Day
Competitive Advance/Revolving Credit Agreement, dated as of November 25, 1997
(the "Agreement"), among the Borrower, the several banks party thereto, Texas
Commerce Bank National Association, as Administrative Agent, The Chase Manhattan
Bank, as Auction Administration Agent, Bank of America NT&SA, as Documentation
Agent, and NationsBank of Texas, as Syndication Agent. This opinion is delivered
to you pursuant to Subsection 3.01(e) of the Agreement. Terms used herein which
are defined in the Agreement shall have the respective meanings set forth in the
Agreement, unless otherwise defined herein.
In connection with this opinion, I have examined executed
copies of the Agreement and such corporate documents and records of the Borrower
and its Subsidiaries, certificates of public officials and officers of the
Borrower and its Subsidiaries, and such other documents, as I have deemed
necessary or appropriate for the purposes of this opinion. In stating my
opinion, I have assumed the genuineness of all signatures of, and the authority
of, persons signing this Agreement on behalf of parties thereto other than the
Borrower, the authenticity of all documents submitted to me as originals and the
conformity to authentic original documents of all documents submitted to me as
certified, conformed or photostatic copies.
Based upon the foregoing, I am of the opinion that:
1. The Borrower is a corporation duly incorporated, validly
existing, and in good standing under the laws of the State of Utah.
2. The execution, delivery, and performance by the Borrower of
the Agreement are within the Borrower's corporate powers, have been duly
authorized by all necessary corporate action, and do not contravene (i) the
Borrower's charter or by-laws or (ii) any law, statute, regulation, or order of
any governmental agency, or (iii) to the best of my knowledge, any contractual
restriction binding on or affecting the Borrower. The Agreement has been duly
executed and delivered by the Borrower.
3. No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery, and performance by the Borrower of the
Agreement.
EXHIBIT C-1
-----------
<PAGE>
4. The Agreement is a legal, valid, and binding obligation of
the Borrower enforceable against the Borrower in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles, and except that
no opinion is expressed as to the availability of the remedy of specific
performance.
5. There is no pending or threatened action or proceeding
affecting the Borrower or any of its consolidated Subsidiaries before any court,
governmental agency or arbitrator, (i) which purports to affect the legality,
validity, or enforceability of the Agreement, or (ii) except as set forth in
public documents filed with the Securities and Exchange Commission prior to the
date of this opinion, which may materially adversely affect the financial
condition or operations of the Borrower or any of its Subsidiaries, taken as a
whole.
This opinion is limited to the laws of the State of New York,
the corporate laws of the State of Utah, and applicable federal laws of the
United States, provided that, as to matters of New York law, we have relied
exclusively upon the opinion of _______________________, special New York
counsel, a copy of which is attached hereto.
This opinion is solely for the benefit of the addressees
hereof, any permitted assigns or participants of such addressees, and the law
firm of Haynes and Boone, L.L.P. for use in connection with the transactions in
connection with the Loan Papers and may not be relied upon by any other person
or entity or for any other purpose without my express written consent.
Very truly yours,
Mark Jones
General Attorney for
Union Pacific Resources Group Inc.
EXHIBIT C-1
-----------
<PAGE>
EXHIBIT C-2
-----------
Opinion of Borrower's New York Counsel
--------------------------------------
________________, 1997
Union Pacific Resources Group Inc.
801 Cherry Street
Fort Worth, TX 76102
To each of the Banks party to the
$300,000,000 364 Day Competitive Advance/
Revolving Credit Agreement, dated as of
November 25, 1997 among Union Pacific
Resources Group Inc., the Banks party
thereto, and Texas Commerce Bank National
Association, as Administrative Agent for
said Banks
Union Pacific Resources Group Inc.
----------------------------------
Ladies and Gentlemen:
We have acted as special counsel to Union Pacific Resources
Group Inc., a Utah corporation (the "Borrower"), in connection with the
execution and delivery of the $300,000,000 364 Day Competitive Advance/Revolving
Credit Agreement, dated as of November 25, 1997 (the "Agreement"), among the
Borrower, the several banks party thereto, Texas Commerce Bank National
Association, as Administrative Agent, The Chase Manhattan Bank, as Auction
Administration Agent, Bank of America NT&SA, as Documentation Agent, and
NationsBank of Texas, as Syndication Agent. This opinion is delivered to you
pursuant to Subsection 3.01(e) of the Agreement. Terms used herein which are
defined in the Agreement shall have the respective meanings set forth in the
Agreement, unless otherwise defined herein.
In connection with this opinion, we have examined executed
copies of the Agreement and such corporate documents and records of the Borrower
and its Subsidiaries, certificates of public officials and officers of the
Borrower and its Subsidiaries, and such other documents, as we have deemed
necessary or appropriate for the purposes of this opinion. In stating our
opinion, we have assumed the genuineness of all signatures of, and the authority
of, persons signing this Agreement on behalf of parties thereto other than the
Borrower, the authenticity of all documents submitted to us as originals, and
the conformity to authentic original documents of all documents submitted to us
as certified, conformed, or photostatic copies.
Based upon and subject to the foregoing, and upon such
investigation as we have deemed necessary, we are of the opinion that:
1. The execution, delivery, and performance by the Borrower of
the Agreement does not contravene any law, statute, regulation, or order of any
governmental agency.
2. No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery, and performance by the Borrower of the
Agreement.
EXHIBIT C-2
-----------
<PAGE>
3. The Agreement is a legal, valid, and binding obligation of
the Borrower enforceable against the Borrower in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles, and except that
no opinion is expressed as to the availability of the remedy of specific
performance.
This opinion is limited to the laws of the State of New York
and applicable federal laws of the United States.
This opinion is solely for the benefit of the addressees
hereof, any permitted assigns or participants of such addressees, and the law
firm of Haynes and Boone, L.L.P. for use in connection with the transactions in
connection with the Loan Papers and may not be relied upon by any other person
or entity or for any other purpose without my express written consent.
Very truly yours,
EXHIBIT C-2
-----------
<PAGE>
EXHIBIT D
---------
Opinion of Counsel to Administrative Agent
------------------------------------------
__________________, 1997
To each of the Banks party to the
$300,000,000 364 Day Competitive Advance/
Revolving Credit Agreement, dated
as of November 25, 1997 among
Union Pacific Resources Group Inc.,
said Banks, and Texas Commerce
Bank National Association, as
Administrative Agent for said Banks
Union Pacific Resources Group Inc.
----------------------------------
Ladies and Gentlemen:
We have acted as counsel to Texas Commerce Bank National
Association, individually and as Administrative Agent (as hereinafter defined),
in connection with the execution and delivery of the $300,000,000 364 Day
Competitive Advance/Revolving Credit Agreement, dated as of November 25, 1997
(the "Credit Agreement"), among Union Pacific Resources Group Inc., the banks
party thereto (the "Banks"), Texas Commerce Bank National Association, as
Administrative Agent for the Banks (the "Administrative Agent"), The Chase
Manhattan Bank, as Auction Administration Agent, Bank of America NT&SA, as
Documentation Agent, and NationsBank of Texas, as Syndication Agent. Terms
defined in the Credit Agreement are, unless otherwise defined herein, used
herein as therein defined.
In this connection with this opinion, we have examined the
following documents, each of which, unless otherwise indicated, is dated the
date hereof:
1. A counterpart of the Credit Agreement executed by the
Borrower and the Administrative Agent (we have been informed by the
Administrative Agent that each Bank has executed at least one counterpart of the
Credit Agreement).
2. A certificate of the Secretary of the Borrower with respect
to (i) certain resolutions adopted by the Board of Directors of the Borrower,
(ii) the Revised Articles of Incorporation and the By-laws of the Borrower and
(iii) the incumbency and signatures of certain officers of the Borrower,
delivered pursuant to Sections 3.01(a) and 3.01(b) of the Credit Agreement.
3. An opinion of Mark Jones, General Attorney of the Borrower,
delivered pursuant to Section 3.01(e) of the Credit Agreement.
4. An opinion of [Morgan, Lewis & Bockius, L.L.P.], special
New York counsel to Borrower delivered pursuant to Section 3.01(e).
In our examination of the documents referred to above, we have
assumed (a) the authenticity of all such documents submitted to us as originals,
the genuineness of all signatures, the due authority of the parties executing
such documents and the conformity to the originals of all such documents
submitted to us as copies and (b) that no action, consent or approval of,
registration or filing with, or any other action by an governmental authority is
or will be required in connection with the transactions contemplated by the
Credit Agreement, except such as have been made
EXHIBIT D
---------
<PAGE>
or obtained and are in full force and effect. We have relied, as to factual
matters, on the documents we have examined.
Our opinions expressed below are limited to the law of the
State of New York and the federal laws of the United States, and we do not
express any opinions concerning any other law.
Based upon and subject to the foregoing and upon such
investigation as we have deemed necessary, and in reliance upon the opinion
described in Items 4 and 5 preceding, we are of the opinion that:
(i) while we have not independently considered the matters
covered by the opinion listed in Item 3, above, the certificates and opinion
referred to in Items 2 and 3 above, respectively, appear to be substantially
responsive to the requirements of Section 3.01 of the Credit Agreement; and
(ii) assuming that the Credit Agreement has been duly
authorized, executed, and delivered by the Borrower, the Credit Agreement
constitutes a legal, valid, and binding obligation of the Borrower enforceable
in accordance with its terms, subject to (i) laws relating to bankruptcy,
insolvency, fraudulent conveyance, fraudulent transfer, reorganization,
rearrangement, liquidation, conservatorship, moratorium, and other laws
affecting the enforcement of creditors' rights or the collection of debtors'
obligations generally; (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law); (iii)
standards of commercial reasonableness and good faith; and (iv) other applicable
laws, rules, regulations, court decisions and constitutional requirements in and
of the States of New York and Utah, or the United States of America limiting or
affecting the Loan Papers; provided that any limitations imposed by such other
applicable laws, rules, regulations, court decisions, and constitutional
requirements will not in our opinion, materially interfere with the Banks
realizing the practical benefits intended to be conferred by the Loan Papers,
though they may result in a delay thereof (and we express no opinion with
respect to the economic consequences of any such delay); and (A) we express no
opinion as to the validity or enforceability of any provision contained in any
Loan Paper that relates to the subject matter jurisdiction of the federal courts
located in the State of New York to adjudicate any controversy relating to any
of the Loan Papers, (B) we express no opinion as to the last sentence of Section
2.16 of the Credit Agreement, (C) we express no opinion as to the effect of the
law of any jurisdiction (other than the State of New York) wherein the Borrower
or any Bank, including any lending office thereof, may be located which limits
rates of interest which may be charged or collected by such Bank; and (D) we
express no opinion as to the validity or enforceability of any provision
contained in the Credit Agreement that purports to preclude the amendment,
waiver, release, or discharge of obligations except by an instrument in writing,
to the extent that such provision purports to exclude executory oral agreements.
Very truly yours,
EXHIBIT D
---------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS.............................1
SECTION 1.01 Certain Defined Terms..................................1
SECTION 1.02 Computation of Time Periods............................9
SECTION 1.03 Accounting Terms.......................................9
SECTION 1.04 Number and Gender of Words.............................9
ARTICLE II. AMOUNTS AND TERMS OF THE ADVANCES...........................10
SECTION 2.01 The Contract Advances.................................10
SECTION 2.02 Making the Contract Advances..........................10
SECTION 2.03 The Competitive Advances..............................11
SECTION 2.04 Conversion and Continuation of Contract Borrowings....13
SECTION 2.05 Fees..................................................14
SECTION 2.06 Optional Reduction of the Commitments.................14
SECTION 2.07 Repayment of Advances; Prepayment.....................15
SECTION 2.08 Interest..............................................15
SECTION 2.09 Alternate Rate of Interest............................16
SECTION 2.10 Optional Renewal of Commitments.......................16
SECTION 2.11 Increased Costs; Increased Capital....................17
SECTION 2.12 Additional Interest on Eurodollar Rate Advances.......18
SECTION 2.13 Change in Legality....................................19
SECTION 2.14 Payments and Computations.............................19
SECTION 2.15 Taxes on Payments.....................................20
SECTION 2.16 Sharing of Payments, Etc..............................21
SECTION 2.17 Removal of a Bank.....................................22
ARTICLE III. CONDITIONS OF LENDING.......................................22
SECTION 3.01 Conditions Precedent to Closing. ....................22
SECTION 3.02 Conditions Precedent to Each Borrowing................23
ARTICLE IV. REPRESENTATIONS AND WARRANTIES..............................23
SECTION 4.01 Representations and Warranties of the Borrower........23
ARTICLE V. COVENANTS OF THE BORROWER...................................25
SECTION 5.01 Affirmative Covenants.................................25
SECTION 5.02 Negative Covenants....................................27
ARTICLE VI. EVENTS OF DEFAULT...........................................30
SECTION 6.01 Events of Default.....................................30
ARTICLE VII. THE ADMINISTRATIVE AGENT....................................32
SECTION 7.01 Authorization and Action..............................32
SECTION 7.02 Administrative Agent's Reliance, Etc..................32
SECTION 7.03 Administrative Agent and Affiliates...................33
SECTION 7.04 Bank Credit Decision..................................33
SECTION 7.05 Indemnification.......................................33
SECTION 7.06 Successor Administrative Agent........................33
(i)
<PAGE>
ARTICLE VIII. MISCELLANEOUS...............................................34
SECTION 8.01 Amendments, Etc.......................................34
SECTION 8.02 Notices, Etc..........................................34
SECTION 8.03 No Waiver; Remedies...................................34
SECTION 8.04 Costs, Expenses and Taxes.............................34
SECTION 8.05 Right of Set-off......................................35
SECTION 8.06. Binding Effect........................................35
SECTION 8.07 Assignments and Participations........................35
SECTION 8.08 Governing Law.........................................37
SECTION 8.09 Exceptions to Covenants...............................37
SECTION 8.10 Survival..............................................38
SECTION 8.11 Invalid Provisions....................................38
SECTION 8.12 Maximum Rate..........................................38
SECTION 8.13 Execution in Counterparts.............................38
SECTION 8.14 Not in Control........................................38
SECTION 8.15 INDEMNIFICATION.......................................38
SECTION 8.16 Certain Agents........................................39
SECTION 8.17 Entirety..............................................39
SCHEDULES AND EXHIBITS
Schedule I - Banks, Lending Offices and Commitments
Schedule II - Principal Subsidiaries
Schedule III - Existing Liens
Exhibit A-1 - Notice of Contract Borrowing
Exhibit A-2 - Notice of Competitive Borrowing
Exhibit A-3 - Form of Notice to Banks of Competitive Bid Request
Exhibit A-4 - Form of Competitive Bid
Exhibit A-5 - Form of Competitive Bid Accept/Reject Letter
Exhibit B - Assignment and Acceptance Agreement
Exhibit C-1 - Opinion of Borrower's Counsel
Exhibit C-2 - Opinion of Borrower's New York Counsel
Exhibit D - Opinion of Counsel to Administrative Agent
(ii)
<PAGE>
EXHIBIT 10.25
EXECUTION COPY
FIRST AMENDMENT dated as of March 2, 1998
(this "Amendment"), among UNION PACIFIC RESOURCES
GROUP INC., a Utah corporation (the "Borrower"), the
undersigned financial institutions party to the
Credit Agreement referred to below (the "Banks"),
CHASE BANK OF TEXAS, N.A., as administrative agent
for the Banks (in such capacity, the "Administrative
Agent"), THE CHASE MANHATTAN BANK, as auction
administration agent (in such capacity, the "Auction
Administration Agent"), BANK OF AMERICA NT&SA, as
documentation agent (in such capacity, the
"Documentation Agent") and NATIONSBANK OF TEXAS,
N.A., as syndication agent (in such capacity, the
"Syndication Agent").
A. Reference is made to the 364 Day Competitive
Advance/Revolving Credit Agreement dated as of November 25, 1997 (the "Credit
Agreement"), among the Borrower, the Banks, the Administrative Agent, the
Auction Administration Agent, the Documentation Agent and the Syndication Agent.
Capitalized terms used but not otherwise defined herein have the meanings
assigned to them in the Credit Agreement.
B. The Borrower has requested that the Banks amend certain
provisions of the Credit Agreement. The Banks are willing to do so, subject to
the terms and conditions of this Amendment.
Accordingly, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Amendment to Article I. (a) The definition of
"Existing Credit Agreements" contained in Article I of the Credit Agreement is
hereby replaced in its entirety with the following: "Existing Credit Agreements"
means collectively (a) the Competitive Advance/Revolving Credit Agreement, dated
as of April 16, 1996 (as amended, extended, renewed or restated from time to
time), among the Borrower, Chase Bank of Texas, N.A., as administrative agent,
The Chase Manhattan Bank, as auction administration agent, Bank of America
NT&SA, as documentation agent, NationsBank of Texas, N.A., as syndication agent
and the banks party thereto and (b) the 364 Day Competitive Advance/Revolving
Credit Agreement (as amended, extended,
<PAGE>
2
renewed or restated from time to time), to be entered into in March 1998 among
the Borrower, The Chase Manhattan Bank, as administrative agent, Bank of
Montreal, as syndication agent and the banks party thereto.
(b) The following new definitions are hereby added to Article I of the
Credit Agreement in their proper alphabetical order:
(i) "Acquisition Subsidiary" means Union Pacific Resources
Inc., a Canadian corporation and wholly owned Subsidiary of the
Borrower.
(ii) "Designated Subsidiary" has the meaning specified in
Section 5.02(b)(ii).
(iii) "Effective Date" means the closing date under the
Existing Credit Agreement referred to in clause (b) of the definition
of "Existing Credit Agreements".
(iv) "Material Debt" has the meaning specified in Section
6.01(e).
(v) "Norcen" means Norcen Energy Resources Limited, a
Canadian corporation.
SECTION 2. Amendment to Section 4.01(g). Section 4.01(g) of
the Credit Agreement is hereby amended by replacing the reference to
"5.02(a)(i)" with "5.02(a)".
SECTION 3. Amendment to Section 5.02(a)(i). Section 5.02(a)(i)
of the Credit Agreement is hereby amended by (a) inserting immediately after the
reference to "paragraph (i)" therein "(A)" and (b) inserting at the end thereof
"and (B) so long as Norcen's capital stock constitutes margin stock (within the
meaning of Regulation U issued by the Board of Governors of the Federal Reserve
System), such portion (but only such portion) of Norcen's capital stock as it
shall be necessary to exclude from the operation of this paragraph in order to
avoid margin stock constituting more than 25% of the value of all assets subject
to this Section 5.02(a)".
SECTION 4. Amendment to Section 5.02(b). Section 5.02(b) of
the Credit Agreement is hereby replaced in its entirety with the following:
<PAGE>
3
(b) Debt. (i) Create or suffer to exist any Debt if,
immediately after giving effect to such Debt and the receipt and
application of any proceeds thereof, the aggregate amount of Debt of
the Borrower and its consolidated Subsidiaries, on a consolidated
basis, would exceed (A) for the period from the Effective Date through
the date eighteen months thereafter, 75%, and (B) at anytime
thereafter, 65%, of the sum of the total consolidated stockholders'
equity of the Borrower and its Subsidiaries as shown on the most recent
consolidated balance sheet required to be delivered to the Banks
pursuant to Section 5.01(b), and the aggregate amount of Debt of the
Borrower and its consolidated Subsidiaries, on a consolidated basis (it
being understood that for purposes of determining compliance with this
covenant, guarantees by the Borrower of up to $200,000,000 of Debt of
OCI Wyoming shall not constitute Debt of the Borrower);
(ii) not permit the Acquisition Subsidiary, Norcen or any of
their respective Subsidiaries (collectively, the "Designated
Subsidiaries") to incur any Debt which would result in the aggregate
principal amount of Debt (other than Debt to the Borrower or any other
Subsidiary) of all the Designated Subsidiaries, on a consolidated
basis, exceeding US$1,400,000,000; and
(iii) not permit any of its Subsidiaries (other than the
Designated Subsidiaries) to incur any Debt which would result in the
aggregate principal amount of Debt (other than Debt to the Borrower or
any other Subsidiary) of all Subsidiaries (other than the Designated
Subsidiaries), on a consolidated basis, exceeding US$150,000,000.
SECTION 5. Amendment to Section 5.02(e). Section
----------------------------
5.02(e) of the Credit Agreement is hereby amended by (a) inserting a "(ii)"
immediately after the word "plus" therein, (b) replacing the reference to "65%"
with "(A) 75% during the period from the Effective Date through the date
eighteen months thereafter and (B) 65% at any time thereafter" and (c) inserting
the following sentence at the end thereof: "For purposes of determining
compliance with the above covenant, guarantees by the Borrower of up to
$200,000,000 of Debt of OCI Wyoming shall not constitute Debt of the Borrower.".
<PAGE>
4
Section 6. Amendment to Section 6.01. Section 6.01(e) of the
Credit Agreement is hereby replaced in its entirety with the following:
(e)(i) the Borrower or any Principal Subsidiary shall fail to
pay any amount of principal or interest when due (or within any
applicable grace period) with respect to any Debt of the Borrower or
any Principal Subsidiary, whether such Debt now exists or shall
hereafter be created, in an aggregate outstanding principal amount
exceeding $50,000,000 ("Material Debt") or (ii) an event of default as
defined in any mortgage, indenture or instrument under which there may
be issued, or by which there may be secured or evidenced, any Debt of
the Borrower or any Principal Subsidiary, whether such Debt now exists
or shall hereafter be created, shall happen and shall result in
Material Debt becoming or being declared due and payable prior to the
date on which it would otherwise become due and payable, and such
declaration shall not be rescinded or annulled; or
SECTION 7. Principal Subsidiaries. Schedule II to the Credit
Agreement is hereby replaced in its entirety by the Schedule II attached
hereto.
SECTION 8. Representations, Warranties and Agreements. The
Borrower hereby represents and warrants to and agrees with each Bank, the
Administrative Agent, the Auction Administration Agent, the Documentation Agent
and the Syndication Agent that:
(a) The representations and warranties set forth in Section
4.01 of the Credit Agreement, as amended hereby, are true and correct
in all material respects with the same effect as if made on the
Amendment Effective Date (as defined herein), except to the extent such
representations and warranties expressly relate to an earlier date.
(b) The Borrower has the requisite power and authority to
execute, deliver and perform its obligations under this Amendment.
(c) The execution, delivery and performance by the Borrower of
this Amendment (i) have been duly authorized by all requisite action
and (ii) will not (A) violate (x) any provision of law, statute, rule
or regulation, or of the certificate of incorporation, by-
<PAGE>
5
laws or other constitutive documents of the Borrower or any of its
Subsidiaries, (y) any order of any governmental court or governmental
department, commission, board, bureau, agency or instrumentality,
domestic or foreign or (z) any provision of any indenture, any
agreement for borrowed money or any other material agreement or
instrument to which the Borrower or any of its Subsidiaries is a party
or by which any of them or any of their property is or may be bound,
(B) be in conflict with, result in a breach of or constitute (alone or
with notice or lapse of time or both) a default under any such
indenture, agreement for borrowed money or other material agreement or
instrument or (C) result in the creation or imposition of any Lien upon
or with respect to any property or assets now owned or hereafter
acquired by the Borrower or any of its Subsidiaries.
(d) This Amendment has been duly executed and delivered by the
Borrower. This Amendment and the Credit Agreement, as amended hereby,
constitutes a legal, valid and binding obligation of the Borrower,
enforceable against the Borrower in accordance with its terms, except
as enforceability may be limited by (i) any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and (ii) general principles
of equity.
(e) As of the Amendment Effective Date, no Event of Default or
any event which, with the giving of notice or the passage of time, or
both, would become an Event of Default has occurred and is continuing.
SECTION 9. Conditions to Effectiveness. This Amendment shall
become effective on the date (the "Amendment Effective Date") that each of the
following conditions has been satisfied:
(a) The Administrative Agent shall have received duly executed
counterparts hereof which, when taken together, bear the authorized
signatures of the Borrower, the Administrative Agent, the Auction
Administration Agent, the Documentation Agent, the Syndication Agent
and the Majority Banks.
(b) The Effective Date occurs.
<PAGE>
6
SECTION 10. Credit Agreement. Except as specifically stated
herein, the Credit Agreement shall continue in full force and effect in
accordance with the provisions thereof. As used therein, the terms "Agreement",
"herein", "hereunder", "hereto", "hereof" and words similar import shall, unless
the context otherwise requires, refer to the Credit Agreement as modified
hereby.
SECTION 11. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 12. Counterparts. This Amendment may be executed in
any number of counterparts, each of which shall be an original but all of which,
when taken together, shall constitute but one instrument.
SECTION 13. Expenses. The Borrower agrees to reimburse the
Administrative Agent for its out-of-pocket expenses in connection with this
Amendment, including the reasonable fees, charges and disbursements of Cravath,
Swaine & Moore, counsel for the Administrative Agent.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their respective authorized officers as of the
date first above written.
UNION PACIFIC RESOURCES GROUP INC.
by
-----------------------------
Name:
Title:
CHASE BANK OF TEXAS, N.A., as
Administrative Agent and as a Bank
by
-----------------------------
Name:
Title:
<PAGE>
7
BANK OF AMERICA NT&SA, as
Documentation Agent and as a Bank
by
-----------------------------
Name:
Title:
NATIONSBANK OF TEXAS, N.A., as
Syndication Agent and as a Bank
by
-----------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as
Auction Administrative Agent
by
-----------------------------
Name:
Title:
ABN AMRO BANK N.V., HOUSTON AGENCY
By: ABN AMRO North America, Inc.,
as Agent
by
-----------------------------
Name:
Title:
by
-----------------------------
Name:
Title:
<PAGE>
8
BANQUE NATIONALE DE PARIS,
HOUSTON AGENCY
by
-----------------------------
Name:
Title:
BANK OF MONTREAL
by
-----------------------------
Name:
Title:
BANK OF NEW YORK
by
-----------------------------
Name:
Title:
CREDIT SUISSE FIRST BOSTON
by
-----------------------------
Name:
Title:
by
-----------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO
by
-----------------------------
Name:
Title:
<PAGE>
9
THE INDUSTRIAL BANK OF JAPAN, LTD.,
NEW YORK BRANCH
by
-----------------------------
Name:
Title:
MELLON BANK, N.A.
by
-----------------------------
Name:
Title:
THE NORTHERN TRUST COMPANY
by
-----------------------------
Name:
Title:
ROYAL BANK OF CANADA
by
-----------------------------
Name:
Title:
WELLS FARGO BANK (TEXAS), N.A.
by
-----------------------------
Name:
Title:
<PAGE>
10
Schedule II
Principal Subsidiaries
1. Union Pacific Resources Company
2. UP Fuels Marketing and Trading, Inc.
3. Rock Springs Royalty Company
4. Bitter Creek Coal Company
5. Union Pacific Resources Inc.
6. Norcen Energy Resources Limited
<PAGE>
EXECUTION COPY
================================================================================
U.S. $2,700,000,000
364 DAY COMPETITIVE ADVANCE/REVOLVING CREDIT AGREEMENT
Among
UNION PACIFIC RESOURCES GROUP INC.,
as Borrower
THE CHASE MANHATTAN BANK,
as Administrative Agent
BANK OF MONTREAL,
as Syndication Agent
and
THE BANKS NAMED HEREIN,
as Banks
Dated as of March 2, 1998
-----------------------------------------------------
CHASE SECURITIES INC. and
BANK OF MONTREAL,
as Arrangers
BANCAMERICA ROBERTSON STEPHENS,
CREDIT SUISSE FIRST BOSTON,
NATIONSBANC MONTGOMERY SECURITIES LLC
and ROYAL BANK OF CANADA,
as Co-Arrangers
================================================================================
[CS&M Ref. #6700-643]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
Definitions and Accounting Terms
--------------------------------
SECTION 1.01. Certain Defined Terms............................................................1
SECTION 1.02. Computation of Time Periods.....................................................17
SECTION 1.03. Accounting Terms................................................................17
SECTION 1.04. Number and Gender of Words......................................................17
ARTICLE II
Amounts and Terms of the Advances
---------------------------------
SECTION 2.01. The Contract Advances...........................................................17
SECTION 2.02. Making the Contract Advances....................................................18
SECTION 2.03. The Competitive Advances........................................................20
SECTION 2.04. Conversion and Continuation of
Contract Borrowings...........................................................23
SECTION 2.05. Fees............................................................................25
SECTION 2.06. Reduction or Termination of the
Commitments...................................................................26
SECTION 2.07. Repayment of Advances; Prepayment...............................................27
SECTION 2.08. Interest........................................................................29
SECTION 2.09. Alternate Rate of Interest......................................................29
SECTION 2.10. Optional Extension of Termination
Date..........................................................................30
SECTION 2.11. Increased Costs; Increased Capital..............................................33
SECTION 2.12. Additional Interest on Eurodollar
Rate Advances.................................................................35
SECTION 2.13. Change in Legality..............................................................35
SECTION 2.14. Payments and Computations.......................................................36
SECTION 2.15. Taxes on Payments...............................................................37
SECTION 2.16. Sharing of Payments, Etc........................................................40
SECTION 2.17. Removal of a Bank...............................................................41
SECTION 2.18. Extension of Maturity Date......................................................42
ARTICLE III
Conditions of Lending
---------------------
SECTION 3.01. Conditions Precedent to Closing.................................................43
SECTION 3.02. Conditions Precedent to Each
Borrowing.....................................................................46
<PAGE>
Contents p. 2
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE IV
Representations and Warranties
------------------------------
ARTICLE V
Covenants of the Borrower
-------------------------
SECTION 5.01. Affirmative Covenants...........................................................50
SECTION 5.02. Negative Covenants..............................................................54
ARTICLE VI
Events of Default
-----------------
ARTICLE VII
The Administrative Agent
------------------------
SECTION 7.01. Authorization and Action........................................................65
SECTION 7.02. Administrative Agent's
Reliance, Etc.................................................................65
SECTION 7.03. Administrative Agent and Affiliates.............................................66
SECTION 7.04. Bank Credit Decision............................................................66
SECTION 7.05. Indemnification.................................................................66
SECTION 7.06. Successor Administrative Agent..................................................67
ARTICLE VIII
Miscellaneous
-------------
SECTION 8.01. Amendments, Etc.................................................................68
SECTION 8.02. Notices, Etc....................................................................69
SECTION 8.03. No Waiver; Remedies.............................................................69
SECTION 8.04. Costs, Expenses and Taxes.......................................................69
SECTION 8.05. Right of Set-off................................................................71
SECTION 8.06. Binding Effect..................................................................71
SECTION 8.07. Assignments and Participations..................................................71
SECTION 8.08. Governing Law...................................................................75
SECTION 8.09. Exceptions to Covenants.........................................................75
SECTION 8.10. Survival........................................................................76
SECTION 8.11. Invalid Provisions..............................................................76
SECTION 8.12. Maximum Rate....................................................................76
SECTION 8.13. Execution in Counterparts.......................................................77
</TABLE>
<PAGE>
Contents p. 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 8.14. Not in Control..................................................................77
SECTION 8.15. INDEMNIFICATION.................................................................77
SECTION 8.16. Syndication Agent...............................................................79
SECTION 8.17. ENTIRETY........................................................................79
</TABLE>
Exhibits
- --------
Exhibit A-1 Form of Notice of Contract Borrowing
Exhibit A-2 Form of Notice of Competitive Borrowing
Exhibit A-3 Form of Notice of Competitive Bid Request
Exhibit A-4 Form of Competitive Bid
Exhibit A-5 Form of Competitive Bid Acceptance/Reject
Letter
Exhibit B Form of Assignment and Acceptance Agreement
Exhibit C-1 Form of Opinion of Borrower's Counsel
Exhibit C-2 Form of Opinion of Borrower's New York
Counsel
Schedules
- ---------
Schedule I Banks, Lending Offices and Commitments
Schedule II Principal Subsidiaries
Schedule III Existing Liens
Schedule IV Proposed Amendments to Existing Credit
Agreements
<PAGE>
This 364 DAY COMPETITIVE ADVANCE/ REVOLVING CREDIT
AGREEMENT is entered into as of March 2, 1998, among UNION
PACIFIC RESOURCES GROUP INC., a Utah corporation (the
"Borrower"), the Banks (as hereinafter defined), THE CHASE
MANHATTAN BANK, as Administrative Agent (as hereinafter
defined) and BANK OF MONTREAL, as Syndication Agent (as
hereinafter defined).
ARTICLE I
Definitions and Accounting Terms
--------------------------------
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"Accepting Banks" has the meaning specified in Section
2.10(a)(i).
"Acquisition" means the acquisition by the Acquisition
Subsidiary of all the outstanding shares of capital stock of Norcen pursuant to
the Acquisition Documents.
"Acquisition Documents" means (a) the Pre-Acquisition
Agreement among the Borrower, the Acquisition Subsidiary and Norcen dated
January 25, 1998, (b) the Offer to Purchase all the Common Shares of Norcen
dated January 30, 1998, and related documents, distributed by the Borrower to
the shareholders of Norcen and (c) any documents or agreements governing the
Merger.
"Acquisition Subsidiary" means Union Pacific Resources Inc., a
Canadian corporation and wholly owned Subsidiary of the Borrower.
"Administrative Agent" means The Chase Manhattan Bank and its
permitted successor or successors as administrative agent for the Banks under
this Agreement.
"Advance" means any Contract Advance or Competitive Advance.
"Affiliate" of a Person means any other individual or entity
who directly or indirectly controls, is controlled by, or is under common
control with that Person; provided that, for purposes of Sections 4.01(k) and
5.02(g) hereof,
<PAGE>
2
the Subsidiaries of Borrower shall not be considered Affiliates of the Borrower
or any Subsidiary (including any Restricted Subsidiary), and Borrower shall not
be considered an Affiliate of a Subsidiary (including any Restricted
Subsidiary). For purposes of such definition, "control," "controlled by," and
"under common control with" mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a Person
(whether through ownership of voting securities or other interests, by contract
or otherwise).
"Agent" means, collectively, Administrative Agent and
Syndication Agent.
"Agreement" means this Agreement, as amended, modified and
supplemented from time to time, including, without limitation, any such
supplement in respect of Competitive Advances under Section 2.03.
"Alternate Base Rate" means, for any day, a rate per annum
equal to the lesser of (a) the Maximum Rate and (b) the greatest of (i) the
Prime Rate in effect on such day, (ii) the Base CD Rate in effect on such day
plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2
of 1%. For purposes hereof, "Prime Rate" means the rate of interest per annum,
publicly announced from time to time by the Administrative Agent as its prime
rate in effect at its principal office in New York City (which prime rate may
not necessarily represent the lowest or best rate actually charged to a
customer); each change in the Prime Rate shall be effective on the date such
change is publicly announced as effective. "Base CD Rate" means the sum of (a)
the product of (i) the Three-Month Secondary CD Rate and (ii) 1.00 plus the
Domestic Reserve Percentage and (b) the Assessment Rate. "Three-Month Secondary
CD Rate" means, for any day, the secondary market rate for three-month
certificates of deposit reported as being in effect on such day (or, if such day
shall not be a Business Day, the next preceding Business Day) by the Board
through the public information telephone line of the Federal Reserve Bank of New
York (which rate will, under the current practices of the Board, be published in
Federal Reserve Statistical Release H.15(519) during the week following such
day), or, if such rate shall not be so reported on such day or such next
preceding Business Day, the average (rounded upwards, if necessary, to the next
1/16 of 1%) of the secondary market quotations for three-month certificates of
deposit of major money center banks received at approximately 10:00 a.m. (New
York City time) on such day (or, if such day shall not be a Business Day, on the
next preceding Business Day) by the Administrative Agent from three New York
City
<PAGE>
3
negotiable certificate of deposit dealers of recognized standing selected by it.
"Federal Funds Effective Rate" means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/16 of 1%) of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers, as published on the next succeeding 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 (rounded upwards, if necessary, to the
next 1/16 of 1%) of the quotations for the day of such transactions received by
the Administrative Agent from three Federal funds brokers of recognized standing
selected by it. If for any reason the Administrative Agent shall have determined
(which determination shall be conclusive absent manifest error) that it is
unable to ascertain the Base CD Rate or the Federal Funds Effective Rate or both
for any reason, including the inability of the Administrative Agent to obtain
sufficient quotations in accordance with the terms hereof, the Alternate Base
Rate shall be determined without regard to clause (b) or (c), or both, of the
first sentence of this definition, as appropriate, until the circumstances
giving rise to such inability no longer exist. Any change in the Alternate Base
Rate due to a change in the Maximum Rate, Prime Rate, the Three-Month Secondary
CD Rate or the Federal Funds Effective Rate shall be effective on the effective
date of such change in the Maximum Rate, Prime Rate, the Three-Month Secondary
CD Rate or the Federal Funds Effective Rate, respectively.
"Alternate Base Rate Advance" means a Contract Advance which
bears interest computed at the Alternate Base Rate.
"Applicable Margin" means, on any date of determination of the
interest rate for any Eurodollar Rate Contract Borrowing or of any Facility
Fees, the applicable percentage set forth in the table below for Eurodollar Rate
Contract Borrowings or Facility Fees, as appropriate, which corresponds to the
ratings (or implied ratings) established by both S&P and Moody's applicable to
the Borrower's senior, unsecured, non-credit-enhanced long term indebtedness for
borrowed money ("Index Debt") on such date of determination; provided that at
any time when outstanding Advances exceed 50% of the aggregate Commitments, the
Applicable Margin for Eurodollar Rate Contract Borrowings shall be increased by
0.075%:
<PAGE>
4
Applicable
Margin for
Eurodollar Rate Applicable
Contract Margin for Drawn
Ratings Borrowings Facility Fees Cost
- ------------------------ --------------- ------------- -------
Category 1
----------
Greater than or 0.275% 0.075% 0.35%
equal to BBB+/Baa1
Category 2
----------
0.325% 0.10% 0.425%
BBB/Baa2
Category 3
----------
0.35% 0.15% 0.50%
BBB-/Baa3
Category 4
----------
0.55% 0.20% 0.75%
Less than BBB-/Baa3
For purposes of the foregoing, (a) if neither Moody's nor S&P shall have in
effect a rating for Index Debt (other than by reason of the circumstances
referred to in the last sentence of this definition), then both such rating
agencies will be deemed to have established ratings for Index Debt in Category
4; (b) if only one of Moody's or S&P shall have in effect a rating for Index
Debt, the Borrower and the Banks will negotiate in good faith to agree upon
another rating agency to be substituted by an amendment to this Agreement for
the rating agency which shall not have a rating in effect, and in the absence of
such amendment the Applicable Margin will be determined by reference to the
available rating; (c) if the ratings established by Moody's and S&P shall fall
within different Categories, the Applicable Margin shall be determined by
reference to the numerically lower Category (for example, if the rating from S&P
is in Category 1 and the rating from Moody's is in Category 2, the Applicable
Margin shall be determined by reference to Category 1); and (d) if any rating
established by Moody's or S&P shall be changed (other than as a result of a
change in the rating system of either Moody's or S&P), such change shall be
effective as of the date on which such change is first announced by the rating
agency making such change. Each change in the Applicable Margin shall apply
during the period commencing on the effective date of such change and ending on
the date immediately preceding the effective date of the next such change. If
the rating system of either Moody's or S&P shall change, the Borrower and the
Banks shall negotiate in good faith to amend the references to specific ratings
in this definition to reflect such changed rating system. If both Moody's and
S&P shall cease to be in
<PAGE>
5
the business of rating corporate debt obligations, the Borrower and the Banks
shall negotiate in good faith to agree upon a substitute rating agency and to
amend the references to specific ratings in this definition to reflect the
ratings used by such substitute rating agency.
"Applicable Lending Office" means, with respect to each Bank,
such Bank's Domestic Lending Office in the case of an Alternate Base Rate
Advance, such Bank's Eurodollar Lending Office in the case of a Eurodollar Rate
Contract Advance and, in the case of a Competitive Advance, the office or
affiliate of such Bank notified by such Bank to the Borrower and the
Administrative Agent as such Bank's Applicable Lending Office with respect to
such Competitive Advance.
"Applicable Rate" means:
(a) with respect to Alternate Base Rate Advances, the
Alternate Base Rate; and
(b) with respect to Eurodollar Rate Contract Advances, the
Eurodollar Rate plus the Applicable Margin for Eurodollar Rate Contract
Borrowings.
"Assessment Rate" means for any date of determination, the
annual rate (rounded upwards, if necessary, to the next 1/100 of 1%) most
recently estimated by the Administrative Agent as the then current net annual
assessment rate that will be employed in determining amounts payable by the
Administrative Agent to the Federal Deposit Insurance Corporation (or any
successor) for insurance by such Corporation (or such successor) of time
deposits made in dollars at the Administrative Agent's domestic offices.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Bank and an Eligible Assignee, and accepted by the
Administrative Agent, in substantially the form of Exhibit B hereto.
"Banks" means the financial institutions named on Schedule I
(as the same may be amended from time to time by the Administrative Agent to
reflect assignments made in accordance with Section 8.07 of this Agreement), and
any and all other financial institutions which from time to time become parties
to this Agreement pursuant to the terms and conditions of Section 8.07 of this
Agreement.
"Board" means the Board of Governors of the Federal Reserve
System of the United States of America or any successor thereto.
<PAGE>
6
"Borrowing" means a Contract Borrowing or a Competitive
Borrowing.
"Business Day" means any day that is not a Saturday, Sunday or
other day on which commercial banks in New York City or Dallas, Texas, are
authorized or required by law to remain closed; provided that, when used in
connection with a Eurodollar Rate Advance, the term "Business Day" shall also
exclude any day on which banks are not open for dealings in dollar deposits in
the London interbank market.
"Closing Date" means the date upon which this Agreement is
executed and delivered and all conditions precedent specified in Section 3.01
have been satisfied or waived.
"Code" means the Internal Revenue Code of 1986, as the same
may be amended from time to time.
"Commitment" has the meaning specified in Section 2.01(a).
"Competitive Advance" means an advance by a Bank to the
Borrower as part of a Competitive Borrowing resulting from the competitive
bidding procedure described in Section 2.03, and refers to a Fixed Rate
Competitive Advance or a Eurodollar Rate Competitive Advance.
"Competitive Borrowing" means a Borrowing consisting of
simultaneous Competitive Advances of the same Type from each of the Banks whose
offer to make a Competitive Advance as part of such Borrowing has been accepted
by the Borrower under the competitive bidding procedure described in Section
2.03.
"Competitive Reduction" means, as to any Bank as at any date,
an amount equal to such Bank's pro rata (in accordance with the Commitments)
share of the aggregate amount of all Competitive Advances outstanding on such
date (giving effect to the payment of any Competitive Advances to be made on
such date).
"Contract Advance" means an advance by a Bank to the Borrower
as part of a Contract Borrowing and refers to an Alternate Base Rate Advance or
a Eurodollar Rate Contract Advance.
"Contract Borrowing" means a Borrowing consisting of
simultaneous Contract Advances of the same Type made ratably by all of the Banks
pursuant to Section 2.01(a).
<PAGE>
7
"Debt" means (a) indebtedness for borrowed money; (b)
obligations evidenced by bonds, debentures, notes or other similar instruments;
(c) obligations to pay the deferred purchase price of property (excluding
obligations under agreements for the purchase of goods in the normal course of
business, but including obligations under agreements relating to the issuance of
performance letters of credit or acceptance financing); (d) obligations as
lessee under leases which shall have been or should be, in accordance with
generally accepted accounting principles, recorded as capital leases; (e)
obligations as account party under all letters of credit, and without
duplication, all drafts drawn and unpaid thereunder; (f) obligations under
direct or indirect guaranties in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor
against loss in respect of, indebtedness or obligations of others of the kinds
referred to in clauses (a) through (e) above; and (g) liabilities in respect of
unfunded vested benefits under Plans covered by Title IV of ERISA; provided that
"Debt" of the Borrower and its Subsidiaries shall not include (i) any rental
obligations, guaranties or other lease obligations or financial assurances
existing on the date of this Agreement and relating to the leveraged lease of
the Corpus Christi, Texas, petrochemical complex and refinery, or (ii) any
obligations as account party under letters of credit issued in connection with,
or in lieu of, any obligations described in the preceding clause (i) arising at
any time after the date of this Agreement.
"Designated Subsidiaries" has the meaning specified in Section
5.02(b).
"Domestic Lending Office" means, with respect to any Bank, the
office or affiliate of such Bank specified as its "Domestic Lending Office"
opposite its name on Schedule I hereto or in the Assignment and Acceptance
pursuant to which it became a Bank, or such other office or affiliate of such
Bank as such Bank may from time to time specify to the Borrower and the
Administrative Agent.
"Domestic Reserve Percentage" means, for any Interest Period,
the reserve percentage applicable on the first day of such Interest Period under
regulations issued from time to time by the Board for determining the maximum
reserve requirement (including, but not limited to, any emergency, supplemental
or other marginal reserve requirement) for a member bank of the Federal Reserve
System in New York City, with deposits exceeding one billion dollars with
respect to liabilities consisting of or including (among other liabilities) U.S.
dollar nonpersonal
<PAGE>
8
time deposits in the United States of America with a maturity equal to such
Interest Period.
"EBITDAX" means, with respect to any Person for any period of
calculation, the sum of (a) operating income (before adjustments for income
taxes, interest expense or extraordinary gains or losses) for such period, (b)
depreciation, depletion and amortization for such period and (c) exploration
expenses for such period, all determined in accordance with generally accepted
accounting principles.
"Eligible Assignee" means: (a) any of the following entities,
if approved (which approval shall not be unreasonably withheld) in writing by
the Borrower (if no Event of Default then exists) and Administrative Agent: (i)
a commercial bank or other financial institution organized under the laws of the
United States of America, or any state thereof, and having total assets in
excess of $3,000,000,000 and a combined capital and surplus of at least
$150,000,000; (ii) a commercial bank or other financial institution organized
under the laws of any other country which is a member of the OECD, or a
political subdivision of any such country, and having total assets in excess of
$3,000,000,000 and a combined capital and surplus of at least $150,000,000;
provided that such bank or financial institution is acting through a branch or
agency located in the United States of America, in the country in which it is
organized or in another country which is also a member of the OECD; and (iii)
the central bank of any country which is a member of the OECD, or (b) a Bank or
an Affiliate of any Bank.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which is a member of a group of which the Borrower is a member and
which is under common control within the meaning of the regulations under
Section 414 of the Code.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D.
"Eurodollar Lending Office" means, with respect to any Bank,
the office or affiliate of such Bank specified as its "Eurodollar Lending
Office" opposite its name on Schedule I hereto or in the Assignment and
Acceptance pursuant to which it became a Bank (or, if no such office or
affiliate is specified, its Domestic Lending Office), or such other office or
affiliate of such Bank as such Bank may
<PAGE>
9
from time to time specify to the Borrower and the Administrative Agent.
"Eurodollar Rate" means, for each Eurodollar Rate Advance
comprising part of the same Borrowing, an interest rate per annum equal to the
lesser of (a) the Maximum Rate and (b) a rate of interest determined on the
basis of at least two offered rates for deposits in United States dollars for a
period equal to the applicable Interest Period commencing on the first day of
such Interest Period, appearing on the Reuters Screen LIBO Page as of 11:00 a.m.
(London time) on the day that is two Business Days prior to the first day of the
Interest Period. If at least two such offered rates appear on the Reuters Screen
LIBO Page, the rate with respect to such Interest Period will be the arithmetic
average (rounded upwards to the next 1/16th of 1%) of such offered rates. If
fewer than two offered rates appear, "Eurodollar Rate" in respect of any
Interest Period will be determined on the basis of the rates at which deposits
in United States dollars are offered by the Administrative Agent at
approximately 11:00 a.m. (London time) on the day that is two Business Days
preceding the first day of such Interest Period to prime banks in the London
interbank market for a period equal to such Interest Period commencing on the
first day of such Interest Period.
"Eurodollar Rate Advance" means any Eurodollar Rate Contract
Advance or Eurodollar Rate Competitive Advance.
"Eurodollar Rate Competitive Advance" means a Competitive
Advance which bears interest based on the Eurodollar Rate.
"Eurodollar Rate Contract Advance" means a Contract Advance
which bears interest based on the Eurodollar Rate.
"Eurodollar Rate Contract Borrowing" means a Contract
Borrowing that bears interest based on the Eurodollar Rate.
"Eurodollar Rate Reserve Percentage" of any Bank for any
Eurodollar Rate Advance means the reserve percentage applicable to such Bank on
(a) in the case of a Contract Advance, the first day of the Interest Period then
applicable to such Contract Advance and (b) in the case of a Competitive
Advance, the date of such Competitive Advance, under regulations issued from
time to time by the Board for determining the reserve requirement (including,
without limitation, any emergency, supplemental or other marginal
<PAGE>
10
reserve requirement) under Regulation D, then applicable to such Bank with
respect to liabilities or assets consisting of or including Eurocurrency
Liabilities having a term equal to such Interest Period or the term of such
Competitive Advance, as the case may be.
"Events of Default" has the meaning specified in Article VI.
"Existing Credit Agreements" means (a) the Competitive
Advance/Revolving Credit Agreement, dated as of April 16, 1996 (as amended,
extended, renewed or restated from time to time), among the Borrower, Texas
Commerce Bank National Association, as administrative agent, The Chase Manhattan
Bank (formerly Chemical Bank), as auction administration agent, Bank of America
NT&SA, as documentation agent, NationsBank of Texas, N.A., as syndication agent
and the banks party thereto and (b) the 364 Day Competitive Advance/Revolving
Credit Agreement, dated as of November 25, 1997 (as amended, extended, renewed
or restated from time to time), among the Borrower, Chase Bank of Texas, N.A.,
as administrative agent, The Chase Manhattan Bank, as auction administration
agent, Bank of America NT&SA, as documentation agent, NationsBank of Texas,
N.A., as syndication agent and the banks party thereto.
"Financial Officer" of any corporation shall mean the chief
financial officer, principal accounting officer, Treasurer, or Controller of
such corporation.
"Financing Transaction" means the execution, delivery and
performance by the Borrower of the Loan Papers, the borrowing of Advances and
the use of the proceeds thereof.
"Fixed Rate" means an interest rate per annum (expressed in
the form of a decimal to no more than four decimal places) specified by a Bank
making a Competitive Advance under the competitive bidding procedure described
in Section 2.03.
"Fixed Rate Competitive Advance" means a Competitive Advance
which bears interest based on the Fixed Rate.
"Index Debt" has the meaning specified in the definition of
"Applicable Margin" in Section 1.01.
"Interest Period" means, (a) for each Contract Advance
comprising part of the same Contract Borrowing, the period commencing on the
date of such Contract Advance or on
<PAGE>
11
the last day of the immediately preceding Interest Period applicable to such
Contract Advance, as the case may be, and ending on the last day of the period
selected by the Borrower pursuant to the provisions below; or (b) for each
Competitive Advance comprising part of the same Competitive Borrowing, the
period commencing on the date of such Competitive Advance and ending on the
maturity selected by the Borrower pursuant to the provisions of Section 2.03(a).
The duration of each such Interest Period shall be (i) in the case of an
Alternate Base Rate Advance, until the next succeeding March 31, June 30,
September 30 or December 31, and (ii) in the case of a Eurodollar Rate Advance,
1, 2, 3, or 6 months, as the Borrower may select (in the case of Contract
Advance) by notice to the Administrative Agent pursuant to Section 2.02(a), and
in the case of Competitive Advances, by notice to Administrative Agent pursuant
to Section 2.03(a); provided, however, that:
(A) Interest Periods commencing on the same date for Contract
Advances comprising part of the same Contract Borrowing shall be of the
same duration;
(B) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day in each of New York
City , Dallas, Texas, and London, the last day of such Interest Period
shall be extended to occur on the next succeeding Business Day in all
such cities; provided that in the case of any Interest Period for a
Eurodollar Rate Advance, that if such extension would cause the last
day of such Interest Period to occur in the next following calendar
month, the last day of such Interest Period shall occur on the next
preceding Business Day in all such cities; and
(C) no Interest Period shall end on a date later than the
Maturity Date.
"Lien" means any mortgage, pledge, lien, encumbrance, charge
or security interest of any kind, granted or created to secure Debt.
"Loan Papers" means (a) this Agreement, certificates delivered
pursuant to this Agreement and Exhibits and Schedules thereto; and (b) all
renewals, extensions or restatements of, or supplements or amendments to, any of
the foregoing.
"Majority Banks" means at any time Banks that in the aggregate
(a) hold at least 51% of the sum of the Commitments and the Term Advances at the
time, or (b) after
<PAGE>
12
the expiry or termination of the Commitments, hold at least 51% of the aggregate
unpaid principal amount of the Advances.
"Margin Stock" has the meaning given such term under
Regulation U.
"Material Plan" means either (a) a Plan under which the
present value of the vested benefits exceeds the fair market value of the assets
of such Plan allocable to such benefits by more than $20,000,000 or (b) a Plan
whose assets have a market value in excess of $100,000,000.
"Maturity Date" means March 1, 1999 (subject to extension as
provided in Section 2.18).
"Maximum Amount" and "Maximum Rate" means, for each Bank, the
maximum non-usurious amount and the maximum nonusurious rate of interest which,
under applicable law, such Bank is permitted to contract for, charge, take,
reserve or receive on the Obligation.
"Merger" has the meaning specified in Section 3.01(g).
"Moody's" means Moody's Investors Service, Inc. or any
successor thereto.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is
making or accruing an obligation to make contributions, or has within any of the
preceding three plan years made or accrued an obligation to make contributions.
"Net Proceeds" means, with respect to any event (a) the cash
proceeds received in respect of such event including (i) any cash received in
respect of any non-cash proceeds, but only as and when received, (ii) in the
case of a casualty, insurance proceeds and (iii) in the case of a condemnation
or similar event, condemnation awards and similar payments, net of (b) the sum
of (i) all reasonable fees and out-of-pocket expenses paid by the Borrower and
the Subsidiaries to third parties (other than Affiliates) in connection with
such event, (ii) in the case of a sale or other disposition of an asset
(including pursuant to a casualty or condemnation), the amount of all payments
required to be made by the Borrower and the Subsidiaries as a result of such
event to repay Debt (other than Advances) secured by such asset or otherwise
subject to mandatory prepayment as a result of such event and (iii) the amount
of
<PAGE>
13
all taxes paid (or reasonably estimated to be payable) by the Borrower and the
Subsidiaries, and the amount of any reserves established by the Borrower and the
Subsidiaries to fund contingent liabilities reasonably estimated to be payable,
in each case during the year that such event occurred or the next succeeding
year and that are directly attributable to such event (as determined reasonably
and in good faith by the chief financial officer of the Borrower).
"Norcen" means Norcen Energy Resources Limited, a Canadian
corporation.
"Notice of Contract Borrowing" has the meaning specified in
Section 2.02(a).
"Notice of Competitive Borrowing" has the meaning specified in
Section 2.03(a).
"Obligation" means all present and future indebtedness,
liabilities, and obligations, and all renewals and extensions thereof, or any
part thereof, now or hereafter owed to Administrative Agent or any Bank by the
Borrower arising from, by virtue of or pursuant to any Loan Paper, together with
all interest accruing thereon, fees, costs and expenses payable under the Loan
Papers.
"OECD" means the Organization for Economic Cooperation and
Development.
"Offer" has the meaning specified in Section 3.01(g).
"Participating Bank" has the meaning specified in Section
2.03(a)(v).
"PBGC" means the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust, unincorporated
association, joint venture or other entity, or a government or any political
subdivision or agency thereof.
"Plan" means an employee benefit plan (other than a
Multiemployer Plan) maintained for employees of the Borrower or any ERISA
Affiliate and covered by Title IV of ERISA.
<PAGE>
14
"Prepayment Amount" has the meaning specified in
Section 2.06(d).
"Prepayment Event" means:
(a) any sale, transfer or other disposition (including
pursuant to a sale and leaseback transaction) of any property or asset
of the Borrower or any of the Subsidiaries, other than (i) sales,
transfers and other dispositions of the production or products of the
Borrower and the Subsidiaries in the ordinary course of business,
including sales, transfers and dispositions of oil, gas, other liquid
and gaseous hydrocarbons and other minerals, (ii) any sale, transfer or
other disposition of any asset or property having an aggregate fair
market value (for any transaction or series of related transactions)
not exceeding $10,000,000 and (iii) sales, transfers and other
dispositions to the Borrower or a Subsidiary; or
(b) any casualty or other insured damage to, or any taking
under power of eminent domain or by condemnation or similar proceeding
of, any property or asset of the Borrower or any of the Subsidiaries,
but only to the extent that the Net Proceeds therefrom have not been
applied to repair, restore or replace such property or asset within 360
days after such event; or
(c) the issuance by the Borrower of any equity securities,
other than any such issuance of equity securities pursuant to
management or employee stock option or compensation plans; or
(d) the issuance by the Borrower of any Debt, other than (i)
Debt under this Agreement and the Existing Credit Agreements, (ii) the
issuance of commercial paper, (iii) the issuance of Debt to any
Subsidiary and (iv) Debt incurred in order to refinance, renew or
replace credit facilities or other Debt of any of the Subsidiaries
(including Norcen and its subsidiaries) existing on the Closing Date in
an amount not to exceed the outstanding principal amount and unused
borrowing availability of the Subsidiaries under such existing credit
facilities and the outstanding principal amount of such other Debt on
the Closing Date; provided that such Debt referred to in this clause
(iv) will only be excluded from this clause (d) to the extent that the
maximum permitted Debt of the applicable group of Subsidiaries as set
forth in clause (ii) or (iii), as applicable, of Section 5.02(b)
<PAGE>
15
shall be permanently reduced by the amount of Debt
incurred under this clause (iv).
"Principal Property" means (a) any property owned or leased by
the Borrower or any Subsidiary, or any interest of the Borrower or any
Subsidiary in property, which is considered by the Borrower to be capable of
producing oil, gas or minerals in commercial quantities, (b) any refinery,
smelter, processing or manufacturing plant owned or leased by the Borrower or
any Subsidiary, (c) all present and future oil, gas, other liquid and gaseous
hydrocarbons and other minerals now or hereafter produced from any other
Principal Property or to which the Borrower or any Subsidiary may be entitled as
a result of its ownership of any Principal Property, and (d) all real and
personal assets owned or leased by the Borrower or any Subsidiary used in the
drilling, gathering, processing, transportation or marketing of any oil, gas,
other liquid and gaseous hydrocarbons or minerals, except (i) any such real or
personal assets related thereto employed in transportation, distribution, or
marketing or (ii) any refinery, smelter, processing or manufacturing plant, or
portion thereof, which property described in clauses (i) or (ii) hereof, in the
opinion of the Board of Directors of the Borrower, is not a principal plant or
principal facility in relation to the activities of the Borrower and its
Restricted Subsidiaries, taken as a whole.
"Principal Subsidiaries" means those Subsidiaries listed on
Schedule II hereto, as such Schedule may be amended and supplemented from time
to time.
"Purchasing Bank" has the meaning specified in Section
2.10(a)(ii).
"Register" has the meaning specified in Section 8.07(c).
"Regulation D" means Regulation D of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation U" means Regulation U of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Rejected Amount" has the meaning specified in Section
2.10(a)(ii).
"Rejecting Banks" has the meaning specified in Section
2.10(a)(ii).
<PAGE>
16
"Reportable Event" means an event described in Section 4043(b)
of ERISA with respect to which the 30-day notice requirement has not been waived
by the PBGC.
"Restricted Subsidiary" means any Subsidiary which owns or
leases (as lessor or lessee) a Principal Property, but does not include any
Subsidiary the principal business of which is leasing machinery, equipment,
vehicles or other properties none of which is a Principal Property, or financing
accounts receivable, or engaging in ownership and development of any real
property which is not a Principal Property.
"S&P" means Standard and Poor's Rating Group, a division of
McGraw Hill, Inc., a New York corporation, or any successor thereto.
"Subsidiary" of the Borrower means any corporation or other
similar entity of which more than 50% of the outstanding capital stock having
ordinary voting power to elect a majority of the Board of Directors of such
corporation or entity (irrespective of whether or not at the time capital stock
of any other class or classes of such corporation or entity shall or might have
voting power upon the occurrence of any contingency) is at the time directly or
indirectly owned by the Borrower, by the Borrower and one or more other
Subsidiaries of the Borrower, or by one or more other Subsidiaries of the
Borrower.
"Syndication Agent" means Bank of Montreal and its permitted
successor or successors as Syndication Agent under this Agreement.
"Term Advances" has the meaning specified in Section 2.18.
"Termination Date" means the earlier of March 1, 1999 (subject
to extension as provided in Section 2.10 hereof), or the date on which the
Commitments shall terminate in accordance with the terms of this Agreement.
"Termination Event" means (a) a "Reportable Event" described
in Section 4043 of ERISA and the regulations issued thereunder (other than a
"Reportable Event" not subject to the provision for 30-day notice to the PBGC
under such regulations), or (b) the withdrawal of the Borrower or any of its
ERISA Affiliates from a Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA, or (c) the filing of a
notice of intent to terminate a Plan or the treatment of a Plan amendment as a
termination under Section 4041 of ERISA, or
<PAGE>
17
(d) the institution of proceedings to terminate a Plan by the PBGC, or (e) any
other event or condition which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan.
"Transactions" means (a) the Financing Transaction, (b) the
Acquisition and (c) the Merger.
"Type", when used in respect of any Advance or Borrowing,
refers to the Rate by reference to which interest on such Advance or on the
Advances comprising such Borrowing is determined. For purposes hereof, "Rate"
shall include the Eurodollar Rate, the Alternate Base Rate and the Fixed Rate.
SECTION 1.02. Computation of Time Periods. In this Agreement
in the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each means "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles from time to time in effect, and all accounting
principles shall be applied on a consistent basis so that the accounting
principles in a current period are comparable in all respects to those applied
during the preceding comparable period.
SECTION 1.04. Number and Gender of Words. Whenever in any Loan
Papers the singular number is used, the same shall include the plural, where
appropriate, and vice versa, and words of any gender shall include each other
gender, where appropriate.
ARTICLE II
Amounts and Terms of the Advances
---------------------------------
SECTION 2.01. The Contract Advances. (a) Each Bank severally
agrees, on the terms and conditions hereinafter set forth, to make Contract
Advances to the Borrower from time to time on any Business Day during the period
from the Closing Date until the Termination Date in an aggregate amount not to
exceed at any time outstanding the amount set opposite such Bank's name on
Schedule I, as such amount may be reduced pursuant to Section 2.06 or increased
pursuant to Section 2.17 or reduced or increased
<PAGE>
18
by Section 8.07 (such Bank's obligation to make such Contract Advances being
hereinafter referred to as such Bank's "Commitment"); provided, however, that at
no time shall the aggregate outstanding principal amount of Contract Advances
(other than Term Advances) and Competitive Advances exceed the aggregate amount
of the Commitments. Each Contract Borrowing shall be in an aggregate amount of
not less than $10,000,000 (subject to the terms of this Section 2.01(a)) or an
integral multiple of $5,000,000 in excess thereof and shall consist of Contract
Advances of the same Type made on the same day by the Banks ratably accordingly
to their respective Commitments.
(b) Within the limits and on the conditions set forth in this
Section 2.01, the Borrower may from time to time borrow under this Section 2.01,
prepay under Section 2.07(c) and reborrow under this Section 2.01.
SECTION 2.02. Making the Contract Advances. (a) Each Contract
Borrowing shall be made on notice, given (i) in the case of a Borrowing
consisting of Alternate Base Rate Advances, not later than 11:00 a.m. (New York
City time) on the Business Day prior to the date of the proposed Borrowing; and
(ii) in the case of a Borrowing consisting of Eurodollar Rate Contract Advances,
not later than 11:00 a.m. (New York City time) on the third Business Day prior
to the date of the proposed Contract Borrowing, by the Borrower to the
Administrative Agent, which shall give to each Bank prompt notice thereof by
cable or telecopy. Each such notice of a Contract Borrowing (a "Notice of
Contract Borrowing") shall be in substantially the form of Exhibit A-1 hereto,
specifying therein the requested (i) date of such Contract Borrowing, (ii) Type
of Contract Advances comprising such Contract Borrowing, (iii) aggregate amount
of such Contract Borrowing and (iv) Interest Period. Each Bank shall, before
12:00 noon (New York City time) on the date of any such Contract Borrowing, make
available for the account of its Applicable Lending Office to the Administrative
Agent at its address referred to in Section 8.02, in same day funds, such Bank's
ratable portion of such Contract Borrowing. Upon the Administrative Agent's
receipt of such funds and upon fulfillment of the applicable conditions set
forth in Article III, the Administrative Agent will make such funds available to
the Borrower at the Administrative Agent's aforesaid address.
(b) Each Notice of Contract Borrowing shall be irrevocable and
binding on the Borrower. In the case of any Contract Borrowing which the related
Notice of Contract Borrowing specifies is to be comprised of Eurodollar Rate
Contract Advances, the Borrower shall indemnify each Bank
<PAGE>
19
against any loss, cost or expense incurred by such Bank as a result of any
failure by the Borrower to complete such Borrowing (whether or not due to a
failure to fulfill on or before the date specified in such Notice of Contract
Borrowing the applicable conditions set forth in Article III), such losses,
costs and expenses to include, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Bank to fund the
Contract Advance to be made by such Bank as part of such Contract Borrowing when
such Contract Advance, as a result of such failure, is not made on such date.
(c) Unless the Administrative Agent shall have received notice
from a Bank prior to the date of any Contract Borrowing that such Bank will not
make available to the Administrative Agent such Bank's ratable portion of such
Contract Borrowing, the Administrative Agent may assume that such Bank has made
such portion available to the Administrative Agent on the date of such Contract
Borrowing in accordance with Section 2.02(a) and the Administrative Agent may,
in reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have so made
such ratable portion available to the Administrative Agent, such Bank and the
Borrower severally agree to repay to the Administrative Agent forthwith on
demand such corresponding amount, together with interest thereon, for each day
from the date such amount is made available to the Borrower until the date such
amount is repaid to the Administrative Agent, at (i) in the case of the
Borrower, the interest rate applicable at the time to Contract Advances
comprising such Contract Borrowing and (ii) in the case of such Bank, an
interest rate equal at all times to the Federal Funds Effective Rate. If such
Bank shall repay to the Administrative Agent such corresponding amount, such
amount so repaid shall constitute such Bank's Contract Advance as part of such
Contract Borrowing for purposes of this Agreement.
(d) The failure of any Bank to make the Contract Advance to be
made by it as part of any Contract Borrowing shall not relieve any other Bank of
its obligation, if any, hereunder to make its Contract Advance on the date of
such Contract Borrowing, but no Bank shall be responsible for the failure of any
other Bank to make the Contract Advance to be made by such other Bank on the
date of any Contract Borrowing.
<PAGE>
20
SECTION 2.03. The Competitive Advances. (a) Each Bank
severally agrees that the Borrower may make Competitive Borrowings under this
Section 2.03 from time to time on any Business Day during the period from the
Closing Date until the Termination Date, in each case on the terms and
conditions hereinafter set forth; provided, however, that at no time shall the
aggregate amount of Contract Advances (other than Term Advances) and Competitive
Advances outstanding exceed the aggregate amount of the Commitments. Each
Competitive Borrowing shall consist of Competitive Advances of the same Type
made on the same day.
(i) The Borrower may request a Competitive Borrowing under
this Section 2.03 by delivering to the Administrative Agent (A) in the
case of a Borrowing consisting of Fixed Rate Competitive Advances, by
not later than 10:00 a.m. (New York City time) on the Business Day
prior to the day of the proposed Competitive Borrowing, and (B) in the
case of a Borrowing consisting of Eurodollar Rate Competitive Advances,
by not later than 11:00 a.m. (New York City time) on the fourth
Business Day prior to the date of the proposed Competitive Borrowing, a
notice of a Competitive Borrowing (a "Notice of Competitive
Borrowing"), in substantially the form of Exhibit A-2 hereto,
specifying the proposed (1) date of such Competitive Borrowing, (2)
Type of Competitive Advances comprising such Competitive Borrowing, (3)
aggregate amount (which shall not be less than $10,000,000 or an
integral multiple of $5,000,000 in excess thereof) of such Competitive
Borrowing, (4) maturity date for repayment of each Competitive Advance
to be made as part of such Competitive Borrowing (which maturity date
shall be, in the case of a Fixed Rate Competitive Borrowing, not
earlier than seven days after the date of such Borrowing, and, in the
case of a Eurodollar Rate Competitive Borrowing, not later than 1, 2, 3
or 6 months after the date of such Borrowing, as the Borrower shall
elect and, in any case, on or prior to the Termination Date) and (5)
any other terms to be applicable to such Competitive Borrowing. The
Administrative Agent shall in turn promptly deliver (by cable or
telecopy) to each Bank a notice of competitive bid request (a "Notice
of Competitive Bid Request"), in substantially the form of Exhibit A-3,
notifying the Banks of each request for a Competitive Borrowing
received by it from the Borrower and of the terms contained in such
Notice of Competitive Borrowing.
(ii) Each Bank shall, if, in its sole discretion, it elects to
do so, irrevocably offer to make one or
<PAGE>
21
more Competitive Advances to the Borrower as part of such proposed
Competitive Borrowing at a rate or rates of interest specified by such
Bank in its sole discretion, by notifying (by telecopy, cable or
telephone (in the case of telephone, immediately confirmed by
telecopy)) the Administrative Agent (which shall give prompt notice
thereof to the Borrower), (A) in the case of a Fixed Rate Competitive
Borrowing, not later than 9:30 a.m. (New York City time) on the date of
such proposed Competitive Borrowing specified in the Notice of
Competitive Borrowing delivered with respect thereto, and (B) in the
case of a Eurodollar Rate Competitive Borrowing, not later than 9:30
a.m. (New York City time) on the third Business Day prior to the date
of such proposed Competitive Borrowing specified in the Notice of
Competitive Borrowing delivered with respect thereto, of the maximum
amount of each Competitive Advance which such Bank would be willing to
make as part of such proposed Competitive Borrowing (which amount may,
subject to the proviso to the first sentence of this Section 2.03(a),
exceed such Bank's Commitment), the rate or rates of interest therefor
(and whether reserves are included therein) and such Bank's Applicable
Lending Office with respect to each such Competitive Advance and any
other terms and conditions required by such Bank; provided that, if the
Administrative Agent in its capacity as a Bank shall, in its sole
discretion, elect to make any such offer, it shall notify the Borrower
of such offer no later than one quarter of an hour before the time
specified herein for notice of offers by the other Banks. Each
competitive bid shall be submitted by a Bank to the Administrative
Agent on a competitive bid form (a "Competitive Bid"), substantially
similar to Exhibit A-4. If any Bank shall fail to notify the
Administrative Agent, before the time specified herein for notice of
offers, that it elects to make such an offer, such Bank shall be deemed
to have elected not to make such an offer, and such Bank shall not be
obligated or entitled to, and shall not, make any Competitive Advance
as part of such Competitive Borrowing. If any Bank shall provide
telephonic notice to the Administrative Agent of its election to make
an offer, but such telephonic notice has not been confirmed by telecopy
to the Administrative Agent at or before the time specified herein for
notice of offers, the Administrative Agent may, in its sole discretion
and without liability to such Bank or the Borrower, elect whether or
not to provide notice thereof to the Borrower.
<PAGE>
22
(iii) The Borrower shall, in turn, (A) in the case of a Fixed
Rate Competitive Borrowing, not later than 10:30 a.m. (New York City
time) on the date of such proposed Competitive Borrowing specified in
the Notice of Competitive Borrowing delivered with respect thereto, and
(B) in the case of a Eurodollar Rate Competitive Borrowing, not later
than 10:30 a.m. (New York City time) on the third Business Day prior to
the date of such proposed Competitive Borrowing specified in the Notice
of Competitive Borrowing delivered with respect thereto, either:
(A) cancel such proposed Competitive Borrowing by
giving the Administrative Agent notice to that effect, or
(B) accept one or more of the offers made by any Bank
or Banks pursuant to paragraph (ii) above, in its sole
discretion, by giving notice to the Administrative Agent of
the amount of each Competitive Advance (which amount shall be
equal to or greater than $5,000,000, and equal to or less than
the maximum amount offered by such Bank, notified to the
Borrower by the Administrative Agent on behalf of such Bank
for such Competitive Advance pursuant to paragraph (ii) above)
to be made by each Bank as part of such Competitive Borrowing,
and reject any remaining offers made by Banks pursuant to
paragraph (ii) above, by giving the Administrative Agent
notice to that effect; provided, however, that the aggregate
amount of such offers accepted by the Borrower shall be equal
at least to $10,000,000 or an integral multiple of $5,000,000
in excess thereof. Each such notice of competitive bid
acceptance/ rejection (a "Competitive Bid Accept/Reject
Letter") from the Borrower shall be in a form substantially
similar to Exhibit A-5.
(iv) If the Borrower notifies the Administrative Agent that
such Competitive Borrowing is canceled pursuant to paragraph (iii)(A)
above, the Administrative Agent shall give prompt notice (by cable or
telecopy) thereof to the Banks, and such Competitive Borrowing shall
not be made.
(v) If the Borrower accepts one or more of the offers made by
any Bank or Banks pursuant to paragraph (iii)(B) above, such offer or
offers and the Notice of Competitive Borrowing in respect thereof shall
constitute a supplement to this Agreement in
<PAGE>
23
respect of such Competitive Borrowing and the Competitive Advances made
pursuant thereto, and the Administrative Agent shall in turn promptly
notify (A) each Bank that has made an offer as described in paragraph
(ii) above of the date and aggregate amount of such Competitive
Borrowing, the interest rate thereon, and whether or not any offer or
offers made by such Bank pursuant to paragraph (ii) above have been
accepted by the Borrower, and (B) each Bank that is to make a
Competitive Advance as part of such Competitive Borrowing (a
"Participating Bank" as to such Competitive Borrowing) of the amount of
each Competitive Advance to be made by such Bank as part of such
Competitive Borrowing and the maturity date for the repayment of each
such Competitive Advance (together with a confirmation of the
Administrative Agent's understanding of the interest rate and any other
terms applicable to each such Competitive Advance; the Administrative
Agent shall assume, unless notified by such Bank to the contrary, that
its understanding of such information is correct). Each such
Participating Bank shall, before 12:00 noon (New York City time) on the
date of such Competitive Borrowing specified in the notice received
from the Administrative Agent pursuant to clause (A) of the preceding
sentence, make available for the account of its Applicable Lending
Office to the Administrative Agent (at its address referred to in
Section 8.02) such Bank's portion of such Competitive Borrowing, in
same-day funds. Upon fulfillment of the applicable conditions set forth
in Article III and after receipt by the Administrative Agent of such
funds, the Administrative Agent will make such funds available to the
Borrower at the Administrative Agent's aforesaid address. Promptly
after each Competitive Borrowing, the Administrative Agent will notify
each Bank of the amount of the Competitive Borrowing, such Bank's
Competitive Reduction resulting therefrom, and the date upon which such
Competitive Reduction commenced and is anticipated to terminate.
(b) Within the limits and on the conditions set forth in this
Section 2.03, the Borrower may from time to time borrow under this Section 2.03,
repay pursuant to Section 2.07(b), prepay under Section 2.07(c) and reborrow
under this Section 2.03.
SECTION 2.04. Conversion and Continuation of Contract
Borrowings. (a) The Borrower shall have the right at any time upon prior
irrevocable notice to the Administrative Agent (i) not later than 12:00 noon
(New York
<PAGE>
24
City time), one Business Day prior to conversion, to convert any Borrowing
consisting of Eurodollar Rate Contract Advances into a Borrowing consisting of
Alternate Base Rate Advances, (ii) not later than 10:00 a.m. (New York City
time), three Business Days prior to conversion or continuation, to convert any
Borrowing consisting of Alternate Base Rate Advances into a Borrowing consisting
of Eurodollar Rate Contract Advances or to continue any Borrowing consisting of
Eurodollar Rate Contract Advances for an additional Interest Period and (iii)
not later than 10:00 a.m. (New York City time), three Business Days prior to
conversion, to convert the Interest Period with respect to any Borrowing
consisting of Eurodollar Rate Contract Advances to another permissible Interest
Period, subject in each case to the following:
(i) each conversion or continuation shall be made pro rata
among the Banks in accordance with the respective principal amounts of
the Advances comprising the converted or continued Contract Borrowing;
(ii) if less than all the outstanding principal amount of any
Contract Borrowing shall be converted or continued, the aggregate
principal amount of such Contract Borrowing converted or continued
shall be in an amount of $10,000,000 or an integral multiple of
$5,000,000 in excess thereof;
(iii) accrued interest on an Advance (or portion thereof)
being converted shall be paid by the Borrower at the time of
conversion;
(iv) if any Borrowing consisting of Eurodollar Rate Contract
Advances is converted at a time other than at the end of the Interest
Period applicable thereto, the Borrower shall pay, upon demand, any
amounts due to the Banks pursuant to Section 8.04(b) as a result of
such conversion;
(v) any portion of a Contract Borrowing maturing or required
to be repaid in less than one month may not be converted into or
continued as a Borrowing consisting of Eurodollar Rate Contract
Advances;
(vi) any portion of a Borrowing consisting of Eurodollar Rate
Contract Advances which cannot be converted into or continued as such
by reason of clause (v) above shall be automatically converted at the
end of the Interest Period in effect for such Borrowing into a
Borrowing consisting of Alternate Base Rate Advances; and
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25
(vii) no Interest Period may be selected for any Borrowing
consisting of Eurodollar Rate Contract Advances that would end later
than the Maturity Date.
(b) Each notice pursuant to clause (a) of this Section shall
be irrevocable and shall refer to this Agreement and specify (i) the identity
and amount of the Contract Borrowing that the Borrower requests be converted or
continued, (ii) whether such Contract Borrowing is to be converted to or
continued as a Borrowing consisting of Eurodollar Rate Contract Advances or
Alternate Base Rate Advances, (iii) if such notice requests a conversion, the
date of such conversion (which shall be a Business Day), and (iv) if such
Contract Borrowing is to be converted to or continued as a Borrowing consisting
of Eurodollar Rate Contract Advances, the Interest Period with respect thereto.
If no Interest Period is specified in any such notice with respect to any
conversion to or continuation as a Borrowing consisting of Eurodollar Rate
Contract Advances, the Borrower shall be deemed to have selected an Interest
Period of one month's duration. The Administrative Agent shall advise the other
Banks of any notice given pursuant to this Section 2.04(b) and of each Bank's
portion of any converted or continued Contract Borrowing. If the Borrower shall
not have given notice in accordance with this Section 2.04(b) to continue any
Contract Borrowing into a subsequent Interest Period (and shall not otherwise
have given notice in accordance with this Section 2.04 to convert such Contract
Borrowing), such Contract Borrowing shall, at the end of the Interest Period
applicable thereto (unless repaid pursuant to the terms hereof), automatically
be continued into a new Interest Period as a Borrowing consisting of Alternate
Base Rate Advances.
SECTION 2.05. Fees. (a) Facility Fees. Borrower shall pay to
each Bank, through the Administrative Agent, a facility fee on the average daily
amount of the Commitment of such Bank (whether used or unused) (or, after such
Bank's Commitment has terminated, on the outstanding principal amount of
Contract Advances made by such Bank) for the period from and including the
Closing Date up to, but excluding, the later of the Maturity Date and the date
of repayment of all outstanding Contract Advances, at a rate per annum equal to
the Applicable Margin for Facility Fees. Accrued facility fees shall be payable
in arrears, commencing on the last day of the calendar quarter in which the
Closing Date occurs, and thereafter, quarterly on the last day of each March,
June, September and December and on the Maturity Date; provided that any
facility fees accruing after the Termination Date shall be payable
<PAGE>
26
contemporaneously with accrued interest on the Contract Advances on which such
facility fees have accrued.
(b) Fees of Administrative Agent. Borrower shall pay to
Administrative Agent, solely for its own account, the fees described in the
separate letter agreement dated January 25, 1998, between Borrower and
Administrative Agent on the dates specified therein.
SECTION 2.06. Reduction or Termination of the Commitments. (a)
Unless previously terminated, the Commitments shall terminate on the Termination
Date.
(b) The Borrower shall have the right, upon at least three
Business Days' irrevocable notice to the Administrative Agent, to terminate in
whole or reduce ratably in part the respective Commitments of the Banks;
provided, however, that (i) each partial reduction shall be in the aggregate
amount of $10,000,000 or in an integral multiple of $5,000,000 in excess
thereof, and (ii) no such termination or reduction shall be made which would
reduce the Commitments to an amount less than the aggregate outstanding
principal amount of the Advances. The Administrative Agent shall promptly
thereafter notify each Bank of such termination or reduction.
(c) If the initial Termination Date shall be extended pursuant
to Section 2.10, and if the sum of the Commitments plus the aggregate principal
amount of any outstanding Term Advances at the time shall exceed $1,350,000,000,
then the Commitments shall be reduced on the initial Termination Date by an
amount necessary to reduce the Commitments to $1,350,000,000; provided that if
any Term Advances shall be outstanding at the time that Commitments are required
to be reduced under this paragraph, then the Commitments shall be reduced and
Term Advances prepaid, ratably based on the aggregate amount of Commitments at
such time and the outstanding principal amount of Term Advances at such time, in
such amount as shall be necessary in order that the sum of the Commitments and
the principal amount of the Term Advances shall equal $1,350,000,000.
(d) In the event and on each occasion prior to the Termination
Date that any Net Proceeds are received by or on behalf of the Borrower or any
Subsidiary in respect of any Prepayment Event, the Commitments shall be reduced
ratably in an aggregate amount equal to 75% of the Net Proceeds so received (the
"Prepayment Amount"); provided that if any Term Advances shall be outstanding at
a time when Commitments are required to be reduced under this paragraph, then
the Prepayment Amount shall be allocated
<PAGE>
27
ratably to the reduction of the Commitments and the prepayment of Term Advances
pursuant to Section 2.07(f) based on the aggregate amount of the Commitments at
such time and the outstanding principal amount of Term Advances at such time.
The Borrower shall notify the Administrative Agent of any Net Proceeds received
in respect of any Prepayment Event immediately after such Net Proceeds are
received. The Administrative Agent shall promptly thereafter notify each Bank of
the reduction in Commitments resulting therefrom.
SECTION 2.07. Repayment of Advances; Prepayment. (a) The
Borrower shall repay to the Administrative Agent for the account of each Bank
the principal amount of each Contract Advance made by each Bank on the Maturity
Date.
(b) The Borrower shall repay to the Administrative Agent, for
the account of each Participating Bank which has made a Competitive Advance, on
the maturity date of each Competitive Advance (such maturity date being that
specified by the Borrower for repayment of such Competitive Advance in the
Notice of Competitive Borrowing delivered with respect thereto) the then unpaid
principal amount of such Competitive Advance.
(c) The Borrower may, on notice given to the Administrative
Agent (i) in the case of Alternate Base Rate Advances, not later than 11:00 a.m.
(New York City time) one Business Day prior to the day of the proposed
prepayment, and (ii) in the case of Eurodollar Rate Contract Advances, not later
than 11:00 a.m. (New York City time) on the third Business Day prior to the day
of the proposed prepayment, stating the proposed date and aggregate principal
amount of the prepayment, and if such notice is given, the Borrower shall,
prepay the outstanding principal amounts of the Contract Advances constituting
part of the same Contract Borrowing in whole or ratably in part; provided,
however, that any such partial prepayment shall be in an aggregate principal
amount not less than $10,000,000, or in an integral multiple of $5,000,000 in
excess thereof. The Borrower may not prepay any principal amount of any
Competitive Advance unless the Participating Bank making such Competitive
Advance shall have expressly agreed thereto. The Administrative Agent shall
promptly notify each Bank of any prepayments pursuant to this Section 2.07(c)
promptly after any such prepayment. The Borrower shall have no right to prepay
any principal amount of any Advance except as expressly set forth in this
Section 2.07.
<PAGE>
28
(d) On the date of any reduction or termination of the
Commitments, the Borrower shall pay or prepay so much of the Contract Advances
(other than Term Advances) as shall be necessary in order that the aggregate
principal amount of outstanding Advances (other than Term Advances) shall not
exceed the Commitments after giving effect to such reduction. In the event that,
after giving effect to the prepayment of Contract Advances pursuant to this
paragraph, there remain outstanding Competitive Advances in a principal amount
greater than the Commitments, the Borrower shall not be required to prepay such
Competitive Advances unless Banks holding such Competitive Advances request
prepayment, in which event the Borrower shall prepay such Competitive Advances;
provided that the Borrower shall not be required to so prepay Competitive
Advances after the outstanding principal amount of Competitive Advances has been
reduced to the amount of the Commitments.
(e) If any Contract Advances become Term Advances on the
initial Termination Date as contemplated by Section 2.18, and if the sum of the
Commitments plus the aggregate principal amount of outstanding Term Advances at
the time shall exceed $1,350,000,000, then the Borrower shall prepay Term
Advances on the initial Termination Date by an amount necessary to reduce the
outstanding principal amount of Term Advances to $1,350,000,000; provided that
if the initial Termination Date is being extended at the time pursuant to
Section 2.10, then the Commitments shall be reduced and the outstanding
principal amount of Term Advances shall be prepaid, ratably based on the
aggregate amount of Commitments at such time and the outstanding principal
amount of Term Advances at such time, in such amounts as shall be necessary in
order that the sum of the Commitments and the principal amount of the Term
Advances shall equal $1,350,000,000.
(f) In the event and on each occasion when any Term Advances
are outstanding and any Net Proceeds are received by or on behalf of the
Borrower or any Subsidiary in respect of any Prepayment Event, the Borrower
shall prepay Term Advances in an aggregate principal amount equal to the
Prepayment Amount; provided that if any Commitments are in effect at a time when
a prepayment is required to be made under this paragraph, then the Prepayment
Amount shall be allocated ratably to the prepayment of Term Advances and the
reduction of Commitments based on the aggregate amount of Commitments at such
time and the outstanding principal amount of Term Advances at such time. The
Borrower shall notify the Administrative Agent of any Net Proceeds received in
respect of a Prepayment Event immediately after such Net Proceeds are received.
<PAGE>
29
(g) Any prepayment of Eurodollar Rate Contract Advances
pursuant to any paragraph of this Section shall be subject to the provisions of
Section 8.04(b) hereof.
SECTION 2.08. Interest. The Borrower shall pay interest on
each Advance made by each Bank from the date of such Advance until paid in full,
at the following rates per annum:
(a) Contract Advances. If such Advance is a Contract Advance,
the Applicable Rate from time to time for such Contract Advance from
the date of such Advance until the last day of the last Interest Period
therefor, payable on the last day of each Interest Period and, in the
case of any Interest Period longer than three months, on the last day
of such three-month period, as the case may be.
(b) Competitive Advances. If such Advance is a Competitive
Advance, a rate per annum equal at all times from the date of such
Advance until the maturity thereof to the rate of interest for such
Competitive Advance specified by the Participating Bank making such
Competitive Advance in its Competitive Bid with respect thereto
delivered pursuant to Section 2.03(a)(ii) above, payable on the
proposed maturity date specified by the Borrower for such Competitive
Advance in the related Notice of Competitive Borrowing delivered
pursuant to Section 2.03(a)(i) above; provided that in the case of
Advances with maturities of greater than three months, interest shall
be payable at the end of each three-month period for such Advance.
(c) Default Amounts. In the case of any past-due amounts of
the principal of, or (to the fullest extent permitted by law) interest
on, any Advance, from the date such amount becomes due until paid in
full, payable on demand, a rate per annum equal at all times to 2%
above the Alternate Base Rate in effect from time to time.
SECTION 2.09. Alternate Rate of Interest. If Banks having more
than 66-2/3% of the sum of the Commitments and the Term Advances shall, at least
one Business Day before the date of any requested Borrowing (including any
requested conversion or continuation of any Borrowing), notify the
Administrative Agent that the Eurodollar Rate for any Eurodollar Rate Advances
comprising such Borrowing will not adequately reflect the cost to such Banks of
making or funding their respective Advances for such Borrowing, the right of the
Borrower to select Advances of such Type for
<PAGE>
30
such Borrowing or any subsequent Borrowing shall be suspended until the
Administrative Agent shall notify the Borrower and the Banks that the
circumstances causing such suspension no longer exist, and (a) any request by
the Borrower for a Eurodollar Rate Competitive Advance shall be of no force and
effect and shall be denied by the Administrative Agent and (b) any request by
the Borrower for a Eurodollar Rate Contract Advance shall be deemed to be a
request for an Alternate Base Rate Advance.
SECTION 2.10. Optional Extension of Termination Date. (a)
Optional Extension Procedures. The Borrower may, upon notice (by telephone
(confirmed in writing promptly thereafter) or telecopy) received by the
Administrative Agent (which shall advise each Bank thereof as soon as
practicable thereafter) not earlier than 60 days and not later than 50 days
prior to the initial Termination Date, request (an "Extension Request") that the
Banks extend the Termination Date for an additional 364 days from the initial
Termination Date.
(i) Banks' Response to Extension Request. The Banks may, at
their option, accept or reject such Extension Request by giving written
notice to Administrative Agent delivered no earlier than 30 days prior
to (but no later than 20 days prior to) the initial Termination Date
(the "Response Date"). If any Bank shall fail to give such notice to
Administrative Agent by the Response Date, such Bank shall be deemed to
have rejected the requested extension. If the Extension Request is not
consented to by Banks holding at least 51% of the Commitments by the
Response Date, the Extension Request will be rejected, and the
Termination Date will not be extended. If the Banks holding at least
51% of the Commitments consent to the Extension Request by the Response
Date, the Termination Date for those Banks consenting to the extension
(for purposes of this Section 2.10(a), the "Accepting Banks") shall be
automatically extended to the date which is the 364th day after the
initial Termination Date.
(ii) Additional Procedures To Extend the Rejected Amount. If
the Extension Request is consented to by Banks holding not less than
51% of the Commitments, but fewer than all Banks (any Bank not
consenting to the Extension Request being referred to as a "Rejecting
Bank"), then Administrative Agent shall, within 48 hours of making such
determination, notify the Accepting Banks and Borrower of the aggregate
Commitments held by the Rejecting Banks (the "Rejected
<PAGE>
31
Amount"). Each Accepting Bank shall have the right, but not the
obligation, to elect to increase its respective Commitment by an amount
not to exceed the Rejected Amount, which election shall be made by
notice from each Accepting Bank to the Administrative Agent given not
later than five days after the date notified by Administrative Agent,
specifying the amount of such proposed increase in such Accepting
Bank's Commitment. If the aggregate amount of the proposed increases in
the Commitments of all Accepting Banks making such an election does not
equal or exceed the Rejected Amount, then Borrower shall have the right
to add one or more financial institutions (which are not Rejecting
Banks and which are Eligible Assignees) as Banks (each a "Purchasing
Bank") to replace such Rejecting Banks, which Purchasing Banks shall
have aggregate Commitments not greater than those of the Rejecting
Banks (less any increases in the Commitments of Accepting Banks, as
described in the following clause (iii)). The transfer of Commitments
and outstanding Borrowings from Rejecting Banks to Purchasing Banks or
Accepting Banks shall take place (on or prior to the initial
Termination Date) on the effective date of, and pursuant to the
execution, delivery and acceptance of, an Assignment and Acceptance in
accordance with the procedures set forth in Section 8.07.
(iii) Adjustments to, and Terminations of, Commitments. (A) If
less than 100% of the Commitments are extended (whether by virtue of
Borrower's failure to request an extension of the total Commitments or
by virtue of any Bank not consenting to any Extension Request), then
the Commitments shall automatically be reduced on the initial
Termination Date by an amount equal to (as the case may be) (i) the
portion of the Commitments not requested to be extended by Borrower in
its Extension Request or (ii) the amount of the Rejected Amount (to the
extent not replaced by Accepting Banks or Purchasing Banks pursuant to
the procedures set forth in the foregoing Section 2.10(a)(ii)).
Notwithstanding the foregoing, each Rejecting Bank's outstanding
Contract Advances (after giving effect to the replacement of the
Rejected Amount by Accepting Banks or Purchasing Banks pursuant to
Section 2.10(a)(ii)) may, at the Borrower's option, be continued as
Term Advances as provided in Section 2.18.
(B) If the aggregate amount of the proposed increases in the
Commitments of all Accepting Banks
<PAGE>
32
making an election to increase their respective Commitments is in
excess of the Rejected Amount, then
(i) the Rejected Amount shall be allocated pro rata
among such Accepting Banks based on the respective amounts of
the proposed increases to Commitments elected by such
Accepting Banks; and
(ii) the respective Commitments of each such
Accepting Bank shall be increased by the respective amount
allocated pursuant to clause (i) of this Section
2.10(a)(iii)(B), such that, after giving effect to the
approved extensions and all such terminations and increases,
no reduction will occur in the aggregate amount of the
Commitments (subject to Section 2.06(c)).
(C) If the aggregate amount of the proposed increases to the
Commitments of all Accepting Banks making such an election to so
increase their respective Commitments equals the Rejected Amount, then
the respective Commitments of such Accepting Banks shall be increased
by the respective amounts of their proposed increases, such that, after
giving effect to the approved extensions and all such terminations and
increases, no reduction will occur in the aggregate amount of the
Commitments (subject to Section 2.06(c)).
(D) If the aggregate amount of the proposed increases to the
Commitments of all Accepting Banks making such an election is less than
the Rejected Amount, then
(i) the respective Commitments of each such
Accepting Bank shall be increased by the
respective amount of its proposed increase; and
(ii) the amount of the Commitments shall be reduced
in the amount of the Rejected Amount (to the extent not
replaced by the Accepting Banks or the Purchasing Banks, if
any).
(E) Any reduction or termination of Commitments required by
this Section shall be effective on the initial Termination Date
immediately prior to determining whether any further reduction of
Commitments is required by Section 2.06(c).
(b) Acknowledgments Regarding Obligations To Renew. Borrower
acknowledges that (i) neither Administrative Agent nor any Bank has made any
<PAGE>
33
representations to Borrower regarding its intent to agree to any extensions set
forth in this Section and (ii) neither Administrative Agent nor any Bank shall
have any obligation to extend the Termination Date.
(c) Payment to Rejecting Banks. If, after giving effect to any
transfer of a Rejecting Bank's Commitment to an Accepting Bank or a Purchasing
Bank under Section 2.10(a)(ii) above, there are any amounts, other than Contract
Advances continued as Term Advances pursuant to Section 2.18 (and accrued
interest thereon), owed by Borrower to such Rejecting Bank under the Loan
Papers, then such amount is due and payable by Borrower to such Rejecting Bank
on the initial Termination Date.
SECTION 2.11. Increased Costs; Increased Capital. (a) If due
to either (i) the introduction of or any change after the date hereof (other
than any change by way of imposition or increase of reserve requirements
included in the Eurodollar Rate Reserve Percentage) in or in the interpretation
of any law or regulation or (ii) the compliance with any guideline or request
received from any central bank or other governmental authority after the date
hereof (whether or not having the force of law), there shall be any increase in
the cost to any Bank of agreeing to make or making, funding, or maintaining
Eurodollar Rate Advances, then the Borrower shall from time to time, upon demand
by such Bank (with a copy of such demand to the Administrative Agent), pay to
the Administrative Agent for the account of such Bank additional amounts
sufficient to compensate such Bank for such increased cost. Increased costs
shall not include income, stamp, or other taxes, imposts, duties, charges, fees,
deductions, or withholdings imposed, levied, collected, withheld, or assessed by
the United States of America or any political subdivision or taxing authority
thereof or therein (including Puerto Rico) or of the country in which any Bank's
principal office or Applicable Lending Office may be located or any political
subdivision or taxing authority thereof or therein. Each Bank agrees that, upon
the occurrence of any event giving rise to a demand under this Section 2.11(a)
with respect to the Eurodollar Lending Office of such Bank, it will, if
requested by the Borrower and to the extent permitted by law or the relevant
governmental authority, endeavor in good faith and consistent with its internal
policies to avoid or minimize the increase in costs resulting from such event by
endeavoring to change its Eurodollar Lending Office; provided, however, that
such avoidance or minimization can be made in such a manner that such Bank, in
its sole determination, suffers no economic, legal, or regulatory disadvantage.
A certificate as to the amount of and
<PAGE>
34
specifying in reasonable detail the basis for such increased cost, submitted to
the Borrower and the Administrative Agent by such Bank, shall constitute such
demand and shall, in the absence of manifest error, be conclusive and binding
for all purposes.
(b) If either (i) the introduction after the date hereof of,
or any change after the date hereof in or in the interpretation of, any law or
regulation or (ii) the compliance by any Bank with any guideline or request
received from any central bank or other governmental authority after the date
hereof (whether or not having the force of law), affects or would affect the
amount of capital required or expected to be maintained by such Bank or any
corporation controlling such Bank and such Bank determines that the amount of
such capital is increased by or based upon the existence of its Advances or
Commitment, then the Borrower shall, from time to time, upon demand by such Bank
(with a copy of such demand to the Administrative Agent), immediately pay to the
Administrative Agent for the account of such Bank additional amounts sufficient
to compensate such Bank to the extent that such Bank determined such increase in
capital to be allocable to the existence of such Bank's Advances or Commitment.
A certificate as to the amount of such increased capital and specifying in
reasonable detail the basis therefor, submitted to the Borrower and the
Administrative Agent by such Bank, shall constitute such demand and shall, in
the absence of manifest error, be conclusive and binding for all purposes. Each
Bank shall use all reasonable efforts to mitigate the effect upon the Borrower
of any such increased capital requirement and shall assess any cost related to
such increased capital on a nondiscriminatory basis among the Borrower and other
borrowers of such Bank to which it applies and such Bank shall not be entitled
to demand or be compensated for any increased capital requirement unless it is,
as a result of such law, regulation, guideline, or request, such Bank's policy
generally to seek to exercise such rights, where available, against other
borrowers of such Bank.
(c) Notwithstanding the foregoing provisions of this Section
2.11, (i) the Borrower shall not be required to reimburse any Bank for any
increased costs incurred more than three months prior to the date that such Bank
notifies the Borrower in writing thereof and (ii) in the event any Bank grants a
participation in an Advance pursuant to Section 8.07, the Borrower shall not be
obligated to reimburse for increased costs with respect to such Advance to the
extent that the aggregate amount thereof exceeds the aggregate amount for which
the Borrower would have been obligated if such Bank had not made such
participation.
<PAGE>
35
SECTION 2.12. Additional Interest on Eurodollar Rate Advances.
The Borrower shall pay to the Administrative Agent for the account of each Bank
any costs which such Bank determines are attributable to such Bank's compliance
with regulations of the Board requiring the maintenance of reserves with respect
to liabilities or assets consisting of or including Eurocurrency Liabilities.
Such costs shall be paid to the Administrative Agent for the account of such
Bank in the form of additional interest on the unpaid principal amount of each
Eurodollar Rate Advance of such Bank, from the date of such Advance until such
principal amount is paid in full, at an interest rate per annum equal at all
times to the remainder obtained by subtracting (i) the Eurodollar Rate for the
applicable period for such Advance from (ii) the rate obtained by dividing such
Eurodollar Rate by a percentage equal to 100% minus the Eurodollar Rate Reserve
Percentage of such Bank for such period, payable on each date on which interest
is payable on such Advance. Such additional interest shall be determined by such
Bank and notified to the Borrower and the Administrative Agent. A certificate
setting forth the amount of such additional interest, submitted to the Borrower
and the Administrative Agent by such Bank, shall be conclusive and binding for
all purposes, absent manifest error.
SECTION 2.13. Change in Legality. If any Bank (as used in this
paragraph, a "Notifying Bank") shall, at least three Business Days before the
date of any requested Borrowing consisting of Eurodollar Rate Advances notify
the Administrative Agent that the introduction of or any change in or in the
interpretation of any law or regulation makes it unlawful, or that any central
bank or other governmental authority asserts that it is unlawful, for such
Notifying Bank or its Applicable Lending Office to perform its obligations
hereunder to make, fund or maintain Eurodollar Rate Advances hereunder, the
right of the Borrower to select Advances of such Type from such Notifying Bank
for such Borrowing or any subsequent Borrowing shall be suspended until such
Notifying Bank shall notify the Administrative Agent that the circumstances
causing such suspension no longer exist; provided that during the period when
such obligation of such Notifying Bank is suspended, any Borrowing consisting of
Eurodollar Rate Advances shall not exceed the Commitments of the other Banks
less the aggregate amount of any Advances (including Competitive Advances) then
outstanding, and shall be made by the other Banks pro rata according to their
respective Commitments; provided further if any such request for a Eurodollar
Rate Advance is made in respect of a Borrowing that includes a Term Advance of
the Notifying Bank, then the immediately preceding proviso shall
<PAGE>
36
not apply to such Term Advance and (i) such Term Advance shall remain
outstanding, (ii) any request for the conversion or continuation of all or any
portion of such Notifying Bank's Term Advance as a Eurodollar Rate Advance shall
be ineffective (but shall be effective for the other Term Advances included in
such Borrower) and (iii) such Notifying Bank's Term Advance included in such
Borrowing shall continue as an Alternate Base Rate Advance.
SECTION 2.14. Payments and Computations. (a) The Borrower
shall make each payment hereunder from a bank account of the Borrower located in
the United States not later than 11:00 a.m. (New York City time) on the day when
due in U.S. dollars to the Administrative Agent at its address referred to in
Section 8.02 in same-day funds. The Administrative Agent will promptly
thereafter cause to be distributed like funds to the Banks entitled thereto for
the account of their respective Applicable Lending Offices, in each case to be
applied in accordance with the terms of this Agreement.
(b) All computations of interest based on the Alternate Base
Rate shall be made by the Administrative Agent on the basis of a year of 365 or
366 days, as the case may be, when determined by reference to the Prime Rate and
on the basis of a year of 360 days at all other times; and all computations of
fees and of interest based on the Eurodollar Rate or the Fixed Rate shall be
made by the Administrative Agent on the basis of a year of 360 days, in each
case for the actual number of days (including the first day but excluding the
last day) occurring in the period for which such interest or fees are payable.
Each determination by the Administrative Agent of an interest rate hereunder
shall be conclusive and binding for all purposes, absent manifest error.
(c) Whenever any payment hereunder shall be stated to be due
on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall be included in the
computation of payment of interest or fees, as the case may be; provided,
however, that if such extension would cause payment of interest on or principal
of Eurodollar Rate Advances to be made in the next following calendar month,
such payment shall be made on the next preceding Business Day.
(d) Unless the Administrative Agent shall have received notice
from the Borrower prior to the date on which any payment is due to the Banks
hereunder that the Borrower will not make such payment in full, the
Administrative Agent
<PAGE>
37
may assume that the Borrower has made such payment in full to the Administrative
Agent on such date and the Administrative Agent may, in reliance upon such
assumption, cause to be distributed to each Bank on such due date an amount
equal to the amount then due such Bank. If and to the extent the Borrower shall
not have so made such payment in full to the Administrative Agent, each Bank
shall repay to the Administrative Agent forthwith on demand such amount
distributed to such Bank together with interest thereon, for each day from the
date such amount is distributed to such Bank until the date such Bank repays
such amount to the Administrative Agent, at the Federal Funds Effective Rate.
(e) Each Bank shall maintain on its books a loan account in
the name of the Borrower in which shall be recorded all Advances made by such
Bank to the Borrower, the interest rate, and the maturity date of each such
Advance and all payments of principal and interest made by the Borrower with
respect to such Advances. The obligation of the Borrower to repay the Advances
made by each Bank and to pay interest thereon shall be evidenced by the entries
from time to time made in the loan account of such Bank maintained pursuant to
this Section 2.14(e); provided that the failure to make an entry with respect to
an Advance shall not affect the obligations of the Borrower hereunder with
respect to such Advance. In case of any dispute, action or proceeding relating
to any Advance, the entries in such loan account shall be prima facie evidence
of the amount of such Advance and of any amounts paid or payable with respect
thereto.
(f) The Administrative Agent shall maintain on its books a set
of accounts in which shall be recorded all Advances made by the Banks to the
Borrower, the interest rates, and maturity dates of such Advances and all
payments of principal and interest made thereon. In case of any discrepancy
between the entries in the Administrative Agent's books and the entries in any
Bank's books, such Bank's records shall be considered correct, in the absence of
manifest error.
SECTION 2.15. Taxes on Payments. (a) All payments made by the
Borrower under this Agreement shall be made free and clear of, and without
reduction for or on account of, any income, stamp, or other taxes, imposts,
duties, charges, fees, deductions, or withholdings, imposed, levied, collected,
withheld, or assessed by the United States of America (or by any political
subdivision or taxing authority thereof or therein) as a result of (i) the
introduction after the date hereof of any law, regulation, treaty, directive, or
guideline (whether or not having the
<PAGE>
38
force of law), or (ii) any change after the date hereof in any law, regulation,
treaty, directive, or guideline (whether or not having the force of law), or
(iii) any change after the date hereof in the interpretation or application of
any law, regulation, treaty, directive, or guideline (whether or not having the
force of law), or (iv) any such taxes, imposts, duties, charges, fees,
deductions, or withholdings being imposed, levied, collected, withheld, or
assessed at a greater rate than the rate that would have been applicable had
such an introduction or change not been made, but only to the extent of the
increase in such rate ("Withholding Taxes"). If any Withholding Taxes are
required to be withheld from any amounts payable to or for the account of any
Bank hereunder, the amounts so payable to or for the account of such Bank shall
be increased to the extent necessary to yield to such Bank (after payment of all
Withholding Taxes) interest or any such other amounts payable hereunder at the
rates or in the amounts payable to or for the account of such Bank under this
Agreement prior to such introduction or change. Whenever any Withholding Tax is
payable by the Borrower, as promptly as possible thereafter, the Borrower shall
send to the Administrative Agent, for the account of such Bank, a certified copy
of an original official receipt showing payment thereof. If the Borrower fails
to pay any Withholding Taxes when due to the appropriate taxing authority or
fails to remit to the Administrative Agent, for the account of any Bank the
required receipts or other required documentary evidence, the Borrower shall
indemnify such Bank or the Administrative Agent for any incremental taxes,
interest, or penalties that may become payable by such Bank or the
Administrative Agent as a result of any such failure.
(b) At least four Business Days prior to the first Borrowing
or, if the first Borrowing does not occur within thirty days after the date of
execution of this Agreement, by the end of such thirty-day period, each Bank
that is organized outside the United States agrees that it will deliver to the
Borrower and the Administrative Agent two duly completed copies of United States
Internal Revenue Service Form 1001 (or such other documentation or information
as may, under applicable United States Federal income tax statutes or
regulations, be required in order to claim an exemption or reduction from United
States income tax withholding by reason of an applicable treaty with the United
States, such documentation or other information being hereafter referred to as
"Form 1001") or Form 4224 (or such other documentation or information as may,
under applicable United States Federal income tax statutes or regulations, be
required in order to claim an exemption from United States
<PAGE>
39
income tax withholding for income that is effectively connected with the conduct
of a trade or business within the United States, such documentation or other
information being hereafter referred to as "Form 4224"), as the case may be,
indicating in each case that such Bank is either entitled to receive payments
under this Agreement without deduction or withholding of any United States
Federal income taxes or, as the case may be, is subject to such limited
deduction or withholding as it is capable of recovering in full from a source
other than the Borrower. Each Bank which delivers to the Borrower and the
Administrative Agent a Form 1001 or Form 4224 pursuant to the next preceding
sentence further undertakes to deliver to the Borrower and the Administrative
Agent two further copies of the said Form 1001 or 4224, or successor applicable
form or certificate, as the case may be, as and when the previous form filed by
it hereunder shall expire or shall become incomplete or inaccurate in any
respect, unless in any of such cases an event has occurred prior to the date on
which any such delivery would otherwise be required which renders such form
inapplicable.
(c) If at any time any Bank by reason of payment by the
Borrower of any Withholding Taxes obtains a credit against, or return or
reduction of, any tax payable by it, or any other currently realized tax
benefit, which it would not have enjoyed but for such payment ("Tax Benefit"),
such Bank shall thereupon pay to the Borrower the amount which such Bank shall
certify to be the amount that after payment, will leave such Bank in the same
economic position it would have been in had it received no such Tax Benefit
("Equalization Amount"); provided, however, that if such Bank shall subsequently
determine that it has lost the benefit of all or a portion of such Tax Benefit,
the Borrower shall promptly remit to such Bank the amount certified by such Bank
to be the amount necessary to restore such Bank to the position it would have
been in if no payment had been made pursuant to this Section 2.15(c); provided
further, however, that if such Bank shall be prevented by applicable law from
paying the Borrower all or any portion of the Equalization Amount owing to the
Borrower such payment need not be made to the extent such Bank is so prevented
and the amount not paid shall be credited to the extent lawful against future
payment owing to such Bank; provided further, however, that the aggregate of all
Equalization Amounts paid by any Bank shall in no event exceed the aggregate of
all amounts paid by the Borrower to such Bank in respect of Withholding Taxes
plus, in the case of a Tax Benefit that occurs by reason of a refund interest
actually received from the relevant taxing authority with respect to such
refund. A certificate submitted in good
<PAGE>
40
faith by the Bank pursuant to this Section 2.15(c) shall be deemed conclusive
absent manifest error.
(d) In the event a Bank shall become aware that the Borrower
is required to pay any additional amount to it pursuant to Section 2.15(a), such
Bank shall promptly notify the Administrative Agent and the Borrower of such
fact and shall use reasonable efforts, consistent with legal and regulatory
restrictions, to change the jurisdiction of its Applicable Lending Office if the
making of such change (i) would avoid the need for, or reduce the amount of, any
such additional amounts that may thereafter accrue, (ii) would not, in the good
faith determination of such Bank, be disadvantageous for regulatory or
competitive reasons to such Bank, and (iii) would not require such Bank to incur
any cost or forego any economic advantage for which the Borrower shall not have
agreed to reimburse and indemnify such Bank.
(e) Notwithstanding the foregoing provisions of this Section
2.15, in the event any Bank grants a participation in any Advance pursuant to
Section 8.07, the Borrower shall not be obligated to pay any taxes, imposts,
duties, charges, fees, deductions, or withholdings to the extent that the
aggregate amount thereof exceeds the aggregate amount for which the Borrower
would have been obligated if such Bank had not granted such participation.
SECTION 2.16. Sharing of Payments, Etc. If any Bank shall
obtain any payment (whether voluntary, involuntary, through the exercise of any
right of setoff or otherwise) on account of the Contract Advances made by it
(other than pursuant to Sections 2.11, 2.15, 2.17, 8.04, or 8.07(g) hereof) in
excess of its ratable share of payments on account of the Contract Advances
obtained by all the Banks, then such Bank shall forthwith purchase from the
other Banks through the Administrative Agent such participations in the Contract
Advances made by them as shall be necessary to cause such purchasing Bank to
share the excess payment ratably with each of them; provided, however, that, if
all or any portion of such excess payment is thereafter recovered from such
purchasing Bank, such purchase from each Bank shall be rescinded, and such Bank
shall repay to the purchasing Bank the purchase price to the extent of such
recovery, together with an amount equal to such Bank's ratable share (according
to the proportion that (i) the amount of such Bank's required repayment bears to
(ii) the total amount so recovered from the purchasing Bank) of any interest or
other amount paid or payable by the purchasing Bank in respect of the total
amount so recovered. The Borrower agrees that any Bank so purchasing a
<PAGE>
41
participation from another Bank pursuant to this Section 2.16 may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of setoff) with respect to such participation as fully as if such Bank
were the direct creditor of the Borrower in the amount of such participation.
SECTION 2.17. Removal of a Bank. The Borrower shall have the
right, by giving at least 15 Business Days' prior notice in writing to the
affected Bank and the Administrative Agent, at any time when no Event of Default
and no event which with the passage of time or the giving of notice or both
would become an Event of Default has occurred and is then continuing, to remove
as a party hereto any Bank having a credit rating of C/D (or its equivalent) or
lower by Thomson BankWatch, Inc. (or any successor thereto), such removal to be
effective as of the date specified in such notice from the Borrower (a "Removal
Date"), which date, for any Eurodollar Rate Contract Advance, shall be the last
day of an Interest Period and, for any Competitive Advance, shall be the
maturity date of such Competitive Advance; provided that no such Bank may be
removed if it does not have a Commitment at the time. On any Removal Date, the
Borrower shall repay all the outstanding Advances (other than Term Advances, if
any) of the affected Bank applicable to such Removal Date, together with all
accrued interest, fees, and all other amounts owing hereunder to such Bank. Upon
each such Removal Date and receipt of the related payment referred to above, the
Commitment relating to the Advances so paid on such Removal Date, together with
all unused Commitment, of such affected Bank shall terminate, and such Bank
shall cease thereafter to constitute a Bank hereunder (other than with respect
to any Term Advances of such Bank). The Borrower shall have the right to offer
to one or more Banks the right to increase their Commitments up to, in the
aggregate for all such increases, the Commitment of any Bank which is removed
pursuant to the foregoing provisions of this Section 2.17 (such Commitment being
herein called an "Unallocated Commitment") effective on the relevant Removal
Date, it being understood that no Bank shall be obligated to increase its
Commitment in response to any such offer. The Borrower shall also have the right
to offer all or any portion of an Unallocated Commitment to one or more Eligible
Assignees not parties hereto having a credit rating higher than C/D (or its
equivalent) by Thomson BankWatch, Inc. (or any successor thereto), and, upon
each such bank's acceptance of such offer and execution and delivery of an
instrument agreeing to the terms and conditions hereof (including, without
limitation, the provisions of Section 8.07 regarding Bank assignments), each
such bank shall become a Bank hereunder with a Commitment in
<PAGE>
42
an amount specified in such instrument. The obligations of the Borrower
described in Sections 2.11, 8.04, and 8.15 shall survive for the benefit of any
Bank removed pursuant to this Section 2.17 notwithstanding such removal.
SECTION 2.18. Extension of Maturity Date. (a) If the initial
Termination Date shall be extended pursuant to Section 2.10, then the initial
Maturity Date shall automatically be extended to the date 364 days after the
initial Termination Date (the "Extended Maturity Date").
(b) If the initial Termination Date shall not be extended
pursuant to Section 2.10, then (unless an Event of Default has occurred and is
continuing) the Borrower may elect to extend the initial Maturity Date to the
Extended Maturity Date by delivering notice of such extension (a "Maturity Date
Extension Notice") to the Administrative Agent (which shall promptly deliver a
copy of such Maturity Date Extension Notice to each Bank) not later than 15 days
prior to the Termination Date. If a Maturity Date Extension Notice shall be
delivered in accordance with this paragraph, then (i) the initial Maturity Date
shall be automatically extended to the Extended Maturity Date, (ii) the
principal amount of all Contract Advances outstanding on the Termination Date
shall remain outstanding as term advances (the "Term Advances") which mature on
the Extended Maturity Date, (iii) all Competitive Advances shall be paid in full
on or prior to the Termination Date and (iv) all Commitments shall terminate on
the Termination Date.
(c) If the initial Termination Date shall be extended pursuant
to Section 2.10, but there shall remain a Rejected Amount (after giving effect
to any replacements by Accepting Banks and Purchasing Banks pursuant to Section
2.10), then (unless an Event of Default has occurred and is continuing) the
Borrower may elect to extend the initial Maturity Date with respect to
outstanding Contract Advances of Rejecting Banks to the Extended Maturity Date
by delivering a Maturity Date Extension Notice to the Administrative Agent
(which shall promptly deliver a copy of such Maturity Date Extension Notice to
the Rejecting Banks) not later than 15 days prior to the initial Termination
Date. If a Maturity Date Extension Notice shall be delivered in accordance with
this paragraph, then (i) the Termination Date with respect to the Commitments of
the Accepting Banks and any Purchasing Banks shall be extended in accordance
with Section 2.10, (ii) the Commitments of the Rejecting Banks (after giving
effect to replacements by Accepting Banks and Purchasing Banks pursuant to
Section 2.10) shall terminate, (iii) the initial Maturity Date shall be extended
to the Extended Maturity Date,
<PAGE>
43
(iv) subject to Section 2.07(e), the principal amount of all Contract Advances
of the Rejecting Banks outstanding on the initial Termination Date (after giving
effect to replacements by Accepting Banks and Purchasing Banks pursuant to
Section 2.10) shall remain outstanding as Term Advances which mature on the
Extended Maturity Date and (v) all Competitive Advances of Rejecting Banks shall
be paid in full on or prior to the initial Termination Date; provided that (A)
Contract Advances of Banks other then Rejecting Banks, including Contract
Advances made pursuant to Section 2.01 after the initial Termination Date shall
not be deemed Term Advances and (B) the sum of the principal amount of the Term
Advances and the Commitments immediately after giving effect to the provisions
of this Section and Section 2.10 on the initial Termination Date, shall not
exceed the lesser of (x) the aggregate amount of Commitments immediately prior
to giving effect to such provisions on the initial Termination Date and (y)
$1,350,000,000.
(d) If any Contract Advance shall remain outstanding as a Term
Advance pursuant to paragraph (b) or (c) above, such Term Advance shall continue
to constitute a Contract Advance for all purposes of this Agreement.
ARTICLE III
Conditions of Lending
---------------------
SECTION 3.01. Conditions Precedent to Closing. The obligations
of the Banks to make Advances hereunder shall not become effective until the
date on which each of the following conditions is satisfied (or waived in
accordance with Section 8.01):
(a) The Administrative Agent (or its counsel) shall have
received from each party hereto either (i) a counterpart of this
Agreement signed on behalf of such party or (ii) written evidence
satisfactory to the Administrative Agent (which may include telecopy
transmission of a signed signature page of this Agreement) that such
party has signed a counterpart of this Agreement.
(b) The Administrative Agent shall have received a favorable
written opinion (addressed to the Agents and the Banks and dated the
Closing Date) of (i) Mark Jones, counsel for the Borrower,
substantially in the form of Exhibit C-1 and (ii) Morgan Lewis &
Bockius LLP, New York counsel for the Borrower, substantially in the
form of Exhibit C-2, in each case covering such
<PAGE>
44
other matters relating to the Borrower, the Loan Papers or the
Transactions as the Majority Banks shall reasonably request. The
Borrower hereby requests such counsel to deliver such opinions.
(c) The Administrative Agent shall have received such
documents and certificates as the Administrative Agent or its counsel
may reasonably request relating to the organization, existence and good
standing of the Borrower and the Acquisition Subsidiary, the
authorization of the Transactions and any other legal matters relating
to the Borrower, the Acquisition Subsidiary, the Loan Papers or the
Transactions, all in form and substance satisfactory to the
Administrative Agent and its counsel.
(d) The Administrative Agent shall have received a
certificate, dated the Closing Date and signed by the President, a Vice
President or a Financial Officer of the Borrower, confirming compliance
with the conditions set forth in paragraphs (a) and (b) of Section
3.02.
(e) The Agents shall have received all fees and other amounts
due and payable on or prior to the Closing Date, including, to the
extent invoiced, reimbursement or payment of all out-of-pocket expenses
required to be reimbursed or paid by the Borrower hereunder.
(f) All consents and approvals required to be obtained from
any governmental authority or other Person in connection with the
Acquisition shall have been obtained, except to the extent that failure
to obtain any such consent or approval, individually or in the
aggregate, could not reasonably be expected to have a material adverse
effect on the business, assets, operations, financial condition or
prospects of the Borrower and its Subsidiaries, taken as a whole, or of
Norcen and its subsidiaries, taken as a whole, and all applicable
waiting periods and appeal periods shall have expired, in each case
without the imposition of any materially adverse conditions. The Agents
shall have received copies of the Acquisition Documents and all
certificates, opinions and other documents delivered thereunder,
certified by a Financial Officer as complete and correct.
(g) The Agents shall be satisfied with the material terms and
conditions (including, without limitation, purchase price) of the
Acquisition and the Acquisition Documents, including without limitation
the
<PAGE>
45
terms and conditions of the offer to be made by the Acquisition
Subsidiary to purchase shares of Norcen's capital stock (the "Offer")
and any subsequent merger, amalgamation or similar transaction to
eliminate minority stockholders after consummation of the Offer (the
"Merger").
(h) The Existing Credit Agreements shall have been amended as
provided in Schedule IV.
(i) All conditions to the acceptance of shares of Norcen's
capital stock pursuant to the Offer shall have been satisfied (without
giving effect to any amendment or waiver that has not been approved by
the Banks, other than amendments and waivers that could not reasonably
be expected to materially and adversely affect the interests of the
Banks) and shares representing at least 75% of the outstanding shares
of Norcen's common stock shall have been accepted for purchase pursuant
to and in accordance with the Offer.
(j) If less than all the outstanding shares of Norcen's
capital stock are being purchased by the Acquisition Subsidiary on the
Closing Date, the Borrower shall have delivered to the Agents a
certificate to the effect that, as of the Closing Date, the Borrower is
not aware of any material impediment that would render unlikely the
consummation of the Merger and completion of the Acquisition on the
terms contemplated by the Acquisition Documents without the imposition
of any materially adverse conditions.
(k) There shall not be any litigation, administrative
proceedings or other legal or regulatory actions pending or threatened
which individually or in the aggregate (i) prevent or impose materially
adverse conditions upon any of the Transactions or (ii) could
reasonably be expected to have a material adverse effect on the
business, assets, operations, financial condition or prospects of the
Borrower and its Subsidiaries, taken as a whole, or of Norcen and its
subsidiaries, taken as a whole.
(l) The consummation of the Transactions shall not (i) violate
any applicable law, statute, rule or regulation or (ii) conflict with,
or result in a default under, or any right to terminate or renegotiate,
any material Debt or contract of the Borrower or any of its
Subsidiaries or Norcen or any of its Subsidiaries.
<PAGE>
46
The Administrative Agent shall notify the Borrower and the Banks of the Closing
Date, and such notice shall be conclusive and binding. Notwithstanding the
foregoing, the obligations of the Banks to make Advances hereunder shall not
become effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 8.01) at or prior to 3:00 p.m., New York City time, on March
16, 1998 (and, in the event such conditions are not so satisfied or waived, the
Commitments shall terminate at such time).
SECTION 3.02. Conditions Precedent to Each Borrowing. The
obligation of each Bank to make an Advance in connection with any Borrowing
(including without limitation, the initial Borrowing) shall be subject to the
further conditions precedent that on the date of such Borrowing, (i)
Administrative Agent shall have received a Notice of Contract Borrowing or
Notice of Competitive Borrowing, executed and completed by a Financial Officer
of the Borrower, and (ii) the following statements shall be true (and each of
the giving of the applicable Notice of Contract Borrowing or Notice of
Competitive Borrowing and the acceptance by the Borrower of the proceeds of such
Borrowing shall constitute a representation and warranty by the Borrower that on
the date of such Borrowing such statements are true):
(a) the representations and warranties contained in Article IV
(excluding for all Borrowings, other than the initial Borrowings, those
contained in subsections (f), (j), (k) and (l) thereof) are correct on
and as of the date of such Borrowing, before and after giving effect to
such Borrowing and to the application of the proceeds therefrom, as
though made on and as of such date; and
(b) no event has occurred and is continuing, or would result
from such Borrowing or from the application of the proceeds therefrom,
which constitutes an Event of Default.
ARTICLE IV
Representations and Warranties
------------------------------
The Borrower represents and warrants as follows:
(a) The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of Utah.
<PAGE>
47
(b) The Transactions are within the Borrower's and the
Acquisition Subsidiary's corporate powers, have been duly authorized by
all necessary corporate action, and do not contravene (i) the
Borrower's or Acquisition Subsidiary's charter or by-laws or (ii) any
law or any contractual restriction binding on or affecting the Borrower
or the Acquisition Subsidiary.
(c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority, regulatory body,
or other Person is required for the due execution, delivery and
performance by the Borrower of this Agreement and the consummation by
the Borrower and the Acquisition Subsidiary of the Transactions, except
such as have been duly obtained or made and are in full force and
effect.
(d) This Agreement is the legal, valid and binding obligation
of the Borrower enforceable against the Borrower in accordance with its
terms.
(e) (i) The statement of consolidated financial position of
the Borrower and its consolidated Subsidiaries as of December 31, 1996,
and the related statements of consolidated income and consolidated
changes in common stockholders' equity of the Borrower and its
consolidated Subsidiaries for the fiscal year then ended, copies of
which have been furnished to each Bank, fairly present the financial
condition of the Borrower and its consolidated Subsidiaries as at such
date and present the financial condition of the Borrower and its
consolidated Subsidiaries for the period ended on such date, all in
accordance with generally accepted accounting principles consistently
applied.
(ii) The statement of consolidated financial position of the
Borrower and its consolidated Subsidiaries as of September 30, 1997,
and the related statements of consolidated income and consolidated
changes in common stockholders' equity of the Borrower and its
consolidated Subsidiaries for the fiscal quarter then ended, copies of
which have been furnished to each Bank, fairly present the financial
condition of the Borrower and its consolidated Subsidiaries as at such
date and present the financial condition of the Borrower and its
consolidated Subsidiaries for the period ended on such date, all in
accordance with generally accepted accounting principles consistently
applied, and since September 30, 1997, there has been
<PAGE>
48
no material adverse change in such condition or operations.
(f) There is no pending or threatened action or proceeding
affecting the Borrower or any of its consolidated Subsidiaries before
any court, governmental agency or arbitrator, (i) which purports to
affect the legality, validity or enforceability of the Transactions or
(ii) except as set forth in public documents filed with the Securities
and Exchange Commission or otherwise disclosed publicly on or prior to
the Closing Date, which may be reasonably expected to materially
adversely affect the financial condition or operations of the Borrower
or any of its Subsidiaries, taken as a whole.
(g) After applying the proceeds of each Advance, not more than
25% of the value of the assets of the Borrower and its Subsidiaries (as
determined in good faith by the Borrower) that are subject to Section
5.02(a)) will consist of or be represented by Margin Stock.
(h) The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying Margin Stock and no
proceeds of any Advance will be used for any purpose which violates the
provisions of the regulations of the Board. If requested by any Bank or
the Administrative Agent, the Borrower will furnish to the
Administrative Agent and each Bank a statement in conformity with the
requirements of Federal Reserve Form U-1 referred to in Regulation U,
the statements made in which shall be such, in the opinion of each
Bank, as to permit the transactions contemplated hereby in accordance
with Regulation U.
(i) No Termination Event has occurred nor is reasonably
expected to occur with respect to any Plan which may materially
adversely affect the financial condition or operations of the Borrower
and its Subsidiaries, taken as a whole. Neither the Borrower nor any of
its ERISA Affiliates has incurred nor reasonably expects to incur any
withdrawal liability under ERISA to any Multiemployer Plan which may
reasonably be expected to materially adversely affect the financial
condition or operations of the Borrower and its Subsidiaries, taken as
a whole. Schedule B (Actuarial Information) to the 1994 annual report
(Form 5500 Series) with respect to each Plan, copies of which have been
filed with the Internal Revenue Service
<PAGE>
49
and furnished to each Bank, is complete and accurate in all material
respects and in all material respects fairly presents the funding
status of each Plan. No Reportable Event has occurred and is continuing
with respect to any Plan which may materially adversely affect the
financial condition or operations of the Borrower and its Subsidiaries,
taken as a whole.
(j) On the date of the initial Borrowing, and after giving
effect to the Transactions, Borrower is Solvent. For purposes hereof,
"Solvent" means, as to a Person, that (i) the aggregate fair market
value of such Person's assets exceeds its liabilities (whether
contingent, subordinated, unmatured, unliquidated, or otherwise), (ii)
such Person has sufficient cash flow to enable it to pay its Debts as
they mature, and (iii) such Person does not have unreasonably small
capital to conduct such Person's business. In computing the amount of
contingent liabilities at any time, for purposes of determining
solvency, it is intended that such liabilities will be computed at the
amount which, in light of all the facts and circumstances existing at
such time, represents, the amount that can reasonably be expected to
become an actual or matured liability.
(k) Except as disclosed in public documents filed with the
Securities and Exchange Commission or otherwise disclosed publicly on
or prior to the Closing Date, neither Borrower nor any Restricted
Subsidiary is a party to a material transaction with any of its
Affiliates, other than transactions in the ordinary course of business
and upon fair and reasonable terms not materially less favorable than
the Borrower or such Restricted Subsidiary could obtain or could become
entitled to in an arm's-length transaction with a Person that was not
its Affiliate.
(l) The proportion that the combined EBITDAX of the Principal
Subsidiaries bears to the consolidated EBITDAX for the Borrower and its
Subsidiaries is not less than 80%.
(m) No Event of Default under either of the Existing Credit
Agreements or any event or existence of any circumstance which, with
the giving of notice or lapse of time or both, would become an Event of
Default under either of the Existing Credit Agreements exists.
<PAGE>
50
ARTICLE V
Covenants of the Borrower
-------------------------
SECTION 5.01. Affirmative Covenants. So long as any Advance
shall remain unpaid or any Bank shall have any Commitment hereunder, the
Borrower will, and, in the case of Section 5.01(a), will cause its Subsidiaries
to, unless the Majority Banks shall otherwise consent in writing:
(a) Keep Books; Corporate Existence; Maintenance
--------------------------------------------
of Properties; Compliance with Laws; Insurance.
-----------------------------------------------
(i) keep proper books of record and account,
all in accordance with generally accepted
accounting principles;
(ii) preserve and keep in full force and effect its
existence, and preserve and keep in full force and effect its
licenses, rights and franchises to the extent it deems
necessary to carry on its business;
(iii) maintain and keep, or cause to be maintained
and kept, its properties in good repair, working order and
condition, and from time to time make or cause to be made all
needful and proper repairs, renewals, replacements and
improvements, in each case to the extent it deems necessary to
carry on its business;
(iv) use its reasonable efforts to comply in all
material respects with all material applicable statutes,
regulations, and orders of, and all material applicable
restrictions imposed by, any governmental agency in respect of
the conduct of its business and the ownership of its
properties, to the extent it deems necessary to carry on its
business, except such as are being contested in good faith by
appropriate proceedings;
(v) insure and keep insured its properties in such
amounts (and with such self insurance and deductibles) as it
deems necessary to carry on its business and to the extent
available on premiums and other terms which the Borrower or
any Subsidiary, as the case may be, deems appropriate. Any of
such insurance may be carried by, through, or with any captive
or affiliated insurance company or by way of self-insurance as
the
<PAGE>
51
Borrower or any Subsidiary, as the case may be,
deems appropriate; and
(vi) use the proceeds of Advances to (a) finance the
Acquisition by the Acquisition Subsidiary and (b) to support
the issuance by the Borrower of commercial paper the proceeds
of which are used to finance the Acquisition by the
Acquisition Subsidiary.
Nothing in this subsection shall prohibit the Borrower or any of its
Subsidiaries from discontinuing any business, forfeiting any license,
right or franchise or discontinuing the operation or maintenance of any
of its properties to the extent it deems appropriate in the conduct of
its business.
(b) Reporting Requirements. Furnish to the
Banks:
(i) as soon as available and in any event within 60
days after the end of each of the first three quarters of each
fiscal year of the Borrower, a statement of the consolidated
financial condition of the Borrower and its consolidated
Subsidiaries as at the end of such quarter and the related
statements of income and retained earnings of the Borrower and
its consolidated Subsidiaries for the period commencing at the
end of the previous fiscal year and ending with the end of
such quarter, certified by a principal financial or accounting
officer of the Borrower; provided that the Borrower may
deliver, in lieu of the foregoing, the quarterly report of the
Borrower for such fiscal quarter on Form 10-Q filed with the
Securities and Exchange Commission or any governmental
authority succeeding to the functions of such Commission, but
only so long as the financial statements contained in such
quarterly report on Form 10-Q relate to the same companies and
are substantially the same in content as the financial
statements referred to in the preceding provisions of this
clause (i);
(ii) as soon as available and in any event within 90
days after the end of each fiscal year of the Borrower, a copy
of the annual report for such year for the Borrower and its
Subsidiaries, containing the audited consolidated financial
statements of the Borrower and its consolidated
<PAGE>
52
Subsidiaries for such year and accompanied by an auditors'
report of Deloitte & Touche or other independent public
accountants of nationally recognized standing that such
financial statements were prepared in accordance with
generally accepted accounting standards and present fairly the
consolidated financial condition of the Borrower and its
consolidated Subsidiaries and results of operations of the
Borrower and its consolidated Subsidiaries;
(iii) promptly after the sending or filing thereof,
copies of all reports which the Borrower sends to its
stockholders generally, and copies of all reports and
registration statements (without exhibits) which the Borrower
files with the Securities and Exchange Commission or any
national securities exchange (other than registration
statements relating to employee benefit plans);
(iv) promptly after the filing or receiving thereof,
copies of any notices of any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder which
the Borrower or any Subsidiary files with the PBGC, or which
the Borrower or any Subsidiary receives from the PBGC to the
effect that proceedings or other action by the PBGC is to be
instituted;
(v) such other information respecting the condition
or operations, financial or otherwise, of the Borrower or any
of its Subsidiaries as any Bank through the Administrative
Agent may from time to time reasonably request;
(vi) at any time the Borrower is not a
publicly-reporting company, upon the request of Administrative
Agent (and in a form acceptable to Administrative Agent), such
information respecting the condition or operations, financial
or otherwise, of the Borrower or any of its Subsidiaries as
the Borrower would have included in any reports filed with the
Securities and Exchange Commission if it had continued to be a
publicly-reporting company; and
(vii) as soon as available and in any event no later
than required to be delivered pursuant to applicable
regulatory delivery requirements, a copy of the annual and
quarterly financial statements of Norcen and its Subsidiaries,
<PAGE>
53
certified by a principal financial or accounting officer of
Norcen, or if audited, accompanied by an auditor's report of
independent public accountants of nationally recognized
standing; provided that such financial statements will not be
required to be delivered if Norcen is not otherwise subject to
any regulatory requirement to deliver such financial
statements to any regulatory or other governmental authority.
(c) Notices. Promptly give notice to the Administrative Agent
and each Bank:
(i) of the occurrence of any Event of Default or any
event which, with the giving of notice or the passage of time,
or both, would become an Event of Default; and
(ii) of the commencement of any litigation,
investigation, or proceeding affecting the Borrower or any of
its Subsidiaries before any court, governmental authority or
arbitrator which, in the reasonable judgment of the Borrower,
could have a material adverse effect on the business,
operations, property, or financial or other condition of the
Borrower and its Subsidiaries, taken as a whole.
Each notice pursuant to this subsection shall be accompanied by a
statement of the Borrower, setting forth details of the occurrence
referred to therein and stating what action the Borrower proposes to
take with respect thereto.
(d) Certificates. Furnish to the Banks:
(i) concurrently with the delivery of the financial
statements referred to in Section 5.01(b)(ii), a letter signed
by the independent public accountants, certifying such
financial statements to the effect that, in the course of the
examination upon which their report for such fiscal year was
based (but without any special or additional audit procedures
for that purpose other than review of the terms and provisions
of this Agreement), they did not become aware of any Event of
Default involving financial or accounting matters or any
condition or event which, after notice or lapse of time, or
both, would constitute such an Event of Default, or, if such
accountants became aware of any such Event of
<PAGE>
54
Default or other condition or event, specifying
the nature thereof; and
(ii) concurrently with the delivery of the financial
statements or Form 10-Q referred to in Sections 5.01(b)(i) and
(ii), a certificate of a Financial Officer of the Borrower,
stating that, to the best of such officer's knowledge, the
Borrower during such period has observed or performed, all of
its covenants and other agreements, and satisfied every
condition, contained in this Agreement to be observed,
performed, or satisfied by it, and that such officer has
obtained no knowledge of any Event of Default or any event
which, with notice or lapse of time, or both, would become an
Event of Default, except as specified in such certificate.
SECTION 5.02. Negative Covenants. So long as any Advance shall
remain unpaid or any Bank shall have any Commitment hereunder, the Borrower will
not, without the written consent of the Majority Banks:
(a) Liens, Etc. (i) Create, assume, incur or suffer to exist,
or permit any Subsidiary to create, assume, incur, or suffer to exist,
any Lien upon any stock or indebtedness, whether now owned or hereafter
acquired, of any Subsidiary, to secure any Debt of the Borrower or any
other Person (other than the Advances made hereunder), without in any
such case making effective provision whereby all of the Advances made
hereunder shall be directly secured equally and ratably with such Debt,
excluding, however, from the operation of the foregoing provisions of
this paragraph (i)(A) any Lien upon stock or indebtedness of any
corporation existing at the time such corporation becomes a Subsidiary,
or existing upon stock or indebtedness of a Subsidiary at the time of
acquisition of such stock or indebtedness, and any extension, renewal,
or replacement (or successive extensions, renewals, or replacements) in
whole or in part of any such Lien; provided, however, that the
principal amount of Debt secured thereby shall not exceed the principal
amount of Debt so secured at the time of such extension, renewal, or
replacement; and; provided further that such Lien shall be limited to
all or such part of the stock or indebtedness which secured the Lien so
extended, renewed, or replaced and (B) so long as Norcen's capital
stock constitutes Margin Stock, such portion (but only such portion) of
Norcen's capital stock as it shall be necessary to exclude from the
<PAGE>
55
operation of this paragraph in order to avoid Margin Stock constituting
more than 25% of the value of all assets subject to this Section
5.02(a);
(ii) create, assume, incur, or suffer to exist, or permit any
Restricted Subsidiary to create, assume, incur or suffer to exist, any
Lien upon any Principal Property, whether owned or leased on the date
hereof or hereafter acquired, to secure any Debt of the Borrower or any
other Person (other than the Advances made hereunder), without in any
such case making effective provision whereby all of the Advances made
hereunder shall be directly secured equally and ratably with such Debt,
excluding, however, from the operation of the foregoing provisions of
this paragraph (ii):
(A) any Lien upon property owned or leased
by any corporation existing at the time such
corporation becomes a Restricted Subsidiary, so long
as such Lien covers, either (x) the assets so
encumbered immediately prior to an acquisition of the
Restricted Subsidiary or (y) assets substituted for
any assets described in clause (x) preceding (the
"acquired assets"), so long as the approximate fair
market value of the substituted assets does not
exceed the approximate fair market value of the
acquired assets for which the substitution is being
made;
(B) any Lien upon property existing at the
time of acquisition thereof or to secure the payment
of all or any part of the purchase price thereof or
to secure any Debt incurred prior to, at the time of,
or within 180 days after, the acquisition of such
property for the purpose of financing all or any part
of the purchase price thereof, so long as such Lien
is limited to the property so acquired;
(C) any Lien upon property to secure all or
any part of the cost of exploration, drilling,
development, construction, alteration, repair, or
improvement of all or any part of such property, or
Debt incurred prior to, at the time of, or within 180
days after, the completion of such exploration,
drilling, development, construction, alteration,
repair, or improvement for the
<PAGE>
56
purpose of financing all or any part of such
cost;
(D) any Lien securing Debt of a Restricted
Subsidiary owing to the Borrower or to another
Restricted Subsidiary;
(E) any Lien existing on the date of
execution of this Agreement and set forth on Schedule
III hereto;
(F) Liens created in favor of Banks to
secure the Obligation;
(G) any Liens securing Debt of Borrower
under the Existing Credit Agreements, so long as the
Banks are granted Liens of equal priority upon any
property to which such Liens under the Existing
Credit Agreements attach; and
(H) any extension, renewal, or replacement
(or successive extensions, renewals, or replacements)
in whole or in part of any Lien referred to in the
foregoing clauses (A) to (G), inclusive; provided,
however, that the principal amount of Debt secured
thereby shall not exceed the principal amount of Debt
so secured at the time of such extension, renewal, or
replacement; and; provided further that such Lien
shall be limited to all or such part of the property
which secured the Lien so extended, renewed, or
replaced (plus improvements on such property).
Notwithstanding the foregoing provisions of this paragraph
(ii), the Borrower may, and may permit any Restricted
Subsidiary to, create, assume, incur, or suffer to exist any
Lien upon any Principal Property which is not excepted by
clauses (A) through (F), above, without equally and ratably
securing the Advances; provided that the aggregate amount of
Debt then outstanding secured by such Lien and all similar
Liens does not exceed the greater of (i) $150,000,000, and
(ii) 10% of the total consolidated stockholders' equity of the
Borrower as shown on the most recently audited consolidated
balance sheet required to be delivered to the Banks pursuant
to Section 5.01(b)(ii). For the purpose of this
<PAGE>
57
paragraph (ii), the following types of transactions shall not
be deemed to create a Lien to secure any Debt:
(A) the sale or other transfer of (y) any
oil, gas, or minerals in place for a period of time
until, or in an amount such that, the purchaser will
realize therefrom a specified amount of money
(however determined) or a specified amount of such
oil, gas, or minerals, or (z) any other interest in
property of the character commonly referred to as a
"production payment"; and
(B) any Lien in favor of the United States
of America or any state thereof, or any other
country, or any political subdivision of any of the
foregoing, to secure partial, progress, advance or
other payments pursuant to the provisions of any
contract or statute, or any Lien upon property of the
Borrower or a Restricted Subsidiary intended to be
used primarily for the purpose of, or in connection
with, air or water pollution control; provided that
no such Lien shall extend to any other property of
the Borrower or a Restricted Subsidiary.
(b) Debt. (i) Create or suffer to exist any Debt if,
immediately after giving effect to such Debt and the receipt and
application of any proceeds thereof, the aggregate amount of Debt of
the Borrower and its consolidated Subsidiaries, on a consolidated
basis, would exceed (A) for the period from the Closing Date through
the date eighteen months thereafter, 75%, and (B) at anytime
thereafter, 65%, of the sum of the total consolidated stockholders'
equity of the Borrower and its Subsidiaries as shown on the most recent
consolidated balance sheet required to be delivered to the Banks
pursuant to Section 5.01(b), and the aggregate amount of Debt of the
Borrower and its consolidated Subsidiaries, on a consolidated basis (it
being understood that for purposes of determining compliance with this
covenant, guarantees by the Borrower of up to $200,000,000 of Debt of
OCI Wyoming shall not constitute Debt of the Borrower);
(ii) not permit the Acquisition Subsidiary, Norcen or any of
their respective Subsidiaries (collectively, the "Designated
Subsidiaries") to incur any Debt which
<PAGE>
58
would result in the aggregate principal amount of Debt (other than Debt
to the Borrower or any other Subsidiary) of all the Designated
Subsidiaries, on a consolidated basis, exceeding US$1,400,000,000;
provided that the amount of Debt permitted by this clause (ii) is
subject to reduction as provided in clause (d)(iv) of the definition of
"Prepayment Event"; and
(iii) not permit any of its Subsidiaries (other than the
Designated Subsidiaries) to incur any Debt which would result in the
aggregate principal amount of Debt (other than Debt to the Borrower or
any other Subsidiary) of all Subsidiaries (other than the Designated
Subsidiaries), on a consolidated basis, exceeding US$150,000,000;
provided that the amount of Debt permitted by this clause (iii) is
subject to reduction as provided in clause (d)(iv) of the definition of
"Prepayment Event".
(c) Restriction on Fundamental Changes of the Borrower. Enter
into any transaction of merger or consolidation, or convey, transfer,
or lease its properties and assets substantially as an entirety to any
Person, unless:
(i) either (A) Borrower (in any merger or
consolidation involving Borrower) is the surviving entity, or
(B) the corporation formed by such consolidation or into which
the Borrower is merged or the Person which acquires by
conveyance or transfer, or which leases, the properties and
assets of the Borrower substantially as an entirety (the
"Successor Corporation") shall either (x) immediately after
giving effect to such merger, consolidation, conveyance,
transfer or lease, have then-effective ratings (or implied
ratings) published by Moody's and S&P applicable to such
Successor Corporation's senior, unsecured,
non-credit-enhanced, long term indebtedness for borrowed
money, which ratings shall be Baa3 or higher (if assigned by
Moody's) or BBB- or higher (if assigned by S&P), or (y) be
acceptable to Majority Banks in their reasonable
determination;
(ii) any Successor Corporation shall be a corporation
organized and existing under the laws of the United States of
America, any state thereof or the District of Columbia, and
shall expressly assume, by amendment to this Agreement
executed by the Borrower and such Successor Corporation and
<PAGE>
59
delivered to the Administrative Agent, the due and punctual
payment of the principal of, and interest on, the Advances
made hereunder and any other amounts payable under this
Agreement and the performance or observance of every covenant
hereof on the part of the Borrower or such Principal
Subsidiary to be performed or observed;
(iii) immediately after giving effect to such
transaction, no Event of Default and no event which, with
notice or lapse of time, or both, would become an Event of
Default, shall have occurred and be continuing;
(iv) if, as a result of any such consolidation or
merger or such conveyance, transfer or lease, properties or
assets of the Borrower or any Principal Subsidiary would
become subject to a Lien which would not be permitted by
Section 5.02(a), the Borrower, the Principal Subsidiary or the
Successor Corporation, as the case may be, shall take such
steps as shall be necessary effectively to secure the Advances
made hereunder equally and ratably with (or prior to) all Debt
secured thereby; and
(v) the Borrower shall have delivered to the
Administrative Agent a certificate signed by an executive
officer of the Borrower and a written opinion of counsel
satisfactory to the Administrative Agent (who may be counsel
to the Borrower), each stating that such transaction and such
amendment to this Agreement comply with this Section 5.02(c)
and that all conditions precedent herein provided for relating
to such transaction have been satisfied.
(d) Prohibition on Sale of UPRC Stock and Fundamental Changes
of UPRC. (i) Convey, sell, assign, or otherwise transfer (or permit any
Subsidiary to so convey, sell, assign or transfer) all or any of the
shares of capital stock of Union Pacific Resources Company ("UPRC") or
any Successor Subsidiary (as hereinafter defined) now owned or
hereafter acquired by the Borrower or any Subsidiary and (ii) permit
UPRC or any Successor Subsidiary (as hereinafter defined) to enter into
any transaction of merger or consolidation with, or to convey, transfer
or lease its properties substantially as an entirety to, any Person,
other than mergers or consolidations with, or conveyances, transfers or
leases to, Borrower or any other
<PAGE>
60
Subsidiary. For purposes of this subsection, "Successor Subsidiary"
shall mean any Subsidiary which is formed by any merger or
consolidation of UPRC or which acquires by conveyance, transfer or
lease substantially all the properties of UPRC or any Successor
Subsidiary.
(e) Ratio of Maximum Total Debt to Total Capital. Permit the
ratio (expressed as a percentage and as calculated at the end of each
fiscal quarter of the Borrower) that (i) the aggregate amount of the
consolidated Debt of Borrower and its consolidated Subsidiaries bears
to (ii) the sum of the total consolidated stockholder's equity of
Borrower and its Subsidiaries plus the consolidated Debt of Borrower
and its consolidated Subsidiaries to be more than (A) 75% during the
period from the Closing Date through the date eighteen months
thereafter and (B) 65% at any time thereafter. For purposes of
determining compliance with the above covenant, guarantees by the
Borrower of up to $200,000,000 of Debt of OCI Wyoming shall not
constitute Debt of the Borrower.
(f) Compliance with ERISA. To the extent that any event or
action set forth in clauses (i) through (iv) below would subject the
Borrower and its Subsidiaries, taken as a whole, to any material
liability to the PBGC or otherwise,
(i) terminate, or permit any Subsidiary to
terminate, any Plan;
(ii) engage in, or permit any Subsidiary to
engage in, any "prohibited transaction" (as
defined in Section 4975 of the Code) involving any
Plan;
(iii) incur or suffer to exist, or permit any
Subsidiary to incur or suffer to exist, any "accumulated
funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, involving any Plan; or
(iv) allow or suffer to exist, or permit any
Subsidiary to allow or suffer to exist, any event or condition
which presents a risk of incurring a liability to the PBGC by
reason of termination of any Plan.
(g) Affiliate Transactions. Enter into (or permit any
Restricted Subsidiary to enter into) any
<PAGE>
61
material transaction with any of its Affiliates, other than any
transaction described in public documents filed with the Securities and
Exchange Commission or otherwise disclosed publicly prior to the
Closing Date, or any transaction in the ordinary course of business and
upon fair and reasonable terms not materially less favorable than
Borrower or such Restricted Subsidiary could obtain or could be
entitled to in an arm's-length transaction with a Person that was not
its Affiliate.
(h) Principal Subsidiaries. Permit the combined EBITDAX of the
Principal Subsidiaries to be less than 80% of the consolidated EBITDAX
of the Borrower and its Subsidiaries as shown on the most recent
consolidated balance sheet required to be delivered to the Banks
pursuant to Section 5.01(b).
ARTICLE VI
Events of Default
If any of the following events ("Events of Default") shall
occur and be continuing:
(a) the Borrower shall fail to pay any principal of any
Advance when the same becomes due and payable; provided that if any
such failure shall result from the malfunctioning or shutdown of any
wire transfer or other payment system employed by the Borrower to make
such payment or from an inadvertent error of a technical or clerical
nature by the Borrower or any bank or other entity employed by the
Borrower to make such payment, no Event of Default shall result under
this paragraph (a) during the period (not in excess of two Business
Days) required by the Borrower to make alternate payment arrangements;
or
(b) the Borrower shall fail to pay any interest on any Advance
or any fee payable hereunder or under any agreement executed in
connection herewith when the same becomes due and payable and such
failure shall remain unremedied for ten days; or
(c) any representation or warranty made by the Borrower herein
or by the Borrower (or any of its officers) in connection with this
Agreement (including, without limitation, any representation or
warranty deemed made by the Borrower at the time of any Advance
pursuant to Article III) shall prove to have been
<PAGE>
62
incorrect in any material respect when made or deemed
made; or
(d) the Borrower shall fail to perform or observe any other
term, covenant, or agreement contained in this Agreement on its part to
be performed or observed if such failure shall remain unremedied for 30
days after written notice thereof shall have been given to the Borrower
by the Administrative Agent or any Bank; or
(e) (i) the Borrower or any Principal Subsidiary shall fail to
pay any amount of principal or interest when due (or within any
applicable grace period) with respect to any Debt of the Borrower or
any Principal Subsidiary, whether such Debt now exists or shall
hereafter be created, in an aggregate outstanding principal amount
exceeding $50,000,000 ("Material Debt") or (ii) an event of default as
defined in any mortgage, indenture, or instrument under which there may
be issued, or by which there may be secured or evidenced, any Debt of
the Borrower or any Principal Subsidiary, whether such Debt now exists
or shall hereafter be created, shall happen and shall result in
Material Debt becoming or being declared due and payable prior to the
date on which it would otherwise become due and payable, and such
declaration shall not be rescinded or annulled; or
(f) (i) the Borrower or any Principal Subsidiary shall
commence any case, proceeding, or other action (A) under any existing
or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, or relief of debtors, seeking
to have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution,
composition, or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian, or other similar
official for it or for all or any substantial part of its assets, or
the Borrower or any Principal Subsidiary shall make a general
assignment for the benefit of its creditors; or
(ii) there shall be commenced against the Borrower or any
Principal Subsidiary any case, proceeding or other action of a nature
referred to in clause (i) above which (A) results in the entry of an
order for relief or any such adjudication or appointment or
<PAGE>
63
(B) remains undismissed, undischarged, or unbonded for
a period of 60 days; or
(iii) there shall be commenced against the Borrower
or any Principal Subsidiary any case, proceeding, or other
action seeking issuance of a warrant of attachment, execution,
distraint, or similar process against all or any substantial
part of its assets which results in the entry of an order for
any such relief which shall not have been vacated, discharged,
or stayed or bonded pending appeal within 60 days from the
entry thereof; or
(iv) the Borrower or any Principal Subsidiary shall
take any action in furtherance of or indicating its consent
to, approval of, or acquiescence in, any of the acts set forth
in clause (i), (ii), or (iii) above; or
(v) the Borrower or any Principal Subsidiary shall
generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due;
(g) a Material Plan shall fail to maintain the minimum funding
standards required by Section 412 of the Code for any plan year or a
waiver of such standard is sought or granted under Section 412(d), or a
Material Plan is, shall have been, or will be terminated or the subject
of termination proceedings under ERISA, or the Borrower or any of its
Subsidiaries or any ERISA Affiliate has incurred or will incur a
liability to or on account of a Material Plan under Sections 4062,
4063, or 4064 of ERISA, and there shall result from any such event
either a liability or a material risk of incurring a liability to the
PBGC or a Material Plan (or a related trust) which will have a material
adverse effect upon the business, operations or the condition
(financial or otherwise) of the Borrower and its Subsidiaries, taken as
a whole;
(h) the Borrower or any ERISA Affiliate shall have been
notified by the sponsor of a Multiemployer Plan that it has incurred
withdrawal liability to such Multiemployer Plan in an amount which,
when aggregated with all other amounts required to be paid to
Multiemployer Plans in connection with withdrawal liabilities
(determined as of the date of such notification), will have a material
adverse effect upon the business, operations, or the condition
(financial
<PAGE>
64
or otherwise) of the Borrower and its Subsidiaries, taken as a whole;
or
(i) any "Event of Default" described in either of the Existing
Credit Agreements shall occur;
then, and in any such event, the Administrative Agent
(i) shall at the request, or may with the consent, of Majority
Banks, by notice to the Borrower, declare the obligation of each Bank
to make Advances to be terminated, whereupon the same shall forthwith
terminate;
(ii) shall at the request or may with the consent, of Banks
owed at least 51% of the then aggregate unpaid principal amount of the
Advances owing to Banks, by notice to the Borrower, declare the
Advances, all interest thereon and all other amounts payable under this
Agreement to be forthwith due and payable, whereupon the Advances, all
such interest and all such amounts shall become and be forthwith due
and payable, without presentment, demand, protest, notice of intention
to accelerate, notice of acceleration, or further notice of any kind,
all of which are hereby expressly waived by the Borrower; and
(iii) shall at the request of, or may with the consent of
Majority Banks, exercise any and all other legal and equitable rights
afforded by the Loan Papers, applicable law, or in equity, including,
but not limited to, the right to bring suit or other proceedings for
specific performance or otherwise in aid of any right granted to
Administrative Agent or any Bank hereunder; provided, however, that in
the event of an actual or deemed entry of an order for relief with
respect to the Borrower or any of its Subsidiaries under the Federal
Bankruptcy Code, (A) the obligation of each Bank to make Advances shall
automatically be terminated and (B) the Advances, all such interest and
all such amounts shall automatically become and be due and payable,
without presentment, demand, protest, or any notice of any kind, all of
which are hereby expressly waived by the Borrower.
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65
ARTICLE VII
The Administrative Agent
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66
SECTION 7.01. Authorization and Action. Each Bank hereby
appoints and authorizes the Administrative Agent to take such action as
administrative agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Administrative Agent by the terms hereof,
together with such powers as are reasonably incidental thereto. As to any
matters not expressly provided for by this Agreement (including, without
limitation, enforcement or collection of the amounts due hereunder), the
Administrative Agent shall not be required to exercise any discretion or take
any action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Majority Banks, and such instructions shall be binding upon all Banks and
all holders of Advances; provided, however, that the Administrative Agent shall
not be required to take any action which exposes the Administrative Agent to
personal liability or which is contrary to this Agreement or applicable law. The
Administrative Agent agrees to give to each Bank prompt notice of each notice
given to it by the Borrower pursuant to the terms of this Agreement.
SECTION 7.02. Administrative Agent's Reliance, Etc. Neither
the Administrative Agent nor any of its directors, officers, agents, or
employees shall be liable for any action taken or omitted to be taken by it or
them under or in connection with this Agreement, except for its or their own
gross negligence or wilful misconduct. Without limitation of the generality of
the foregoing, the Administrative Agent:
(i) may consult with legal counsel (including counsel for the
Borrower), independent public accountants, and other experts selected
by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such
counsel, accountants or experts;
(ii) makes no warranty or representation to any Bank and shall
not be responsible to any Bank for any statements, warranties, or
representations made in or in connection with this Agreement;
(iii) shall not have any duty to ascertain or to inquire as to
the performance or observance of any of the terms, covenants or
conditions of this Agreement on the part of the Borrower or to inspect
the property (including the books and records) of the Borrower;
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(iv) shall not be responsible to any Bank for the due
execution, legality, validity, enforceability, genuineness, sufficiency
or value of this Agreement or any other instrument or document
furnished pursuant hereto; and
(v) shall incur no liability under or in respect of this
Agreement by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telecopy, telegram or cable)
believed by it to be genuine and signed or sent by the proper party or
parties.
SECTION 7.03. Administrative Agent and Affiliates. With
respect to its Commitment, The Chase Manhattan Bank shall have the same rights
and powers under this Agreement as any other Bank, and may exercise the same as
though it were not the Administrative Agent and the term "Bank" or "Banks"
shall, unless otherwise expressly indicated, include The Chase Manhattan Bank in
its individual capacity. The Chase Manhattan Bank and its affiliates may accept
deposits from, lend money to, act as trustee under indentures of, and generally
engage in any kind of business with, the Borrower, any of its Subsidiaries and
any Person who may do business with or own securities of the Borrower or any
such Subsidiary, all as if The Chase Manhattan Bank were not the Administrative
Agent and without any duty to account therefor to the Banks.
SECTION 7.04. Bank Credit Decision. Each Bank acknowledges
that it has, independently and without reliance upon the Administrative Agent or
any other Bank and based on the financial statements referred to in Article IV
and such other documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement.
SECTION 7.05. Indemnification. The Banks agree to indemnify
each Agent, acting in their respective agency capacities, (to the extent not
reimbursed by the Borrower), ratably as computed as set forth below 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 such
Agent in any way relating to, or arising out of, this Agreement or
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68
any action taken or omitted by such Agent under this Agreement; provided that no
Bank shall be liable to any Agent for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from such Agent's gross negligence or wilful
misconduct. Without limitation of the foregoing, each Bank agrees to reimburse
the Administrative Agent promptly upon demand for its ratable share of any
out-of-pocket expenses (including counsel fees) incurred by the Administrative
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings, or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that the Administrative
Agent is not reimbursed for such expenses by the Borrower. For purposes of this
Section 7.05, ratable allocations among the Banks shall be made (i) in respect
of any demand by the Administrative Agent prior to termination of the
Commitments, according to the respective amounts of their Commitments and
outstanding Term Advances and (iii) thereafter according to the respective
principal amounts of the Advances then outstanding to them.
SECTION 7.06. Successor Administrative Agent. The
Administrative Agent may resign at any time by giving written notice thereof to
the Banks and the Borrower and may be removed at any time with or without cause
by the Majority Banks. Upon any such resignation or removal, the Majority Banks
shall have the right to appoint a successor Administrative Agent with the
consent of the Borrower (which consent shall not be required if at the time of
such appointment any Event of Default or an event which with the passage of time
or the giving of notice or both would become an Event of Default has occurred
and is continuing). If no successor Administrative Agent shall have been so
appointed by the Majority Banks, and shall have accepted such appointment,
within 30 days after the retiring Administrative Agent's giving of notice of
resignation or the Majority Banks' removal of the retiring Administrative Agent,
then the retiring Administrative Agent may, on behalf of the Banks, appoint a
successor Administrative Agent, which shall be a commercial bank organized or
licensed under the laws of the United States of America or of any state thereof
and having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent
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69
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations under
this Agreement. After any retiring Administrative Agent's resignation or removal
hereunder as Administrative Agent, the provisions of this Article VII shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Administrative Agent under this Agreement.
ARTICLE VIII
Miscellaneous
-------------
SECTION 8.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement nor consent to any departure by the Borrower
therefrom, shall in any event be effective, unless the same shall be in writing
and signed by the Majority Banks, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no amendment, waiver, or consent shall, unless in
writing and signed by all the Banks, do any of the following: (a) waive any of
the conditions specified in Section 3.01 or 3.02 (if and to the extent that the
Borrowing which is the subject of such waiver would involve an increase in the
aggregate outstanding amount of Advances over the aggregate amount of Advances
outstanding immediately prior to such Borrowing), (b) increase, or (except as
provided in Section 2.10) extend the scheduled termination of, the Commitments
of the Banks or subject the Banks to any additional obligations, (c) reduce the
principal of, or interest on, the Advances or any fees or other amounts payable
hereunder, (d) postpone any date fixed for any payment of principal of, or
interest on, the Advances or any fees or other amounts payable hereunder (other
than mandatory prepayments in respect of Prepayment Events, which may be changed
with the consent of the Majority Banks), (e) make any change which would alter
the percentage of the Commitment, or of the aggregate unpaid principal amount of
the Advances, or the number of Banks, which shall otherwise be required for the
Banks or any of them to take any action hereunder, or (f) amend this Section
8.01, and; provided further that no amendment, waiver or consent shall, unless
in writing and signed by the Administrative Agent in addition to the Banks
required above to take such action, affect the rights or duties of the
Administrative Agent under this Agreement.
SECTION 8.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing (including telecopy,
telegraphic or cable communication) and telecopied, mailed, telegraphed, cabled
or delivered, if to the Borrower, at its address at
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70
P.O. Box 7, 801 Cherry Street, Fort Worth, Texas 76101, if to any Bank listed on
Schedule I hereto, at its Notice Address specified opposite its name on Schedule
I hereto; if to any other Bank, at its Domestic Lending Office specified in the
Assignment and Acceptance pursuant to which it became a Bank; if to the
Administrative Agent, to The Chase Manhattan Bank, c/o Loan and Agency Services
Group, One Chase Manhattan Plaza, 8th Floor, New York, New York 10081,
Attention: Daniel Fischer (Telecopy No. (212) 552- 5777), with a copy to Chase
Bank of Texas, N.A., P.O. Box 660197, Dallas, Texas 75266-0197, Attention: Tim
Perry (Telecopy No. (214) 965-2536); or, as to the Borrower, any Bank or the
Administrative Agent, at such other address as shall be designated by such party
in a written notice to the other parties and, as to each other party, at such
other address as shall be designated by such party in a written notice to the
Borrower and the Administrative Agent. All such notices and communications
shall, when telecopied, mailed, telegraphed, or cabled, be effective when sent
by telecopy, deposited in the mails, delivered to the telegraph company, or
delivered to the cable company, respectively, except that notices and
communications to the Administrative Agent pursuant to Article II or VII shall
not be effective until received by the Administrative Agent. The Administrative
Agent shall be entitled to rely on any oral notice made pursuant to Section
2.03(a)(v) believed by it to be genuine and made by the proper party or parties,
and the Borrower and the Banks, as the case may be, agree to be conclusively
bound by the Administrative Agent's records in respect of any such notice.
SECTION 8.03. No Waiver; Remedies. No failure on the part of
any Bank or the Administrative Agent to exercise, and no delay in exercising,
any right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 8.04. Costs, Expenses and Taxes. (a) The Borrower
agrees to pay on demand all costs and expenses of the Agents in connection with
the preparation, execution, delivery, administration, modification, and
amendment of this Agreement, the Loan Papers, and the other documents to be
delivered hereunder, including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Administrative Agent with respect
thereto and with respect to advising the Administrative Agent as to its rights
and responsibilities under this Agreement, and all costs and expenses, if any,
(including, without
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71
limitation, reasonable counsel fees and expenses), incurred by the
Administrative Agent or any Bank in connection with the enforcement (whether
through negotiations, legal proceedings or otherwise) of this Agreement and the
other documents to be delivered hereunder. In addition, the Borrower agrees to
pay any present or future stamp or documentary taxes or any other excise or
property taxes, charges, or similar levies which arise from the execution and
delivery of this Agreement and agrees to save the Administrative Agent and each
Bank harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes.
(b) If any payment of principal of any Eurodollar Rate
Contract Advance or Competitive Advance is made by the Borrower to or for the
account of a Bank other than on the last day of the Interest Period for such
Contract Advance, or on the maturity date of such Competitive Advance, as the
case may be, or as a result of a payment pursuant to Section 2.07, or as a
result of acceleration of the maturity of the Advances pursuant to Article VI,
or for any other reason, or by an Eligible Assignee to a Bank other than on the
last day of the Interest Period (or the final maturity date in the case of a
Competitive Advance) for such Advance upon an assignment of rights and
obligations under this Agreement pursuant to Section 8.07 as a result of a
demand by the Borrower pursuant to Section 8.07(a), or an assignment of rights
and obligations under this Agreement pursuant to Section 2.17 as a result of a
demand by the Borrower, or if the Borrower fails to convert or continue any
Contract Advance hereunder after irrevocable notice of such conversion or
continuation has been given pursuant to Section 2.04, the Borrower shall, upon
demand by such Bank (with a copy of such demand to the Administrative Agent),
pay to the Administrative Agent for the account of such Bank any amounts
required to compensate such Bank for any additional losses, costs or expenses
which it may reasonably incur as a result of such payment or failure, including,
without limitation, any loss (excluding loss of anticipated profits), cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Bank to fund or maintain such Advance. A
certificate of such Bank setting forth the amount demanded hereunder and the
basis therefor shall, in the absence of manifest error, be conclusive and
binding for all purposes.
SECTION 8.05. Right of Set-off. Upon (i) the occurrence and
during the continuance of any Event of Default and (ii) the making of the
request or the granting of the consent specified by Article VI to authorize the
Administrative Agent to declare the Advances due and payable
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pursuant to the provisions of Article VI, each Bank is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set-off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by such Bank
to or for the credit or the account of the Borrower against any and all of the
Obligation of the Borrower now or hereafter existing under this Agreement and
the Advances made by such Bank, irrespective of whether or not such Bank shall
have made any demand under this Agreement and although such obligations may be
unmatured. Each Bank agrees promptly to notify the Borrower and the
Administrative Agent after any such set-off and application made by such Bank;
provided that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Bank under this Section 8.05
are in addition to other rights and remedies (including, without limitation,
other rights of set-off) which such Bank may have.
SECTION 8.06. Binding Effect. This Agreement shall become
effective when it shall have been executed by the Borrower and the
Administrative Agent and when the Administrative Agent shall have been notified
by each Bank that such Bank has executed it and thereafter shall be binding upon
and inure to the benefit of the Borrower, the Administrative Agent and each Bank
and their respective successors and assigns.
SECTION 8.07. Assignments and Participations. (a) Each Bank
may and, if demanded by the Borrower pursuant to subsection (g) hereof, shall
assign to one or more banks or other entities all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment and the Advances owing to it); provided, however, that
(i) each such assignment shall be of a constant, and not a varying, percentage
of all of the rights and obligations of the assigning Bank under this Agreement
(except that Term Advances and Commitments may be assigned separately), (ii) in
the case of a partial assignment, the amount of the Commitment or Term Advances
of the assigning Bank being assigned pursuant to each such assignment
(determined as of the date of the Assignment and Acceptance with respect to such
assignment) shall in no event be less than $25,000,000 and shall be an integral
multiple of $5,000,000, (iii) each such assignment shall be to an Eligible
Assignee, and (iv) the parties to each such assignment shall execute and deliver
to the Administrative Agent, for its acceptance and recording in the Register
(as defined in Section 8.07(c)), an Assignment and Acceptance, together with a
processing fee
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73
of $3,500. Upon such execution, delivery, acceptance, and recording, from and
after the effective date specified in each Assignment and Acceptance, which
effective date shall be at least three Business Days after the execution
thereof, (x) the assignee thereunder shall be a party hereto and, to the extent
that rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, have the rights and obligations of a Bank hereunder,
and (y) the Bank assignor thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under
this Agreement (and, in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Bank's rights and obligations under this
Agreement, such Bank shall cease to be a party hereto). Notwithstanding the
foregoing (unless such assignment is being made on demand of the Borrower
pursuant to subsection (g)), any Bank assigning its rights and obligations under
this Agreement may retain any Competitive Advances made by it outstanding at
such time, and in such case shall retain its rights hereunder in respect of any
Advances so retained until such Advances have been repaid in full in accordance
with this Agreement.
(b) By executing and delivering an Assignment and Acceptance,
the Bank assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows:
(i) other than as provided in such Assignment and Acceptance,
such assigning Bank makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency
or value of this Agreement or any other instrument or document
furnished pursuant hereto;
(ii) such assigning Bank makes no representation or warranty
and assumes no responsibility with respect to the financial condition
of the Borrower or the performance or observance by the Borrower of any
of its obligations under this Agreement or any other instrument or
document furnished pursuant hereto;
(iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements
referred to in subsection (e) of Article IV and such other documents
and information as it has deemed appropriate to make its own credit
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analysis and decision to enter into such Assignment and Acceptance;
(iv) such assignee will, independently and without reliance
upon the Administrative Agent, such assigning Bank or any other Bank
and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement;
(v) such assignee confirms that it is an Eligible
Assignee, except for any required consent of the
Borrower and Administrative Agent;
(vi) such assignee appoints and authorizes the Administrative
Agent to take such action as Administrative Agent on its behalf and to
exercise such powers under this Agreement as are delegated to the
Administrative Agent by the terms hereof, together with such powers as
are reasonably incidental thereto; and
(vii) such assignee agrees that it will perform in accordance
with their terms all the obligations which by the terms of this
Agreement are required to be performed by it as a Bank.
(c) The Administrative Agent shall maintain at its address
referred to in Section 8.02 a copy of each Assignment and Acceptance delivered
to and accepted by it and a register for the recordation of the names and
addresses of the Banks and the Commitment of, and principal amount of the
Advances owing to, each Bank from time to time (the "Register"). The entries in
the Register shall be conclusive and binding for all purposes, absent manifest
error, and the Borrower, the Administrative Agent and the Banks may treat each
Person whose name is recorded in the Register as a Bank hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower or any Bank at any reasonable time and from time to time upon
reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed
by an assigning Bank and an assignee that it is an Eligible Assignee, the
Administrative Agent shall, if such Assignment and Acceptance has been completed
and is in substantially the form of Exhibit B hereto, and if the processing
fees required by Section 8.07 have been paid to Administrative Agent, (i) accept
such Assignment and Acceptance, (ii) record the information contained therein
in the Register, (iii) give prompt notice thereof to the Borrower and (iv) send
a copy thereof to the Borrower.
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(e) Each Bank may sell participations to one or more banks or
other entities in or to all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its
Commitment and the Advances owing to it); provided, however, that (i) such
Bank's obligations under this Agreement (including, without limitation, its
Commitment to the Borrower hereunder) shall remain unchanged, (ii) such Bank
shall remain solely responsible to the other parties hereto for the performance
of such obligations and (iii) the Borrower, the Administrative Agent and the
other Banks shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Agreement and;
provided further, however, that such Bank shall not agree with any such bank or
other financial institution to permit such bank or other financial institution
to enforce the obligations of the Borrower relating to the Advances or to
approve of any amendment, modification or waiver of any provision of this
Agreement (other than amendments, modifications, or waivers with respect to any
decrease in any fees payable hereunder or the amount of principal or rate of
interest which is payable in respect of such Advances or any extension of the
dates fixed for the payment thereof).
(f) Any Bank may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
8.07, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower furnished to such Bank by
or on behalf of the Borrower; provided that prior to any such disclosure, the
assignee or participant or proposed assignee or participant, if not an Eligible
Assignee, shall agree to preserve the confidentiality of any confidential
information relating to the Borrower received by it from such Bank.
(g) If any Bank shall make demand for payment under or shall
notify the Borrower that it is affected by an event described in Section 2.11 or
2.15 hereunder or shall notify the Administrative Agent pursuant to Section 2.13
hereunder, then within 15 days after such demand or such notice, the Borrower
may (i) demand that such Bank assign in accordance with this Section 8.07 to one
or more Eligible Assignees, designated by the Borrower all (but not less than
all) of such Bank's Commitment and the Advances owing to it within the next
succeeding 30 days; provided that if any such Eligible Assignee designated by
the Borrower shall fail to consummate such assignment on terms acceptable to
such Bank, or if the Borrower shall fail to designate any such Eligible
Assignees for all or part of such Bank's Commitment
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or Advances, then such Bank may assign such Commitment or Advances to any other
Eligible Assignee in accordance with this Section 8.07 during such 30-day period
or (ii) so long as no Event of Default has occurred and is continuing, terminate
all (but not less than all) of such Bank's Commitment and repay all (but not
less than all) of such Bank's Advances not so assigned on or before such 30th
day in accordance with Sections 2.06 and 2.07(c) hereof (but without the
requirements stated therein for ratable treatment of the Banks). Nothing in this
Section 8.07(g) shall relieve the Borrower of its obligations for payment under
Section 2.11 or 2.15 arising prior to an assignment or termination pursuant
hereto.
(h) Any Bank may at any time assign all or any portion of its
rights under this Agreement to a Federal Reserve Bank; provided that no such
assignment shall release a Bank from any of its obligations hereunder. In
connection with any such assignment or proposed assignment, the Borrower will,
promptly upon the request of any Bank, execute and deliver to such Bank a note
evidencing the Borrower's obligations hereunder, in a form mutually satisfactory
to the Borrower and such Bank.
(i) This Section 8.07 sets forth the exclusive manner by which
a Bank may assign its rights and obligations hereunder or sell participations in
or to its rights and obligations hereunder.
(j) Each Bank agrees to notify the Borrower of any assignment
of or grant of a participating interest in any Advance and of the identity of
the assignee or participant.
(k) The Borrower may not assign or delegate any rights or
obligations hereunder without the prior written consent of each Bank.
SECTION 8.08. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York.
SECTION 8.09. Exceptions to Covenants. The Borrower may not
take or fail to take any action that is permitted as an exception to any of the
covenants contained in any Loan Paper if that action or omission would result in
the breach of any other covenant contained in any Loan Paper.
SECTION 8.10. Survival. All covenants, agreements,
undertakings, representations and warranties
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made in any of the Loan Papers survive all closings under the Loan Papers until
payment in full of the Obligation and termination of this Agreement, except that
Sections 2.11, 2.12, 2.15, 7.05, 8.04 and 8.15 (together with any other
provisions in the Loan Papers which expressly provides that it shall survive
termination of this Agreement) shall survive termination of this Agreement; and
such covenants, agreements, undertakings, representations and warranties, except
as otherwise indicated, are not affected by any investigation made by any party.
SECTION 8.11. Invalid Provisions. Any provision in any Loan
Paper held to be illegal, invalid, or unenforceable is fully severable; the
appropriate Loan Paper shall be construed and enforced as if that provision had
never been included; and the remaining provisions shall remain in full force and
effect and shall not be affected by the severed provision. Administrative Agent,
Banks and the Borrower party to the affected Loan Paper agree to negotiate in
good faith the terms of a replacement provision as similar to the severed
provision as may be possible and be legal, valid and enforceable.
SECTION 8.12. Maximum Rate. Regardless of any provision
contained in any Loan Paper, no Bank shall ever be entitled to contract for,
charge, take, reserve, receive or apply as interest on the Obligation, or any
part thereof, any amount in excess of the Maximum Rate, and, if Banks ever do
so, then any excess shall be deemed a partial prepayment of principal and
treated hereunder as such and any remaining excess shall be refunded to the
Borrower. In determining if the interest paid or payable exceeds the Maximum
Rate, the Borrower and Banks shall, to the maximum extent permitted under
applicable law, (a) treat all Borrowings as but a single extension of credit
(and Banks and Borrower agree that such is the case and that provision herein
for multiple Borrowings is for convenience only), (b) characterize any
nonprincipal payment as an expense, fee, or premium rather than as interest, (c)
exclude voluntary prepayments and the effects thereof, and (d) amortize,
prorate, allocate, and spread the total amount of interest throughout the entire
contemplated term of the Obligation; provided that if the Obligation is paid and
performed in full prior to the end of the full contemplated term thereof, and if
the interest received for its actual period of existence thereof exceeds the
Maximum Amount, Banks shall refund any excess (and Banks shall not, to the
extent permitted by law, be subject to any penalties provided by any laws for
contracting for, charging, taking, reserving, or receiving interest in excess of
the Maximum Amount).
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SECTION 8.13. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
SECTION 8.14. Not in Control. Nothing in any Loan Paper gives
or may be deemed to give to Administrative Agent or any Bank the right to
exercise control over the Borrower or any Subsidiary's Principal Property, other
assets, affairs or management or to preclude or interfere with the Borrower or
any Subsidiary's compliance with any law or require any act or omission by the
Borrower or any Subsidiary that may be harmful to Persons or property. Any
materiality or substantiality qualifier of any representation, warranty,
covenant, agreement or other provision of any Loan Paper is included for credit
documentation purposes only and does not imply, and shall not be deemed to mean,
that Administrative Agent or any Bank acquiesces in any noncompliance by the
Borrower or any Subsidiary with any law, document, or otherwise or does not
expect the Borrower or any Subsidiary to promptly, diligently and continuously
carry out all appropriate removal, remediation, compliance, closure or other
activities required or appropriate in accordance with all Environmental Laws.
SECTION 8.15. INDEMNIFICATION. THE BORROWER SHALL INDEMNIFY,
PROTECT, AND HOLD AGENTS, CHASE SECURITIES INC., EACH BANK, AND THEIR RESPECTIVE
AFFILIATES, PARENTS, AND SUBSIDIARIES, AND EACH OF THE FOREGOING PARTIES'
RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, REPRESENTATIVES, AGENTS, SUCCESSORS,
ASSIGNS, AND ATTORNEYS (COLLECTIVELY, THE "INDEMNIFIED PARTIES") HARMLESS FROM
AND AGAINST ANY AND ALL PRESENT AND FUTURE, KNOWN AND UNKNOWN, FIXED AND
CONTINGENT, LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, CLAIMS, AND PROCEEDINGS AND ALL REASONABLE AND NECESSARY
COSTS, EXPENSES (INCLUDING, WITHOUT LIMITATION, ALL REASONABLE ATTORNEYS' FEES
AND LEGAL EXPENSES, AND AMOUNTS PAID IN SETTLEMENT WHETHER OR NOT SUIT IS
BROUGHT), AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER (THE "INDEMNIFIED
LIABILITIES") WHICH MAY AT ANY TIME BE IMPOSED ON, INCURRED BY, OR ASSERTED
AGAINST THE INDEMNIFIED PARTIES, IN ANY WAY RELATING TO OR ARISING OUT OF (A)
ANY LOAN PAPERS OR TRANSACTION CONTEMPLATED BY ANY LOAN PAPER (INCLUDING,
WITHOUT LIMITATION, THE ACQUISITION), OR (B) ANY INDEMNIFIED PARTY'S SOLE OR
CONCURRENT ORDINARY NEGLIGENCE ARISING IN CONNECTION WITH ANY LOAN PAPER OR ANY
TRANSACTION CONTEMPLATED BY ANY LOAN PAPER, TO THE EXTENT THAT ANY OF
<PAGE>
79
THE INDEMNIFIED LIABILITIES AS TO ANY INDEMNIFIED PARTY RESULTS, DIRECTLY OR
INDIRECTLY, FROM ANY CLAIM MADE, OR ACTION, SUIT, OR PROCEEDING COMMENCED BY OR
ON BEHALF OF ANY PERSON OTHER THAN BY SUCH INDEMNIFIED PARTY; PROVIDED THAT, THE
BORROWER SHALL HAVE NO OBLIGATION HEREUNDER TO ANY INDEMNIFIED PARTY WITH
RESPECT TO ANY INDEMNIFIED LIABILITY ARISING FROM THE FRAUD, GROSS NEGLIGENCE,
OR WILFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY OR ANY ASSOCIATED PERSON OF SUCH
INDEMNIFIED PARTY. AS USED IN THIS PARAGRAPH, THE TERM "ASSOCIATED PERSON"
MEANS, WITH RESPECT TO ANY PERSON, THE AFFILIATES, PARENTS, SUBSIDIARIES,
DIRECTORS, OFFICERS, EMPLOYEES, REPRESENTATIVES, AGENTS, SUCCESSORS, ASSIGNS,
AND ATTORNEYS OF SUCH PERSON, OR OF ANOTHER PERSON OF WHICH SUCH PERSON IS ALSO
AN ASSOCIATED PERSON. THE PROVISIONS OF AND UNDERTAKINGS AND INDEMNIFICATION SET
FORTH IN THIS SECTION SHALL SURVIVE THE SATISFACTION AND PAYMENT OF THE
OBLIGATION AND TERMINATION OF THIS AGREEMENT. THE BORROWER MAY, AT ITS OWN COST
AND EXPENSE, PARTICIPATE IN THE DEFENSE IN ANY PROCEEDING INVOLVING ANY
INDEMNIFIED LIABILITY. IF NO EVENT OF DEFAULT EXISTS, THE BORROWER MAY ASSUME
THE DEFENSE IN THAT PROCEEDING ON BEHALF OF THE APPLICABLE INDEMNIFIED PARTIES,
INCLUDING THE EMPLOYMENT OF COUNSEL IF FIRST APPROVED (WHICH APPROVAL MAY NOT BE
UNREASONABLY WITHHELD) BY THE APPLICABLE INDEMNIFIED PARTIES. IF THE BORROWER
ASSUMES ANY DEFENSE, IT SHALL KEEP THE APPLICABLE INDEMNIFIED PARTIES FULLY
ADVISED OF THE STATUS OF, AND SHALL CONSULT WITH THOSE INDEMNIFIED PARTIES
BEFORE TAKING ANY MATERIAL POSITION IN RESPECT OF, THAT PROCEEDING. IF THE
BORROWER CONSENTS OR IF ANY INDEMNIFIED PARTY REASONABLY DETERMINES THAT AN
ACTUAL CONFLICT OF INTEREST EXISTS BETWEEN THE BORROWER AND THAT INDEMNIFIED
PARTY WITH RESPECT TO THE SUBJECT MATTER OF THE PROCEEDING OR THAT THE BORROWER
IS NOT DILIGENTLY PURSUING THE DEFENSE, THEN (I) THAT INDEMNIFIED PARTY MAY, AT
THE BORROWER'S EXPENSE, EMPLOY COUNSEL TO REPRESENT INDEMNIFIED PARTY THAT IS
SEPARATE FROM COUNSEL FOR THE BORROWER OR ANY OTHER PERSON IN THAT PROCEEDING
AND (II) THE BORROWER IS NO LONGER ENTITLED TO ASSUME THE DEFENSE ON BEHALF OF
THAT INDEMNIFIED PARTY. THE BORROWER MAY NOT AGREE TO THE SETTLEMENT OF ANY
INDEMNIFIED LIABILITY WITHOUT THE PRIOR WRITTEN CONSENT OF THE APPLICABLE
INDEMNIFIED PARTIES UNLESS THAT SETTLEMENT FULLY RELIEVES THOSE INDEMNIFIED
PARTIES OF ANY LIABILITY WHATSOEVER FOR THAT INDEMNIFIED LIABILITY.
SECTION 8.16. Syndication Agent. The Syndication Agent shall
not have any rights, powers, obligations, liabilities, responsibilities or
duties under this Agreement other than those applicable to all Banks as such.
The foregoing also shall apply to the Arrangers and Co-Arrangers referred to on
the cover page of this Agreement.
<PAGE>
80
SECTION 8.17. ENTIRETY. THE LOAN PAPERS REPRESENT THE FINAL
AGREEMENT BETWEEN THE BORROWER, BANKS AND ADMINISTRATIVE AGENT AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
BY SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN SUCH PARTIES.
SECTION 8.18. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
UNION PACIFIC RESOURCES GROUP
INC., as Borrower,
by
------------------------------
Name:
Title:
<PAGE>
ABN AMRO BANK N.V., HOUSTON
AGENCY
By: ABN AMRO North America,
Inc., as Agent
by
---------------------------
Name:
Title:
<PAGE>
BANC ONE, N.A.
by
---------------------------
Name:
Title:
by
---------------------------
Name:
Title:
<PAGE>
BANK OF AMERICA NT&SA
by
---------------------------
Name:
Title:
<PAGE>
BANK OF MONTREAL, as
Syndication Agent and as a
Bank
by
---------------------------
Name:
Title:
<PAGE>
THE BANK OF NEW YORK
by
---------------------------
Name:
Title:
<PAGE>
THE BANK OF NOVA SCOTIA
by
---------------------------
Name:
Title:
<PAGE>
BANK OF TOKYO-MITSUBISHI
by
---------------------------
Name:
Title:
<PAGE>
BANQUE NATIONALE DE PARIS,
HOUSTON AGENCY
by
---------------------------
Name:
Title:
<PAGE>
BARCLAYS BANK PLC
by
---------------------------
Name:
Title:
<PAGE>
THE CHASE MANHATTAN BANK, as
Administrative Agent and as a
Bank,
by
---------------------------
Name:
Title:
<PAGE>
CREDIT SUISSE FIRST BOSTON
by
---------------------------
Name:
Title:
by
---------------------------
Name:
Title:
<PAGE>
DEUTSCHE BANK AG NEW YORK
AND/OR CAYMAN ISLANDS BRANCHES
by
---------------------------
Name:
Title:
by
---------------------------
Name:
Title:
<PAGE>
THE FIRST NATIONAL BANK OF
CHICAGO
by
---------------------------
Name:
Title:
<PAGE>
KREDIETBANK N.V.
by
---------------------------
Name:
Title:
by
---------------------------
Name:
Title:
<PAGE>
MELLON BANK, N.A.
by
---------------------------
Name:
Title:
<PAGE>
NATIONSBANK OF TEXAS, N.A.
by
---------------------------
Name:
Title:
<PAGE>
THE NORTHERN TRUST COMPANY
by
---------------------------
Name:
Title:
<PAGE>
ROYAL BANK OF CANADA
by
---------------------------
Name:
Title:
<PAGE>
SOCIETE GENERALE, SOUTHWEST
AGENCY
by
---------------------------
Name:
Title:
<PAGE>
SUNTRUST BANK, ATLANTA
by
---------------------------
Name:
Title:
by
---------------------------
Name:
Title:
<PAGE>
TORONTO DOMINION (TEXAS) INC.,
by
---------------------------
Name:
Title:
<PAGE>
UNION BANK OF SWITZERLAND,
HOUSTON AGENCY
by
---------------------------
Name:
Title:
by
---------------------------
Name:
Title:
<PAGE>
WACHOVIA BANK, N.A.
by
---------------------------
Name:
Title:
<PAGE>
EXHIBIT A-1
Form of Notice of Contract Borrowing
[Date]
Chase Bank of Texas, N.A.
Energy Department
2200 Ross Avenue
3rd Floor
Dallas, Texas 75201
Attn: Lee Beckelman
Vice President
Ladies and Gentlemen:
The undersigned, Union Pacific Resources Group Inc., refers to
the U.S.$2,700,000,000 364 Day Competitive Advance/Revolving Credit Agreement,
dated as of March 2, 1998 (the "Credit Agreement", the terms defined therein
being used herein as therein defined), among the undersigned, certain Banks
party thereto, The Chase Manhattan Bank, as Administrative Agent for said Banks
and Bank of Montreal, as Syndication Agent, and hereby gives you notice,
irrevocably, pursuant to Section 2.02 of the Credit Agreement that the
undersigned hereby requests a Contract Borrowing under the Credit Agreement, and
in that connection sets forth below the information relating to such Contract
Borrowing (the "Proposed Contract Borrowing") as required by Section 2.02(a) of
the Credit Agreement:
(i) The Business Day of the Proposed Contract
Borrowing is 19 .
(ii) The Type of Contract Advances comprising the
Proposed Contract Borrowing is [Alternate Base Rate
Advances] [Eurodollar Rate Contract Advances].
(iii) The aggregate amount of the Proposed Contract
Borrowing is $ .
<PAGE>
2
(iv) The Interest Period for each Contract Advance made as
part of the Proposed Contract Borrowing is [ days] [ months[s]].
Very truly yours,
UNION PACIFIC RESOURCES GROUP INC.,
by
------------------------------
Name:
Title:
<PAGE>
EXHIBIT A-2
Form of Notice of Competitive Borrowing
[Date]
Chase Bank of Texas, N.A.
2200 Ross Avenue, 3rd Floor
Dallas, Texas 75201
Attn: Daniel Fischer
The Chase Manhattan Bank,
as Administrative Agent
In care of The Loan and Agency Services Group
One Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attn: Daniel Fischer
Fax: (212) 552-5777
Ladies and Gentlemen:
The undersigned, Union Pacific Resources Group Inc., refers to
the U.S.$2,700,000,000 364 Day Competitive Advance/Revolving Credit Agreement,
dated as of March 2, 1998 (the "Credit Agreement", the terms defined therein
being used herein as therein defined), among the undersigned, certain Banks
party thereto, The Chase Manhattan Bank, as Administrative Agent and Bank of
Montreal, as Syndication Agent, and hereby gives you notice pursuant to Section
2.03 of the Credit Agreement that the undersigned hereby requests a Competitive
Borrowing under the Credit Agreement, and in that connection sets forth the
terms on which Competitive Borrowing (the "Proposed Competitive Borrowing") is
requested to be made:
1. Date of Competitive
Borrowing (which is a
Business Day)
---------------------------------
2. Type of Competitive
Advances comprising the
Proposed Competitive
Borrowing1
---------------------------------
- -------------------
1Eurodollar Rate Competitive Advance or Fixed Rate Competitive Advance.
<PAGE>
2
3. Amount of Competitive
Borrowing2
---------------------------------
4. Maturity Date3
---------------------------------
5. Other Provisions, if any
---------------------------------
Very truly yours,
UNION PACIFIC RESOURCES GROUP INC.,
by
------------------------------
Name:
Title:
- --------------------
2Not less than $10,000,000 or greater than the annual aggregate Commitment
of the Bank and in integral multiples of $5,000,000.
3(i) In the case of a Eurodollar Rate Competitive Borrowing, 1, 2, 3, or 6
months and (ii) in the case of a Fixed Rate Competitive Borrowing, not less than
seven calendar days, and which in either case shall not end later than the
Termination Date.
<PAGE>
EXHIBIT A-3
Form of Notice of Competitive Bid Request
[Name of Bank]
[Address of Bank] [Date]
Attention:
Ladies and Gentlemen:
Reference is made to the U.S.$2,700,000,000 364 Day
Competitive Advance/Revolving Credit Agreement (the "Credit Agreement") dated as
of March 2, 1998, among Union Pacific Resources Group Inc. ("Borrower"), the
Banks named therein, The Chase Manhattan Bank, as Administrative Agent and Bank
of Montreal, as Syndication Agent. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to such terms in the
Credit Agreement. The Borrower delivered a Notice of Competitive Borrowing
requesting a Competitive Bid on , 19 pursuant to Section 2.03(a) of
the Credit Agreement and in that connection you are invited to submit a
Competitive Bid by [Date]/[Time]1. Your Competitive Bid must comply with Section
2.03(b) of the Credit Agreement and the terms set forth below on which the
Notice of Competitive
Borrowing was made:
(A) Date of Competitive
Borrowing
---------------------------------
(B) Aggregate Principal Amount
of Competitive Borrowing
---------------------------------
(C) Interest Rate Basis
---------------------------------
(D) Interest Period and the Last
Day Thereof
---------------------------------
- -------------------
1The Competitive Bid must be received by the Administrative Agent (i) in
the case of Eurodollar Rate Competitive Advances, not later than 9:30 a.m., New
York City time, three Business Days before a proposed Competitive Borrowing, and
(ii) in the case of a Fixed Rate Competitive Borrowing, not later than 9:30
a.m., New York City time, on the date of a proposed Competitive Borrowing.
<PAGE>
2
Very truly yours,
THE CHASE MANHATTAN BANK, as
Administrative Agent
by
------------------------------
Name:
Title:
<PAGE>
EXHIBIT A-4
Form of Competitive Bid
-----------------------
The Chase Manhattan Bank, as Administrative
Agent for the Banks referred to below
In care of The Loan and Agency Services Group
One Chase Manhattan Plaza, 8th Floor
New York, New York 10081
[Date]
Attention: Daniel Fischer
Fax: (212) 552-5777
Ladies and Gentlemen:
The undersigned, [Name of Bank], refers to the
U.S.$2,700,000,000 364 Day Competitive Advance/Revolving Credit Agreement dated
as of March 2, 1998 (the "Credit Agreement"), among Union Pacific Resources
Group Inc. (the "Borrower"), the Banks named therein, The Chase Manhattan Bank,
as Administrative Agent and Bank of Montreal, as Syndication Agent. Capitalized
terms used herein and not otherwise defined herein shall have the meanings
assigned to such terms in the Credit Agreement. The undersigned hereby makes a
Competitive Bid pursuant to Section 2.03(a)(ii) of the Credit Agreement in
response to the Notice of Competitive Borrowing made by the Borrower on , 19 ,
and in that connection sets forth below the terms on which such Competitive Bid
is made:
(A) Principal Amount1
---------------------------------
(B) Competitive Bid Rate2
---------------------------------
(C) Interest Period and the Last
Day Thereof3
---------------------------------
The undersigned hereby confirms that it is prepared to extend
credit to the Company upon acceptance by the Company of this bid in accordance
with Section 2.03(a)(v) of the Credit Agreement.
- ---------------------
1Not less than $10,000,000 or greater than the available aggregate
Commitment and in integral multiples of $5,000,000. Multiple bids will be
accepted by the Administrative Agent.
2I.E., Eurodollar Rate + or %, in the case of Eurodollar Rate Competitive
Advances, or %, in the case of Fixed Rate Competitive Advances (in each case,
expressed in the form of a decimal to no more than four decimal places).
3The Interest Period must be the Interest Period specified in the Notice
of Competitive Borrowing.
<PAGE>
2
Very truly yours,
[NAME OF BANK],
by
---------------------------
Name:
Title:
<PAGE>
EXHIBIT A-5
Form of Competitive Bid Acceptance/Reject Letter
------------------------------------------------
[Date]
The Chase Manhattan Bank, as
Administrative Agent under the
Credit Agreement referred to below
The Loan and Agency Services Group
One Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attention: Daniel Fischer
Fax: (212) 552-5777
Ladies and Gentlemen:
Reference is made to the U.S.$270,000,000 364 Day Competitive
Bid/Revolving Credit Agreement dated as of March 2, 1998 (the "Credit
Agreement"), among the Union Pacific Resources Group Inc. (the "Borrower"), the
Banks named therein, The Chase Manhattan Bank, as Administrative Agent and Bank
of Montreal, as Syndication Agent. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to such terms in the
Credit Agreement.
In accordance with Section 2.03(a)(ii), the Borrower has
received a notice of bids in connection with its Competitive Bid Request dated
[insert date] and in accordance with Section 2.03(a)(iii) of the Credit
Agreement, the undersigned hereby accepts the following bids for maturity on
[insert date]:
Principal Amount Fixed Rate/Margin Bank
---------------- ----------------- ----
$ [%]/[+/-, . %]
-----------------------------
$ [%]/[+/-, . %]
-----------------------------
The undersigned hereby rejects the following bids:
Principal Amount Fixed Rate/Margin Bank
---------------- ----------------- ----
$ [%]/[+/-, . %]
-----------------------------
$ [%]/[+/-, . %]
-----------------------------
<PAGE>
2
The $ should be deposited in The Chase Manhattan Bank
account number [insert number] on [insert date] [or] [wire transferred to (Name
of Bank) account number [insert number] [other wire instructions] on [date]].
Very truly yours,
UNION PACIFIC RESOURCES GROUP INC.,
by
------------------------------
Name:
Title:
<PAGE>
EXHIBIT B
Form of Assignment and Acceptance Agreement
, 19
Reference is made to the U.S.$2,700,000,000 364 Day
Competitive Advance/Revolving Credit Agreement, dated as of March 2, 1998 (the
"Credit Agreement") among Union Pacific Resources Group Inc., a Utah corporation
(the "Borrower"), the Banks (as defined in the Credit Agreement), The Chase
Manhattan Bank, as Administrative Agent for the Banks (the "Administrative
Agent") and Bank of Montreal, as Syndication Agent. Terms defined in the Credit
Agreement are used herein with the same meaning.
(the "Assignor") and
(the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee,
without recourse and without any representations and warranties of the Assignor
except as specifically set forth below, and the Assignee hereby purchases and
assumes from the Assignor, a portion of the Assignor's rights and obligations
under the Credit Agreement as of the Assignment Date (as defined below) equal to
a %1 interest in and to all of the rights and obligations of the Banks under
the Credit Agreement (including, without limitation, such percentage interest in
the Commitments as in effect on the Assignment Date and the Advances, if any,
outstanding on the Assignment Date).
2. The Assignor (i) represents and warrants that as of the
date hereof its Commitment (without giving effect to assignments thereof which
have not yet become effective) is $ and the aggregate outstanding
principal amount of Advances owing to it (without giving effect to assignments
thereof which have not yet become effective) is $ ; (ii) represents and
warrants that it is the legal and beneficial owner of the interest being
assigned by it hereunder and that such interest is free and clear of any
adverse claim; (iii) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties, or representations
made in or in connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or any other instrument or document furnished pursuant thereto;
(iv) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower or the performance or
observance by the Borrower of any of its obligations under the Credit Agreement
or any other instrument or document furnished pursuant thereto.
- ----------------
1Specify percentage to no more than four decimal points.
<PAGE>
2
3. The Assignee (i) confirms that it has received a copy of
the Credit Agreement, together with copies of the financial statements referred
to in Section 4.01(e) thereof and such other document and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon the Administrative Agent, the Assignor or any other Bank
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Administrative Agent to take such action as
administrative agent on its behalf and to exercise such powers as are reasonably
incidental thereto; (v) agrees that it will perform in accordance with their
terms all of the obligations which by the terms of the Credit Agreement are
required to be performed by it as a Bank; and (vi) specifies as its Domestic
Lending Office (and address for notices) and Eurodollar Lending Office the
offices set forth beneath its name on the signature pages hereof.
4. The effective date for this Agreement and Acceptance shall
be (the "Assignment Date")2. Following the execution of this Agreement
and Acceptance, it will be delivered to the Administrative Agent for acceptance
and recording by the Administrative Agent.
5. Upon such acceptance and recording, as of the Assignment
Date, (i) the Assignee shall be a party to the Credit Agreement and, to the
extent provided in this Assignment and Acceptance, have the rights and
obligations of a Bank thereunder, and (ii) the Assignor shall, to the extent
provided in this Agreement and Acceptance, relinquish its rights and be released
from its obligations under the Credit Agreement.
6. Upon such acceptance and recording, from and after the
Assignment Date, the Administrative Agent shall make all payments under the
Credit Agreement in respect of the interest assigned hereby (including, without
limitation, all payments of principal, interest and fees with respect thereto)
to the Assignee. The Assignor and Assignee shall make all appropriate
adjustments in payments under the Credit Agreement for periods prior to the
Assignment Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of New York.
- ---------------
2See Section 8.07(a) of the Credit Agreement; such date shall be at least
three Business Days after the execution of this Assignment and Acceptance.
<PAGE>
3
[NAME OF ASSIGNOR],
by
------------------------------
Name:
Title:
[NAME OF ASSIGNEE],
by
------------------------------
Name:
Title:
DOMESTIC LENDING OFFICE (and
address for notices)
[Address]
EURODOLLAR LENDING OFFICE
[Address]
Accepted this day
of , 19
THE CHASE MANHATTAN BANK, as
Administrative Agent,
by
-------------------------------
Name:
Title:
<PAGE>
EXHIBIT C-1
Form of Opinion of Borrower's Counsel
-------------------------------------
, 19
To each of the Bank's party to
the U.S.$2,700,000,000 364
Day Competitive Advance/
Revolving Credit Agreement,
dated as of March 2, 1997
among Union Pacific
Resources Group Inc., the
Banks party thereto, The
Chase Manhattan Bank, as
Administrative Agent for
said Banks and Bank of
Montreal, as Syndication
Agent
Union Pacific Resources Group Inc.
----------------------------------
Ladies and Gentlemen:
I am the General Attorney of Union Pacific Resources Group
Inc., a Utah corporation (the "Borrower"), and have acted in such capacity in
connection with the execution and delivery of the U.S.$2,700,000,000 364 Day
Competitive Advance/Revolving Credit Agreement, dated as of March 2, 1998 (the
"Agreement"), among the Borrower, the several banks party thereto, The Chase
Manhattan Bank, as Administrative Agent and Bank of Montreal, as Syndication
Agent. This opinion is delivered to you pursuant to Section 3.01(b) of the
Agreement. Terms used herein which are defined in the Agreement shall have the
respective meanings set forth in the Agreement, unless otherwise defined herein.
In connection with this opinion, I have examined executed
copies of the Agreement and such corporate documents and records of the Borrower
and its Subsidiaries, certificates of public officials and officers of the
Borrower and its Subsidiaries, and such other documents, as I have deemed
necessary or appropriate for the purposes of this opinion. In stating my
opinion, I have assumed the genuineness of all signatures of, and the authority
of, persons signing this Agreement on behalf of parties thereto other than the
Borrower, the authenticity of all documents submitted to me as originals and the
conformity to authentic original documents of all documents submitted to me as
certified, conformed or photostatic copies.
Based upon the foregoing, I am of the opinion that:
1. The Borrower is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Utah.
<PAGE>
2
2. The Transactions are within the Borrower's and the
Acquisition Subsidiary's corporate powers, have been duly authorized by all
necessary corporate action, and do not contravene (i) the Borrower's or the
Acquisition Subsidiary's charter or by-laws or (ii) any law, statute, regulation
or order of any governmental agency or (iii) to the best of my knowledge, any
contractual restriction binding on or affecting the Borrower or the Acquisition
Subsidiary. The Agreement has been duly executed and delivered by the Borrower.
3. No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by the Borrower of the
Agreement and the consummation by the Borrower and the Acquisition Subsidiary of
the Transactions[, except such as have been duly obtained or made and are in
full force and effect].
4. The Agreement is a legal, valid and binding obligation of
the Borrower enforceable against the Borrower in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles, and except that
no opinion is expressed as to the availability of the remedy of specific
performance.
5. There is no pending or threatened action or proceeding
affecting the Borrower or any of its consolidated Subsidiaries before any court,
governmental agency or arbitrator (i) which purports to affect the legality,
validity, or enforceability of the Transactions, or (ii) except as set forth in
public documents filed with the Securities and Exchange Commission prior to the
date of this opinion, which may materially adversely affect the financial
condition or operations of the Borrower or any of its Subsidiaries, taken as a
whole.
This opinion is limited to the laws of the State of New York,
the corporate laws of the State of Utah, and applicable Federal laws of the
United States; provided that, as to matters of New York law, we have relied
exclusively upon the opinion of , special New York counsel, a copy of
which is attached hereto.
This opinion is solely for the benefit of the addressees
hereof, any permitted assigns or participants of such addressees, and the law
firm of Cravath, Swaine & Moore for use in connection with the transactions in
connection with the Loan Papers and may not be relied upon by any other person
or entity or for any other purpose without my express written consent.
<PAGE>
3
Very truly yours
Mark Jones
General Attorney for
Union Pacific Resources
Group Inc.
<PAGE>
EXHIBIT C-2
Form of Opinion of Borrower's New York Counsel
----------------------------------------------
, 19
Union Pacific Resources Group Inc.
801 Cherry Street
Fort Worth, TX 76102
To each of the Banks party to the U.S.$2,700,000,000 364 Day Competitive
Advance/ Revolving Credit Agreement, dated as of March 2, 1998 among
Union Pacific Resources Group Inc., the Banks party thereto, The Chase
Manhattan Bank, as Administrative Agent for said Banks and Bank of
Montreal, as Syndication Agent
Union Pacific Resources Group Inc.
----------------------------------
Ladies and Gentlemen:
We have acted as special counsel to Union Pacific Resources
Group Inc., a Utah corporation (the "Borrower"), in connection with the
execution and delivery of the U.S.$2,700,000,000 364 Day Competitive
Advance/Revolving Credit Agreement, dated as of March 2, 1998 (the "Agreement"),
among the Borrower, the several banks party thereto, The Chase Manhattan Bank,
as Administrative Agent and Bank of Montreal, as Syndication Agent. This opinion
is delivered to you pursuant to Section 3.01(b) of the Agreement. Terms used
herein which are defined in the Agreement shall have the respective meanings set
forth in the Agreement, unless otherwise defined herein.
In connection with this opinion, we have examined executed
copies of the Agreement and such corporate documents and records of the Borrower
and its Subsidiaries, certificates of public officials and officers of the
Borrower and its Subsidiaries, and such other documents, as we have deemed
necessary or appropriate for the purposes of this opinion. In stating our
opinion, we have assumed the genuineness of the signatures of, and the authority
of, persons signing this Agreement on behalf of parties thereto other than the
Borrower, the authenticity of all documents submitted to us as originals and the
conformity to authentic original documents of all documents submitted to us as
certified, conformed or photostatic copies.
Based upon and subject to the foregoing, and upon such
investigation as we have deemed necessary, we are of the opinion that:
<PAGE>
2
1. The execution, delivery and performance by the Borrower of
the Agreement and the consummation of the Transactions by the Borrower and the
Acquisition Subsidiary does not contravene any law, statute, regulation or order
of any governmental agency.
2. No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery, and performance by the Borrower of the
Agreement and the consummation of the Transactions by the Borrower and the
Acquisition Subsidiary[, except such as have been duly obtained or made or are
in full force and effect].
3. The Agreement is a legal, valid, and binding obligation of
the Borrower enforceable against the Borrower in accordance with its terms,
except as enforceability may be affected by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles, and except that
no opinion is expressed as to the availability of the remedy of specific
performance.
This opinion is limited to the laws of the State of New York
and applicable Federal laws of the United States.
This opinion is solely for the benefit of the addressees
hereof, any permitted assigns or participants of such addressees, and the law
firm of Cravath, Swaine & Moore for use in connection with the transactions in
connection with the Loan Papers and may not be relied upon by any other person
or entity or for any other purpose without my express written consent.
Very truly yours,
<PAGE>
SCHEDULE II
Principal Subsidiaries
----------------------
1. Union Pacific Resources Company
2. UP Fuels Marketing and Trading, Inc.
3. Rock Springs Royalty Company
4. Bitter Creek Coal Company
5. Union Pacific Resources Inc.
6. Norcen Energy Resources Limited
<PAGE>
SCHEDULE III
Existing Liens
--------------
None
<PAGE>
SCHEDULE IV
Proposed Amendments
-------------------
1. Amend the definition of Principal Subsidiaries to include Norcen and
the Acquisition Subsidiary.
2. Amend the covenant restricting liens to provide that, so long as
Norcen's capital stock constitutes "margin stock", such covenant shall
not apply to Norcen's capital stock to the extent necessary to avoid
"margin stock" constituting more than 25% of the value of the assets
subject to such covenant.
3. Amend the limitation on debt of the Borrower's subsidiaries to permit
(a) debt of the Acquisition Subsidiary, Norcen and their respective
subsidiaries not exceeding US$1.4 billion aggregate principal amount at
any time outstanding and (c) debt of subsidiaries (other than the
Acquisition Subsidiary, Norcen and their respective subsidiaries), not
exceeding US$150,000,000 at any time outstanding.
4. Amend the Borrower's covenants regarding its maximum ratio of total
debt to total capital to require that such ratio not exceed (a) 75%
prior to the date eighteen months after the Closing Date and (b) 65% at
any time thereafter.
5. Amend the cross-acceleration default to apply to acceleration of, or
failure to pay any amount of principal or interest when due (or within
any applicable grace period) with respect to, any debt of the Borrower
or any Principal Subsidiary in excess of $50,000,000.
6. Amend the pricing under the Existing Credit Agreement dated April 16,
1996, to add the following categories:
Facility Fee LIBOR Spread
------------ ------------
BBB/Baa2 15.0 bps 22.5 bps
(less than) BBB/Baa2 15.0 bps 30.0 bps
<PAGE>
NORCEN ENERGY RESOURCES LIMITED
-------------------------------
EXTENDIBLE REVOLVING TERM CREDIT FACILITY
-----------------------------------------
May 22, 1997
BORROWER: Norcen Energy Resources Limited. (Norcen).
- ---------
FACILITY: Extendible Revolving Term Credit Facility.
- ---------
AMOUNT: Cdn. $200,000,000 or the U.S. dollar equivalent.
- -------
PURPOSE: For general corporate purposes, including commercial paper
- -------- backstop, capital expenditures, short term working capital
needs, refinancing existing bank indebtedness and for
Permitted Acquisitions.
LENDER: Canadian Imperial Bank of Commerce (CIBC).
- -------
AVAILABILITY
PERIOD: The Facility will revolve and fluctuate for a period of 364
- ------- days ("Revolving Period"), subject to renewal as provided
below, followed by a 2 year non-revolving term loan ("Term
Period") with a bullet payment at the end of the Term Period.
REPAYMENT: Revolving Period
- ---------- ----------------
The Revolving Period ends May 28, 1998. The Revolving Period
may be extended from time to time at the Lender's sole
discretion for up to 364 days, within 30 days after the
Borrower's request which may not be made more than twice in
any 12 month period. The Borrower's request for extension will
include restatement of Representations and Warranties. No
response from the Lender within 30 days of the request shall
mean that an extension is not granted.
<PAGE>
-2-
Term Period
-----------
The Term Period commences on the day after the last day of the
Revolving Period and ends two years thereafter. Any undrawn
portion of the Facility will be cancelled at the end of the
Revolving Period. Any prepayment during the Term Period will
constitute a permanent reduction of the credit facility. For
greater certainty, the rollover of a BA or Libor Loan does not
constitute a prepayment during the Term Period.
RANKING: All amounts outstanding under the Facility will be senior
- -------- unsecured obligations of the Borrower ranking pari passu with
all existing and future Senior Debt of the Borrower, other
than Permitted Encumbrances. The Facility will at all times
rank senior to any existing or future Subordinated
Indebtedness.
AVAILMENTS: The Facility will be available by way of the following:
- -----------
o Canadian dollar prime loans ("Cdn. Prime Rate Loans");
o US dollar base rate loans ("USBR Loans");
o Canadian dollar bankers' acceptances ("B/A's");
o US dollar London interbank offer rate loans ("Libor
Loans"); and
o US dollar or Canadian dollar letters of credit or guarantee.
CURRENCY
EXCESS: If at any time the Canadian dollar equivalent of all
- ------- outstanding advances based on the noon (Toronto time) Bank of
Canada exchange rate exceeds the available facility amount (a
"Currency Excess"), the Borrower will repay forthwith Cdn.
Prime Rate Loans or USBR Loans until such time as the Currency
Excess is eliminated, or if a Currency Excess remains after
repayment of all Cdn. Prime Rate Loans or USBR Loans, then the
Borrower will:
1) collateralize dollar for dollar the Currency Excess with
<PAGE>
-3-
Canadian or US dollar deposits, or
2) repay any Libor Loans, as well as any expenses associated
with breaking a Libor Loan, prior to maturity; or
3) any combination of the foregoing.
BORROWING
AND NOTICE
PROVISIONS: A) The Borrower may borrow as follows:
- -----------
o Cdn. Prime Rate Loans in minimum amounts of C$1 million and
multiples of $100,000 thereafter;
o USBR Loans in minimum amounts of US$1 million and
multiples of $100,000 thereafter;
o advances of B/A's will, subject to availability, be issued
for periods of 30, 60, 90, 120 or 180 days, or such other
periods as are agreed to by the Lender, in minimum amounts
of C$1 million and multiples of C$100,000 thereafter unless
otherwise determined by the market for BA's; and
o Libor Loans, with maturities of 1, 2, 3 or 6 months, or
such other period which is agreed to by the Lender, in
minimum amounts of US$1 million and multiples thereof.
B) The following notice provisions will apply for borrowings,
rollovers and repayments:
Prime Rate/USBR Loans
o up to $25,000,000: same day notice is required;
o between $25,000,000 and $50,000,000: by 10:00 a.m. one
banking day prior notice is required; and
o over $50,000,000: by 10:00 am. 2 banking days prior notice
is required;
BA's
<PAGE>
-4-
To the extent that the Borrower markets the BA's, no notice is
required. Should the Borrower request the Lender to market the
BA's then the following notice provisions shall apply:
o up to $5,000,000: no notice is required.
o between $5,000,000 and $25,000,000: 9:00 a.m., same day
notice.
o between $25,000,000 and $50,000,000: 2:00 p.m. one business
day prior notice;
o over $50,000,000: 2:00 p.m. two business days prior notice.
o one business day notice is required for the rollover of
Bankers' Acceptances, regardless of size.
LIBOR Loans
o Three banking days (in London and Calgary) prior notice.
The Borrower may repay any part of the outstanding amount
without penalty subject to applicable notice periods and
provided that BA's and Libor Loans are repaid at maturity.
BA's and Libor Loans may be repaid prior to maturity provided
Borrower pays the breakage costs.
INTEREST
RATES: During Revolving Period: - Libor + 40 bp
- ------ - BA Rate + 40 bp
- USBR
- Canadian Prime
During Term Period: - All rates increase by 12.5 bp
Letters of Credit - Financial L/C and/or L/G - 40 bp
- Non-Financial or Performance L/C
and L/G - 20 bp.
- All L/C and L/G's may be renewed
annually at the discretion of
the Lender for an additional 1 year
term.
<PAGE>
-5-
Interest based on Cdn. Prime Rate and USBR Loans will
be calculated on a 365 or 366 day year, as
applicable, and payable monthly in arrears on the
last banking day of the month.
BA fees are payable at the time of endorsement and
are calculated based on a 365-day or 366-day year.
Interest on Libor Loans will be based on the Telerate
screen # 3750 rate two days prior to funding and on a
360-day year. Interest is payable on rollover dates,
or if the period of advance exceeds 6 months,
interest will accrue and be payable on the day which
is 6 months after the first day of such period, and
on the last day of the Libor Loan.
Any interest rate based on a period less than a year
expressed as an annual rate for purposes of the
Interest Act (Canada) is equivalent to such
determined rate multiplied by the actual number of
days in the calendar year in which same is to be
ascertained and divided by the number of days in the
period upon which it was based.
FEES: Standby Fees of 10 bp will be paid quarterly in arrears on the
- ----- undrawn portion of the Facility during the Revolving Period.
EXPENSES: The Borrower will pay all reasonable costs and expenses
- --------- (including legal fees) incurred in connection with the review
of the Facility Documents, the preservation and/or enforcement
of any of the rights of the Lender under the Facility
Documents, and loss or expenses (including legal fees)
incurred by the Lender as a consequence of any failure to
pay any stamp, registration or other tax to which the Facility
may be subject.
CONDITIONS
PRECEDENT: A) Conditions precedent to implementation of the terms and
- ---------- conditions herein contained will include the following:
1) officer's certificate stating that Representations
and Warranties are true and accurate in all
material respects;
<PAGE>
-6-
2) notification from the Borrower cancelling the
Extendible Revolving Term Credit Facility
dated June 24, 1996; and
3) an opinion of in-house council to the
Borrower, addressed to the Lender, that this
Facility is a valid, legally binding and
enforceable document.
B) Conditions precedent to subsequent drawdowns,
rollovers and conversions will be as follows:
1) receipt of applicable notice; and
2) no Event of Default or Potential Event of Default
has occurred or would occur as a result of such
drawdown, rollover or conversion.
REPRESENTATIONS
AND WARRANTIES: Representations and Warranties are the following:
- ---------------
1) corporate existence of the Borrower;
2) corporate power and legal capacity of the Borrower
to carry on business and own assets;
3) corporate power and authorization of the Borrower
to execute and deliver the Facility Documents and
to perform covenants under the Facility Documents;
4) Facility Documents have been duly executed and
delivered by the Borrower;
5) Facility Documents create legal, valid, binding
and enforceable obligations of the Borrower;
6) the most recent audited consolidated financial
statements of the Borrower (initially December 31,
1996), fairly present the consolidated financial
condition of the Borrower, as at such date and the
results of operations for the year ended, in
accordance with GAAP consistently applied, and
since the most recent audited financial statements
of the Borrower, there has been no material
adverse change in the consolidated financial
position or business operations of the Borrower;
<PAGE>
-7-
7) the Borrower has in full force and effect such
insurance policies in amounts covering the
properties and operations of the Borrower as are
customarily held by similar corporations engaged
in the same or similar businesses in the
localities where the Borrower' properties and
operations are located;
8) no pending or threatened action, suit, litigation,
judgement or proceeding that has a reasonable
likelihood of materially adversely affecting the
Borrower's ability to repay or perform its
obligations under the Facility Documents other
than as disclosed in writing by the Borrower on or
prior to the execution of the Facility Documents;
9) no known material environmental liability, actual
or contingent which have not been provided for in
the financial statements of Borrower in accordance
with GAAP; compliance with environmental laws in
all material respects, all necessary material
permits, licenses and other consents required
under environmental laws have been received and
are in good standing, and properties are not the
subject of any outstanding or threatened order or
judgement alleging violation of Environmental Laws
which if enforced against the Borrower would have
a material adverse effect on the financial
condition, operations or business of the Borrower;
10) unencumbered ownership and clear title to assets
except for Permitted Encumbrances;
11) all amounts outstanding under the Facility rank
at least pari passu in right of payment with the
Borrower's other most senior unsecured
Indebtedness, other than Indebtedness which is a
preferred claim arising by operation of law or a
Permitted Encumbrance; and
12) no Event of Default or Potential Event of Default
has occurred and is continuing.
<PAGE>
-8-
COVENANTS: The Borrower will:
- ----------
1) pay all amounts owing under the Facility when due;
2) perform its obligations under the Facility Documents;
3) maintain its corporate existence;
4) supply to the Lender on a regular basis:
a) annual audited consolidated financial statements
of the Borrower as soon as available but in any
event within 120 days of the end of each fiscal
year;
b) quarterly unaudited consolidated financial
statements of the Borrower as soon as available
but in any event within 90 days of the end of the
first 3 fiscal quarters of each fiscal year, in
all cases stating comparative figures for the
corresponding date and period in the previous
fiscal year;
c) a compliance certificate as per Exhibit A within
120 days of the fiscal year end and within 90 days
of the end of the first 3 quarters of each fiscal
year showing the calculation of all Financial
Ratios and including officer's certificate stating
that no Event of Default or Potential Event of
Default has occurred;
d) annual information forms or notices of material
change which are required to be filed by the
Borrower with any regulatory authority or
securities exchange;
5) maintain Interest Coverage Ratio and Senior Debt to Total
Capital Ratio as defined below for the Borrower calculated
quarterly (the "Financial Ratios"):
a) Interest Coverage Ratio on a rolling 4 quarter
basis to be greater than 2.50 times;
b) Senior Debt to Total Capital Ratio to be
<PAGE>
-9-
maintained below .60:1.
Financial Ratio tests to be calculated on a Consolidated
Basis, in accordance with GAAP;
6) carry on and conduct its business in a proper and efficient
manner and in compliance with applicable laws in all
material respects;
7) maintain insurance policies covering its material
properties and operations as is customarily maintained by
similar corporations engaged in the same or similar
business;
8) not liquidate, dissolve or wind-up or take any steps or
proceedings in connection therewith;
9) not permit a merger with or into, or a consolidation or
amalgamation with, or transfer all or substantially all its
assets to, another entity, other than a merger or
amalgamation between the Borrower and a Wholly-Owned
Subsidiary, or between Wholly-Owned Subsidiaries:
a) if an Event of Default or Potential Event of
Default exists or would occur and be continuing
immediately before and after giving effect to the
transaction; and
b) unless the successor corporation:
i) agrees to be bound by the Facility
Documents;
ii) acknowledges the continuing validity and
enforceability of the Facility Documents;
iii) represents and warrants that the
transaction will not adversely affect the
rights and benefits afforded the Lender
under the Facility Documents;
iv) represents that the creditworthiness of
the resulting, surviving or transferee
entity is
<PAGE>
-10-
not materially weaker than the
Borrower prior to such action; and
v) provides legal opinions confirming the
matters set forth in paragraphs i), ii),
and iii) above; and
10) not permit any lien, mortgage, charge, hypothec, pledge
or any other security interest or encumbrance on its
property or assets, except for Permitted Encumbrances,
unless at the same time or prior to securing any other
Indebtedness, the Borrower grants security for this
Facility which ranks equally and rateably with the other
Indebtedness.
EVENTS OF
DEFAULT: Events of Default are as follows:
- --------
1) nonpayment of principal when due;
2) nonpayment of interest or stamping fees due to the Lender
for 5 days after due date. Non-payment of standby fees or
other fees due to the Lender, in either case for 5 days
after notice of nonpayment;
3) nonpayment of other amounts under the facility within 30
days after notice from the Lender:
4) breach of covenant under the Facility which remains
unremedied for 30 days after notice;
5) materially incorrect or misleading representation or
warranty under the Facility when given;
6) cross default to any defaulted Indebtedness of the Borrower
in excess of C$25 million and any applicable period of
grace has expired;
7) bankruptcy, insolvency, cessation of business or other
dissolution proceedings of the Borrower (30 day cure period
if involuntary bankruptcy);
8) final judgement or order in excess of C$25 million is
<PAGE>
-11-
rendered against the Borrower which is not, within 60 days
after entry thereof, bonded, discharged or stayed pending
appeal, or is not discharged within 60 days after the
expiration of such stay; or
9) a lien or security interest in excess of $25 million is
enforced against the Borrower or a Wholly-Owned Subsidiary.
Upon the occurrence and continuance of an Event of Default the
Lender may declare all Indebtedness under the Facility to be
due and payable, and the Lender will have no obligation to
make further advances, rollovers or conversions. The Lender
will have right of set off upon the occurrence and continuance
of an Event of Default. All Libor Loans and USBR Loans may, at
the Lender's sole discretion, be converted to Cdn. Prime Rate
Loans at any time and B/A's and letters of credit must be
collateralized by the Borrower in an escrow account. Interest
will be calculated at the default rate of 1% above the
Applicable Credit Spread. Also, upon the occurrence and
continuance of an Event of Default the Lender may arrange for
an environmental audit at the expense of the Borrower.
INCREASED
COSTS AND
CHANGE OF
LAW: Increased costs to the Lender in providing and maintaining the
- ---- Facility, including those costs rising from capital adequacy
requirements and change of law to be for the account of the
Borrower. The Lender will not be obligated to provide advances
if rendered illegal.
ASSIGNMENT: The Lender reserves the right to sell, assign, transfer or
- ----------- grant participations in the Facility, in whole or in part,
with the consent of the Borrower (such consent not to be
unreasonably withheld) provided that consent of the Borrower
will not be required after an Event of Default or Potential
Event of Default. Assignments will be permitted in minimum
amounts equal to the lesser of (i) Cdn. $10,000,000; and (ii)
the remaining commitment of the Lender.
The Borrower agrees to execute such further documentation as
<PAGE>
-12-
the Lender may request for the purpose of any assignment, sale
or transfer of the Facility.
GOVERNING
LAW: Governing law will be the laws of the Province of Alberta and
- ---- of Canada applicable therein.
CANADIAN IMPERIAL BANK OF COMMERCE
Per: /s/ L.V. Sagriff
------------------------------
L.V. Sagriff, Director
In witness whereof the parties hereto, by executing this document, are agreeable
to the terms and conditions as presented herein; Dated on 30th day of
----
May, 1997.
- ----
NORCEN ENERGY RESOURCES LIMITED
Per: /s/ Robert J. Waters
----------------------------
Robert J. Waters
Treasurer
Per: /s/ Mark Schwirtz
----------------------------
<PAGE>
-13-
DEFINITIONS
-----------
"Applicable Credit Spread" means the spread of interest rates for Canadian Prime
Rate Loans, USBR Loans, and Libor Loans, as the case may be, and the stamping
fee, all as determined pursuant to the Interest Rates section of this Term
Sheet.
"B/A Rate" means the discount rate at which CIBC B/A's are purchased by CIBC or
sold into the market by the Borrower.
"Business Day" is a day, other than a Saturday or Sunday, on which the Lender is
open for business in Calgary, Alberta, Toronto, Ontario and New York, New York,
and with respect to Libor Loans in London, England.
"Cashflow" means, in respect of the Borrower, the aggregate of Consolidated Net
Earnings, Consolidated Interest Expense, Taxes and Non-Cash Items.
"Cdn. Prime" means the rate of interest per annum, based on a 365 day year,
established and reported by CIBC to the Bank of Canada from time to time as its
reference rate of interest for determination of interest rates which CIBC
charges to customers of varying degrees of creditworthiness in Canada for
Canadian dollar loans made by it in Canada. For purposes of this Facility, the
Cdn. Prime will be the higher of the stated rate by CIBC or CDOR plus the
Applicable Credit spread.
"CDOR" means the average yield to maturity for bankers' acceptances which is
quoted on Reuter's Canadian Discount Offer Rate screen at 10:00 am Toronto time
on the applicable date of advance for B/A's having a term to maturity of 1
month.
"Consolidated Interest Expense" means consolidated interest, whether expensed or
capitalized, in respect of Indebtedness determined in accordance with GAAP.
"Consolidated Net Earnings" means consolidated net income or loss as reported on
the Borrower's consolidated statement of earnings excluding income from
discontinued operations.
"Consolidated Net Tangible Assets" means the net book value of all the assets
(after depreciation, amortization and depletion) appearing in the most recent
available balance sheet of the Borrower, determined on a consolidated basis in
accordance with G.A.A.P. after deducting all amounts attributable to goodwill.
"Consolidated Tangible Net Worth" means, at any time, the sum of:
a) the Borrower's total shareholder equity; and
b) Subordinated Indebtedness;
<PAGE>
-14-
less:
c) any amounts of goodwill attributable to the Borrower;
all on a consolidated basis.
"Facility Documents" means:
a) this letter agreement between the Borrower and CIBC; and
b) such other documents and certificates which in the opinion of CIBC,
acting reasonably, are required to fully document or satisfy the
terms and conditions herein contained.
"Fed Funds Rate" means the rate set forth in the Federal Reserve Bank of New
York weekly statistical release designated as H.15(519), opposite the caption
"Federal Funds (Effective)"
"Funded Debt" means all Indebtedness payable more than one year from the date of
creation thereof including current maturities of such Indebtedness and
Indebtedness which by its terms is renewable to a due date beyond one year;
excluding Subordinated Indebtedness.
"GAAP" means generally accepted accounting principles which are in effect from
time to time in Canada.
"Guarantees" means an undertaking to become liable for indebtedness for borrowed
money as presented on consolidated financial statements of Borrower.
"Hostile Acquisition" means an offer to acquire shares of a corporation, which
is required to be reported to an applicable securities regulatory authority,
where the board of directors of that corporation has not approved such offer nor
recommended to the shareholders of the corporation that they sell their shares
pursuant to the proposed offer.
"Indebtedness" means all items on the consolidated financial statements of the
Borrower classified as liabilities for money borrowed in accordance with GAAP
(and will include capitalized leases, and Guarantees or endorsements (other than
of notes, bills and cheques presented to banks for collection or deposit in the
ordinary course of business) of indebtedness of others by the Borrower or a
Wholly-Owned Subsidiary, to the extent required by GAAP).
"Interest Coverage Ratio" means Cashflow divided by Consolidated Interest
Expense.
"Libor" means the rate of interest per annum, based on a 360 day year, as
determined by the Reference Banks (rounded upwards, if necessary to the nearest
whole multiple of 1/16th of
<PAGE>
-15-
1%) at which CIBC makes available United States dollars obtained by CIBC in the
Interbank Euro Currency Market, London, England at approximately 10:00 a.m.
(New York time) on the second Business Day before the first day of, and in an
amount similar to, and for the period similar to the interest period of such
advance.
"Non-Cash Items" means depreciation, depletion, amortization, foreign exchange
translation gains or losses and other non-cash items included in the calculation
of Consolidated Net Earnings as reported on the Borrower's consolidated
statement of earnings.
"Permitted Acquisitions" means a direct or indirect acquisition by the Borrower
which is not a Hostile Acquisition.
"Permitted Encumbrances" means,
a) any security interest, except on fixed assets or on shares of any
Subsidiary or affiliate, given in the ordinary course of business
to banks, or other financial institutions, to secure indebtedness
payable on demand or maturing within 12 months of the date that such
indebtedness is originally incurred provided that the total
indebtedness so secured does not exceed $25 million;
b) any Purchase Money Mortgage;
c) Risk Management Liens where the aggregate value of all cash and
securities will not at any time exceed $25 million;
d) any security interest incurred by the Borrower in the ordinary
course of business on any petroleum and natural gas right, tangible
assets associated therewith or the products derived therefrom or the
proceeds of sale of such products, to secure production payments,
royalties, carried interests and similar obligations or to secure
obligations in connection with or necessarily incidental to
commitments of purchase and sale of, or the transportation or
distribution of, products derived from any petroleum and natural gas
right, including without limitation forward sales;
e) any security interest on any resource property of the Borrower that
has not been in commercial production during the 12-month period
ending on the date hereof, or has not been in commercial production
during the 12-month period ending at the time of the imposition of
such security to secure any indebtedness incurred for the
development or improvement thereof or the development or improvement
of any other resource property of the Borrower that has not been in
commercial production during the 12-month period ending on the date
hereof or has not been in commercial production during the 12-month
period ending at the time of the imposition of such security;
<PAGE>
-16-
f) any security interest in favour of the government of any country in
which the Borrower owns assets or carries on business or the
government of any province, state, municipality or other political
subdivision in any such country, or any department or agency of any
such government, given pursuant to a contract, concession, lease,
license, franchise, grant, permit or other instrument pertaining to
such assets or business or required by applicable laws;
g) liens for taxes, assessments or other governmental charges not yet
due or, if due, the validity of which is being contested in good
faith, and liens for the excess of the amount of any past due taxes
for which a final assessment has not been received over the amount
of such taxes as estimated and paid by the Borrower;
h) unless it constitutes an Event of Default, the lien of any
judgement rendered or claim filed against the Borrower, which is
being contested in good faith by the Borrower;
i) undetermined or inchoate liens and charges (including builders',
mechanics', warehousemen's carriers' and other similar liens)
incidental to construction or current operations which relate to
obligations not due or delinquent or which are being contested in
good faith by the Borrower;
j) liens incurred or created in the ordinary course of business on any
particular petroleum and natural gas right and or on any tangible
assets associated therewith as security, in favour of any other
person who is conducting the exploration, exploitation, development
or operation of the property or asset to which such petroleum and
natural gas right relates, to secure payment by the Borrower of its
proportion of the costs and expenses of such exploration,
exploitation, development or operation incurred by such other
person;
k) any security interest given to a public utility or municipality or
governmental or other public authority when required by such utility
or municipality or other authority in connection with utility or
municipal services required for the operations of the Borrower in
the ordinary course of its business;
l) any security interest on a lease or other instrument permitting the
extraction of substances other than crude oil, natural gas, natural
gas liquids and related products by the Borrower, provided that any
such lease does not interfere with the enjoyment by the Borrower of
any petroleum and natural gas right;
m) any renewal, refunding or extension of any security interest
referred to in the foregoing clauses a) or 1) or of any security
interest on any property in existence at the time of acquisition
thereof, in which the indebtedness thereby
<PAGE>
-17-
secured outstanding after such renewal, refunding or extension is
not increased and the security interest is limited in it's recourse
to the property originally subject thereto and any improvements
thereon; or
n) any security interest, other than those referred to in the foregoing
clauses a) to m), created by the Borrower if, after giving effect to
the creation of such security interest the aggregate principal
amount of the indebtedness secured thereby would not be greater than
Cdn. $25,000,000.
"Potential Event of Default" means an event that would constitute an Event of
Default with the giving of notice, lapse of time or both.
"Purchase Money Mortgage" means any mortgage, charge, hypothec, pledge or other
security or encumbrance created upon any real or personal property acquired by
the Borrower after the date hereof (or previously acquired and substantially
unimproved) to secure or securing the whole or any part of the purchase price of
such property (or, in the case of previously acquired and substantially
unimproved property, the cost of the improvement thereof) or the repayment of
money borrowed to pay the whole or any part of such purchase price or cost, or
any vendor's privilege or lien on such property securing all or any part of such
purchase price or cost, including title retention agreements and leases in the
nature of title retention agreements.
"Risk Management Liens" means liens on cash or marketable securities of the
Borrower granted in connection with any interest rate, foreign exchange or
commodity risk management arrangements provided:
a) the Borrower reasonably expects to produce sufficient commodities of
the type in question in the ordinary course of business to fulfil
such contracts; and
b) the obligations secured by such liens are not due and delinquent.
"Senior Debt" means all Funded Debt that ranks senior to Subordinated
Indebtedness.
"Subordinated Indebtedness" means Indebtedness that is subordinate under all
circumstances, including bankruptcy in right of payment to Indebtedness under
this Facility and Senior Debt.
"Subsidiary" means any corporation a majority of the shares carrying voting
rights which are at the time owned or controlled directly or indirectly, by the
Borrower.
"Taxes" means income taxes on the Borrower's consolidated statement of
earnings.
"Total Capital" means Senior Debt plus Consolidated Tangible Net Worth.
"USBR" or "US Base Rate" means the rate of interest per annum, based on a 365
day year,
<PAGE>
-18-
established by CIBC from time to time as a reference rate for the determination
of interest rates that CIBC charges to customers of varying degrees of
creditworthiness for US dollar loans made by it in Canada. For purposes of this
Facility, the US Base Rate will be the higher of the stated rate by CIBC or the
Fed Funds Rate plus 1%.
"Wholly-Owned Subsidiary means any Subsidiary in which all of the issued and
outstanding voting shares of each class of its capital are owned directly or
indirectly by the Borrower, except that director's qualifying shares need not be
so owned.
<PAGE>
AMENDED AND RESTATED
--------------------
EXTENDIBLE REVOLVING TERM CREDIT FACILITY
-----------------------------------------
This Agreement amends and restates in full the Extendible Revolving
Term Credit Facility dated September 15, 1995 and the Amended and Restated
Extendible Revolving Term Credit Facility Agreement dated July 4, 1996 between
the Borrower and the Lender.
May 29, 1997
BORROWER: Norcen Energy Resources Limited (Norcen).
- --------
FACILITY: Extendible Revolving Term Credit Facility (the
- -------- "Facility").
AMOUNT: Cdn. $100,000,000 or the U.S. dollar equivalent.
- ------
PURPOSE: For general corporate purposes, including commercial paper
- ------- backstop, capital expenditures, short term working capital
needs, refinancing existing bank indebtedness and for
Permitted Acquisitions.
LENDER: Royal Bank of Canada
- ------
AVAILABILITY
PERIOD: The Facility will revolve and fluctuate for a period of
- ------------ 364 days ("Revolving Period"), subject to renewal as
provided below, followed by a 2 year non-revolving term
loan ("Term Period") with a bullet payment at the end of
the Term Period.
REPAYMENT: Revolving Period
- --------- ----------------
The Revolving Period ends May 28, 1998. The Revolving
Period may be extended from time to time at the Lender's
sole discretion for up to 364 days, within 30 days after
the Borrower's written request which may not be made more
than twice in any 12 month period. The Borrower's request
for extension will include a restatement of the
Representations and Warranties. No response from the
Lender within 30 days of the request shall mean that an
extension is not granted.
<PAGE>
2
Term Period
-----------
The Term Period commences on the day after the last day of
the Revolving Period and ends two years thereafter. Any
undrawn portion of the Facility will be canceled at the
end of the Revolving Period. Any prepayment during the
Term Period will constitute a permanent reduction of the
Facility. For greater certainty, the rollover of a B/A or
Libor Loan does not constitute a prepayment during the
Term Period.
REPAYMENT: The Borrower will repay all borrowings and other amounts
- --------- outstanding hereunder in full on the last day of the Term
Period, and the commitment shall reduce to zero on such
date. The Borrower will ensure that Libor Loans and B/A's
mature, and L/C's and L/G's expire, on or before such
date.
RANKING: All amounts outstanding under the Facility will be senior
- ------- unsecured obligations of the Borrower ranking pari passu
with all existing and future Senior Debt of the Borrower,
other than indebtedness secured by Permitted Encumbrances.
The Facility will at all times rank senior to any existing
or future Subordinated Indebtedness.
AVAILMENTS: The Facility will be available by way of the following:
- ----------
o Canadian dollar prime loans ("Cdn. Prime Rate Loans");
o US dollar base rate loans ("USBR Loans")'
o Canadian dollar bankers' acceptances ("B/A's");
o US dollar London interbank offer rate loans ("Libor
Loans"); and
o US dollar or Canadian dollar letters of credit ("L/C's)
or guarantee ("L/G's).
CURRENCY EXCESS: If at any time the Canadian dollar equivalent of all
- --------------- outstanding advances based on the noon (Toronto time) Bank
of Canada exchange rate exceeds the available facility
amount (a "Currency Excess"), the Borrower will repay
forthwith Cdn. Prime Rate
<PAGE>
3
Loans or USBR Loans until such time as the Currency Excess
is eliminated. If a Currency Excess remains after
repayment of all Cdn. Prime Rate Loans or USBR Loans, then
the Borrower will:
1) collateralize dollar for dollar the Currency Excess
Canadian or US dollar deposits;
2) repay any Libor Loans, as well as any expenses
associated with breaking a Libor Loan, prior to
maturity; or
3) any combination of the foregoing.
BORROWING AND
NOTICE PROVISIONS: A) The Borrower may borrow as follows:
- -----------------
o Cdn. Prime Rate Loans in minimum amounts of C$1
million and multiples of $100,000 thereafter;
o USBR Loans in minimum amounts of US$1 million and
multiples of $100,000 thereafter;
o advances of B/A's will, subject to availability, be
issued for periods of 30, 60, 90, 120 or 180 days,
or such other period as is agreed to by the Lender,
in minimum amounts of C$1 million and multiples of
C$100,000 thereafter unless otherwise determined by
the market for B/A's; and
o Libor Loans, with maturities of 1, 2, 3 or 6 months,
or such other period as is agreed to by the Lender,
in minimum amounts of US$1 million and multiples
thereof.
B) The following notice provisions will apply to
drawdowns, repayments, rollovers and conversions:
Prime Rate/USBR Loans
o up to $20,000,000: same Business Day 9:00 a.m.
notice is required; and
o over $20,000,000: 9:00 a.m. one Business Day prior
notice is required.
<PAGE>
4
B/A's
To the extent that the Borrower markets the B/A's,
customary notice is required. Should the Borrower request
the Lender to market the B/A's then the following notice
provisions shall apply:
o same Business Day 9:00 notice is required.
o one Business Day 9:00 a.m. notice is required for the
rollover of B/A's, regardless of size.
B/A's will be issued and dealt with in accordance with the
Lender's usual practices, and must be repaid, rolled over,
or converted to another borrowing on their maturity dates.
LIBOR Loans
o 3 banking days (in London and Calgary) prior notice.
The Borrower may repay any part of the outstanding amount
without penalty subject to applicable notice periods and
provided that B/A's and Libor Loans may be repaid on
maturity dates only, unless, in the case of Libor Loans,
the Borrower pays the expenses associated with breaking
the Libor Loan prior to maturity.
ACCOUNTS: The Lender's records will constitute prima facie evidence
- -------- of amounts outstanding hereunder.
INTEREST RATES: The Borrower shall pay interest or fees on all borrowings
- --------------- hereunder at the following rates:
During Revolving Period: - Libor + 40 bp
- BA Rate + 40 bp
- USBR
- Canadian Prime
<PAGE>
5
Letters of Credit ("L/C")
and Letters of Guarantee
("L/G"): - Financial L/C and/or L/G - 50
bp
- Non-Financial or Performance
L/C and L/G - 25 bp.
- All L/C and L/G's may be
renewed annually at the
discretion of the Lender for
an additional 1 year term.
During Term Period: - All rates increase by 12.5 bp
prorated on commencement of
the Term Period.
Interest on Cdn. Prime Rate and USBR Loans is payable
monthly in arrears on the last Business Day of each month,
on the basis of a year of 365 days. Interest on Libor
Loans is payable in arrears on the last day of the
interest period thereof, or every 3 months if such
interest period exceeds 3 months, on the basis of a year
of 360 days. Stamping fees on B/A's are payable in advance
on the acceptance thereof, calculated on the face amount
of each B/A on the basis of the number of days in its term
in a year of 365 days. Fees in respect of L/C's and L/G's
are payable in advance on issuance thereof, calculated on
the maximum amount available to be drawn thereunder on the
basis of the number of days in its term in a year of 365
days.
Any interest rate based on a period less than a year
expressed as an annual rate for purposes of the Interest
Act (Canada) is equivalent to such determined rate
multiplied by the actual number of days in the calendar
year in which same is to be ascertained and divided by the
number of days in the period upon which it is based.
The Borrower will pay interest on all overdue amounts
(including overdue interest) at Cdn. Prime (for Canadian
Dollars) and USBR (for U.S. Dollars), plus 1% per annum.
All overdue interest is calculated on a daily basis and
will be payable both before and after default, maturity
and judgment.
FEES: Standby fees of 10 bp will be paid quarterly in arrears on
- ---- the undrawn portion of the Facility during the Revolving
Period. For these purposes the amount of borrowings
outstanding in US
<PAGE>
6
Dollars will be notionally converted to Cdn. Dollars at
the exchange rate in effect on the Business Day prior to
the due date for payment.
EVIDENCE OF INDEBTEDNESS:
- ------------------------
The Bank shall open and maintain at the Branch of Account
accounts and records evidencing the principal amount of
each Borrowing, the payment of principal and interest and
all other amounts owing to the Bank under this Agreement.
The Bank's accounts and records constitute, in the absence
of manifest error, conclusive evidence of the indebtedness
of the Borrower to the Bank.
EXPENSES: The Borrower will pay all reasonable costs and expenses
- -------- (including legal fees) incurred in connection with the
review of the Facility Documents, the preservation and/or
enforcement of any of the rights of the Lender under the
Facility Documents, and loss or expenses (including legal
fees) incurred by the Lender as a consequence of any
failure to pay any stamp, registration or other tax to
which the Facility may be subject.
CONDITIONS
PRECEDENT: A) Conditions precedent to implementation of the terms and
- ---------- conditions herein contained are the following:
1) officer's certificate stating that the
Representations and Warranties are true and accurate
in all material respects;
2) internal legal opinion stating that this Facility
Agreement is valid, binding and legally enforceable.
B) Conditions precedent to subsequent drawdowns,
rollovers and conversions will be as follows:
1) receipt of applicable notice; and
2) no Event of Default or Potential Event of Default
has occurred or would occur as a result of such
drawdown, rollover or conversion.
<PAGE>
7
REPRESENTATIONS
AND WARRANTIES: The borrower represents and warrants as follows:
- ---------------
1) it is duly incorporated, validly existing, and duly
registered where required;
2) it has all corporate power and legal capacity to carry
on business and own assets;
3) it has all corporate power and authorization to execute
and deliver the Facility Documents and to perform its
covenants under the Facility Documents;
4) the Facility Documents have been duly executed and
delivered by the Borrower;
5) the Facility Documents create legal, valid, binding and
enforceable obligations of the Borrower;
6) the most recent audited consolidated financial
statements of the Borrower (initially December 31,
1996), fairly present the consolidated financial
condition of the Borrower, as at such date and the
results of operations for the year ended, in accordance
with GAAP consistently applied, and since the most
recent audited financial statements of the Borrower,
there has been no material adverse change in the
consolidated financial position or business operations
of the Borrower;
7) the Borrower has in full force and effect such
insurance policies in amounts covering the properties
and operations of the Borrower as are customarily held
by similar corporations engaged in the same or similar
businesses in the localities where the Borrower's
properties and operations are located;
8) there is no pending or threatened action, suit,
litigation, judgment or proceeding that has a
reasonable likelihood of materially adversely affecting
the Borrower's ability to repay or perform its
obligations under the Facility Documents other than as
disclosed in writing by the Borrower on or prior to the
execution of the Facility Documents;
<PAGE>
8
9) there is no known material environmental liability,
actual or contingent which has not been provided for
in the financial statements of Borrower in accordance
with GAAP; it is in compliance with environmental laws
in all material respects; all necessary material
permits, licenses and other consents required under
environmental laws have been received and are in good
standing, and its properties are not the subject of any
outstanding or threatened order or judgment alleging
violation of environmental laws which if enforced
against the Borrower would have a material adverse
effect on the financial condition, operations or
business of the Borrower;
10) it has unencumbered ownership and clear title to
its assets except for Permitted Encumbrances;
11) all amounts outstanding under the Facility rank at
least pari passu in right of payment with the
Borrower's other most senior unsecured Indebtedness,
other than Indebtedness which is a preferred claim
arising by operation of law or a Permitted Encumbrance;
12) no Event of Default or Potential Event of Default
has occurred and is continuing; and
13) neither the execution and delivery of the Facility
Documents nor compliance with the terms and provisions
thereof will conflict with, result in a breach of, or
constitute a default under any law or regulation, any
court order, judgment or decree, or any agreement or
instrument binding upon the Borrower.
GENERAL COVENANTS: The Borrower will:
- -----------------
1) pay all amounts owing under the Facility Documents when
due;
2) perform its obligations under the Facility Documents;
3) maintain its current corporate existence as a Canadian
corporation;
4) supply to the Lender on a regular basis:
<PAGE>
9
a) annual audited consolidated financial statements of
the Borrower prepared in accordance with GAAP, as
soon as available but in any event within 120 days
of the end of each fiscal year;
b) quarterly unaudited consolidated financial
statements of the Borrower prepared in accordance
with GAAP, as soon as available but in any event
within 90 days of the end of the first 3 fiscal
quarters of each fiscal year, in all cases stating
comparative figures for the corresponding date and
period in the previous fiscal year;
c) a compliance certificate as per Exhibit A within 120
days of the fiscal year end and within 90 days of
the end of the first 3 quarters of each fiscal year
showing the calculation of all Financial Ratios and
including an officer's certificate stating that no
Event of Default or Potential Event of Default has
occurred;
d) Annual information forms or notices of material
change which are required to be filed by the
Borrower with any regulatory authority or securities
exchange;
5) maintain the Interest Coverage Ratio and the Senior
Debt to Capital Ratio (the "Financial Ratios") as
follows:
a) Interest Coverage Ratio on a rolling 4 quarter basis
to be greater than 2.50 times;
b) Senior Debt to Total Capital Ratio to be maintained
below .60:1,
all Financial Ratios to be calculated quarterly on a
consolidated basis, in accordance with GAAP;
6) carry on and conduct its business in a proper and
efficient manner and in compliance with applicable laws
in all material respects;
7) maintain insurance policies covering its material
properties and operations as is customarily maintained
by similar corporations engaged in the same or similar
business;
8) not liquidate, dissolve or wind-up or take any steps or
proceedings in connection therewith;
<PAGE>
10
9) not permit a merger with or into, or a consolidation
or amalgamation with, or transfer all or substantially
all its assets to, another entity, other than a merger
or amalgamation between the Borrower and a Wholly-Owned
Subsidiary, or between Wholly-Owned Subsidiaries:
a) if an Event of Default or Potential Event of Default
exists or would occur and be continuing immediately
before and after giving effect to the transaction;
and
b) unless the successor corporation:
i) agrees to be bound by the Facility Documents;
ii) acknowledges the continuing validity and
enforceability of the Facility Documents;
iii) represents and warrants that the transaction
will not adversely affect the rights and
benefits afforded the Lender under the Facility
Documents;
iv) represents and warrants that the
creditworthiness of the resulting, surviving or
transferee entity is not materially weaker than
the Borrower prior to such action; and
v) provides legal opinions confirming the matters
set forth in paragraphs i), ii), and iii)
above;
10) not permit any lien, mortgage, charge, hypothec, pledge
or any other security interest or encumbrance on its
property or assets, except for Permitted Encumbrances,
unless at the same time or prior to securing any other
Indebtedness, the Borrower grants security for this
Facility which ranks equally and rateably with the
other Indebtedness; and
11) promptly advise the Lender in writing of any Event of
Default or any Potential Event of Default.
ENVIRONMENTAL
INDEMNITY The Borrower will indemnify the Lender for losses or damages
- ------------- incurred as a result of environmental matters that are
attached to the Lender as a result hereof.
<PAGE>
11
EVENTS OF DEFAULT: Events of Default are as follows:
- -----------------
1) nonpayment of principal when due;
2) nonpayment of interest, stamping fees, L/C fees,
or L/G fees due to the Lender for 5 days after the
due date. Nonpayment of standby fees or other fees
due to the Lender in either case for 5 days after
notice of nonpayment;
3) nonpayment of other amounts under the Facility
Documents within 30 days after notice from the
Lender;
4) breach of covenant or other written agreement
(e.g. L/C, L/G, and B/A's) under the Facility
Documents which remains unremedied for 30 days after
notice;
5) materially incorrect or misleading representation
or warranty under the Facility Documents when given;
6) if the Borrower defaults under any obligations to
pay any Indebtedness (excluding under this Agreement)
in an amount in aggregate in excess of $25,000,000 or
its equivalent in any other currency or causes or
permits to exist any default or event of default
under any agreement evidencing Indebtedness
(excluding this Agreement) if the effect of such
default or event of default is to accelerate, or
permit the acceleration of, the maturity of any such
obligations which are of an aggregate amount in
excess of $25,000,000, provided that an occurrence
under this clause will not be an Event of Default, if
within such period that is available under such
agreement for remedying such default or event of
default, such default or event of default is remedied
by the Borrower or duly waived by the relevant lender
in respect of such Indebtedness;
7) if the Borrower becomes insolvent, or institutes
proceedings for its winding-up or dissolution, or to
be adjudicated a voluntary bankrupt, or files an
application seeking reorganization, arrangement,
composition or any other similar relief under any
bankruptcy, arrangement or other similar law, or
files a proposal (or notice of intent to file a
proposal) under any bankruptcy law, or makes an
assignment for the benefit of creditors, or applies
for the appointment of a receiver or receiver-manager
over any of its property, or admits in writing its
inability to pay its debts
<PAGE>
12
generally as they become due, or suspends transaction
of its usual business, or consents to any proceeding
in 8) below;
8) any application is filed or proceeding instituted
against the Borrower to have it adjudged a bankrupt
or insolvent or seeking reorganization, arrangement,
composition or other similar relief under any
bankruptcy, arrangement or any other similar law in
respect of the Borrower, or seeking the appointment
of a receiver, receiver-manager, administrator,
liquidator, trustee or assignee in bankruptcy or
insolvency of the Borrower or its property, or for
the winding-up or dissolution of its affairs, and
such application or proceeding remains in force
undischarged or unstayed for a period of 30 days or
more;
9) final judgment or order in excess of C$25 million
is rendered against the Borrower which is not, within
60 days after entry thereof, bonded, discharged or
stayed pending appeal, or is not discharged within 60
days after the expiration of such stay; or
10) a lien or security interest in excess of $25 million
is enforced against the property of the Borrower or
a Wholly-Owned Subsidiary.
Upon the occurrence and continuance of an Event of
Default: the Lender may declare all Indebtedness under
the Facility to be due and payable, whereupon the same
shall be due and payable, and the Lender will have no
obligation to make further advances, rollovers or
conversions; the Lender will have a right of set off upon
the occurrence and continuance of an Event of Default;
all Libor Loans and USBR Loans may, at the Lender's sole
discretion, be converted to Cdn Prime Rate Loans at any
time and B/A's, L/C's and L/G's must be collateralized by
the Borrower in an escrow account; interest on overdue
amounts shall be payable as provided in "Interest Rates"
above; and, upon the occurrence and continuance of an
Event of Default the Lender may arrange for an
environmental audit at the expense of the Borrower.
INCREASED COSTS
AND CHANGE OF LAW: Increased costs and compensation for reduced return
- ----------------- to the Lender in providing and maintaining the
Facility including those costs arising from capital
adequacy requirements and change of law shall be for
the account of the Borrower. The Lender will not
<PAGE>
13
be obliged to provide advances if rendered illegal or if
market conditions make advances unavailable or
impracticable.
ASSIGNMENT: The Lender reserves the right to sell, assign, transfer
- ---------- or grant participation in the Facility, in whole or in
part, with the consent of the Borrower (such consent not
to be unreasonably withheld) provided that consent of the
Borrower will not be required after an Event of Default
or Potential Event of Default. Assignments will be
permitted in minimum amounts equal to the lesser of (i)
C$10,000,000; and (ii) the remaining commitment of the
Lender.
The Borrower agrees to execute such further documentation
as the Lender may request for the purpose of any
assignment, sale or transfer of the Facility.
CANCELLATION: The undrawn portion of the-Credit Facility may be
- ------------ cancelled without penalty upon three Business Days
notice.
GOVERNING LAW: Governing law will be the laws of the Province of Alberta
- ------------- and Canada applicable therein. Parties submit to Alberta
courts.
JUDGMENT
CURRENCIES: In order to obtain judgments, the Lender can convert
- ---------- currencies to Canadian dollars on a customary basis.
In witness whereof the parties hereto, by executing this document, have agreed
to the terms and conditions as presented herein, with the intention that this
document will form a binding contract between them. Dated on 30 day of May,
1997.
ROYAL BANK OF CANADA
Per: /s/
--------------------------
Per: /s/
--------------------------
NORCEN ENERGY RESOURCES LIMITED
Per: /s/ Robert J. Waters
--------------------------
Robert J. Waters
Treasurer
Per: /s/
--------------------------
<PAGE>
14
DEFINITIONS
-----------
"B/A Rate" means the discount rate at which the Lender's B/A's are purchased by
the Lender or sold into the market by the Borrower.
"Business Day" is a day, other than a Saturday or Sunday, on which the Lender is
open for business in Calgary, Alberta, Toronto, Ontario and New York, New York,
and with respect to Libor Loans, in London, England.
"Cashflow" means, in respect of the Borrower, the aggregate of Consolidated Net
Earnings, Consolidated Interest Expense, Taxes and Non-Cash Items, all without
duplication and determined in accordance with GAAP.
"Cdn. Prime" means the rate of interest per annum, based on a 365 day year,
established and reported by the Lender to the Bank of Canada from time to time
as its reference rate of interest for determination of interest rates which the
Lender charges to customers of varying degrees of creditworthiness in Canada for
Canadian dollar loans made by it in Canada. For purposes of this Facility, the
Cdn. Prime will be the higher of the stated rate by the Lender or CDOR plus 1%.
"CDOR" means the average yield to maturity for bankers' acceptances which is
quoted on Reuter's Canadian Discount Offer Rate screen at 10:00 a.m. Toronto
time on the applicable date of advance for B/A's having a term to maturity of 1
month.
"Consolidated Interest Expense" means consolidated interest, whether expensed or
capitalized, in respect of Indebtedness determined in accordance with GAAP.
"Consolidated Net Earnings" means consolidated net income or loss as reported on
the Borrower's consolidated statement of earnings excluding income from
discontinued operations determined in accordance with GAAP.
"Consolidated Tangible Net Worth" means, on a consolidated basis determined in
accordance with GAAP, at any time, the sum of:
a) the Borrower's total shareholder equity; and
b) Subordinated Indebtedness;
less:
c) any amounts of goodwill attributable to the Borrower.
"Facility Documents" means:
a) this letter agreement between the Borrower and the Lender; and
b) such other documents and certificates which in the opinion of
the Lender, acting reasonably, are required to fully document or
satisfy the terms and conditions herein contained.
<PAGE>
15
"Fed Funds Rate" means, for any day, the rate set forth in the Federal Reserve
Bank of New York's weekly statistical release designated at H.15(519), opposite
the caption "Federal Funds (Effective)" for that day, or (if that day is not a
Business Day) for the next preceding Business Day.
"Funded Debt" means, all Indebtedness payable more than one year from the date
of creation thereof including current maturities of such Indebtedness and
Indebtedness which by its terms is renewable to a due date beyond one year;
excluding Subordinated Indebtedness.
"GAAP" means generally accepted accounting principles which are in effect from
time to time in Canada.
"Guarantees" means an undertaking to become liable for indebtedness for borrowed
money as presented on consolidated financial statements of Borrower.
"Hostile Acquisition" means an offer to acquire shares of a corporation, which
is required to be reported to an applicable securities regulatory authority,
where the board of directors of the target corporation has not approved such
offer nor recommended to the shareholders of the corporation that they sell
their shares pursuant to the proposed offer.
"Indebtedness" means all items in the consolidated financial statements of the
Borrower classified as liabilities for money borrowed in accordance with GAAP
(and will include capitalized leases, and Guarantees or endorsements (other than
of notes, bills and cheques presented to banks for collection or deposit in the
ordinary course of business) of indebtedness of others by the Borrower or
Subsidiaries, to the extent required by GAAP).
"Interest Coverage Ratio" means Cashflow divided by Consolidated Interest
Expense.
"Libor" means the rate of interest per annum, based on a 360 day year, as
determined by the Lender (rounded upwards, if necessary to the nearest whole
multiple of 1/16th of 1%) at which the Lender, in accordance with its normal
practice, would be prepared to offer U.S. dollar deposits to leading banks in
the Interbank Euro Currency Market, London, England at approximately 10:00 a.m.
(New York time) on the second Business Day before the first day of, in an amount
similar to, and for the period similar to the interest period of, a requested
Libor Loan.
"Non-Cash Items" means depreciation, depletion, amortization, foreign exchange
translation gains or losses and other non-cash items included in the calculation
of Consolidated Net Earnings as reported on the Borrower's consolidated
statement of earnings as determined in accordance with GAAP.
"Permitted Acquisition" means a direct or indirect acquisition by the Borrower
which is not a Hostile Acquisition.
"Permitted Encumbrances" means:
<PAGE>
16
a) any security interest, except on fixed assets or on shares of any
Subsidiary or affiliate, given in the ordinary course of business to
any bank or other financial institution, to secure indebtedness payable
on demand or maturing within 12 months of the date that such
indebtedness is originally incurred provided that the total indebtedness
so secured does not exceed $25 million;
b) any Purchase Money Mortgage;
c) Risk Management Liens where the aggregate value of all cash and
securities will not at any time exceed $25 million;
d) any security interest on any petroleum and natural gas right, tangible
assets associated therewith or the products derived therefrom or the
proceeds of sale of such products, to secure production payments,
royalties, carried interests and similar obligations or to secure
obligations in connection with or necessarily incidental to commitments
or purchase and sale of, or the transportation or distribution of,
products derived from the petroleum and natural gas right, including
without limitation forward sales;
e) any security interest on any resource property of the Borrower that has
not been in commercial production during the 12-month period ending on
the date hereof or has not been in commercial production during the
12-month period ending at the time of the imposition of such security to
secure any indebtedness incurred for the development or improvement
thereof or the development or improvement of any other resource property
of the Borrower that has not been in commercial production during the
12-month period ending on the date hereof or has not been in commercial
production during the 12-month period ending at the time of the
imposition of such security;
f) any security interest in favour of the government of any country in
which the Borrower owns assets or carries on business or the government
of any province, state, municipality or other political subdivision in
any such country, or any department or agency of any such government,
given pursuant to a contract, concession, lease, license, franchise,
grant, permit or other instrument pertaining to such assets or business
or required by applicable laws;
g) liens for taxes, assessments or other governmental charges not yet due
or, if due, the validity of which is being contested in good faith, and
liens for the excess of the amount of any past due taxes for which a
final assessment has not been received over the amount of such taxes as
estimated and paid by the Borrower;
h) unless it constitutes an Event of Default, the lien of any judgment
rendered or claim filed against the Borrower, which is being contested
in good faith by the Borrower;
<PAGE>
17
i) undetermined or inchoate liens and charges (including builders',
mechanics', warehousemen's carriers' and other similar liens) incidental
to construction or current operations which relate to obligations not
due or delinquent or which are being contested in good faith by the
Borrower;
j) liens incurred or created in the ordinary course of business on any
particular petroleum and natural gas right and or on any tangible assets
associated therewith as security, in favour of any other person who is
conducting the exploration, exploitation, development or operation of
the property or asset to which such petroleum and natural gas right
relates, to secure payment by the Borrower of its proportion of the
costs and expenses of such exploration, exploitation, development or
operation incurred by such other person;
k) any security interest given by the Borrower to a public utility or
municipality or governmental or other public authority when required by
such utility or municipality or other authority in connection with
utility or municipal services required for the operations of the
Borrower in the ordinary course of its business;
l) any security on a lease or other instrument permitting the extraction of
substances other than crude oil, natural gas, natural gas liquids and
related products by the Borrower, provided that any such lease does not
interfere with the enjoyment by the Borrower of any petroleum and
natural gas right;
m) any renewal, refunding or extension of any security interest or
encumbrance referred to in the foregoing clauses a) or l) or of any
security interest or encumbrance on any property in existence at the
time of acquisition thereof, in which the indebtedness thereby secured
after such renewal, refunding or extension is not increased and the
security interest or encumbrance is limited in its recourse to the
property originally subject thereto and any improvements thereon; and
n) any security interest or encumbrance, other than those referred to in
the foregoing clauses a) to m), created by the Borrower if, after giving
effect to the creation of such security interest or encumbrance, the
aggregate principal amount of the indebtedness secured thereby would not
be greater than C$25,000,000.
"Potential Event of Default" means an event that would constitute an Event of
Default with the giving of notice, lapse or time or both.
"Purchase Money Mortgage" means any mortgage, charge, hypothec, pledge or other
security or encumbrance created upon any real or personal property acquired by
the Borrower after the date hereof (or previously acquired and substantially
unimproved) to secure or securing the whole or any part of the purchase price of
such property (or, in the case of previously acquired and substantially
unimproved property, the cost of the improvement thereof) or the repayment of
money borrowed to pay the whole or any part of such purchase price or cost, or
any vendor's
<PAGE>
18
privilege or lien on such property securing all or any part of such purchase
price or cost, including title retention agreements and leases in the nature of
title retention agreements.
"Risk Management Liens" means liens on cash or marketable securities of the
Borrower granted in connection with any interest rate, foreign exchange or
commodity risk management arrangements provided:
a) the Borrower reasonably expects to produce sufficient commodities of
the type in question in the ordinary course of business to fulfill such
contracts; and
b) the obligations secured by such liens are not due and delinquent.
"Senior Debt" means all Funded Debt that ranks senior to Subordinated
Indebtedness.
"Senior Debt to Total Capital Ratio" means Senior Debt divided by Total Capital.
"Subordinated Indebtedness" means Indebtedness that is subordinate in all
circumstances including bankruptcy, in right of payment to Indebtedness under
this Facility and Senior Debt.
"Subsidiary" means any corporation a majority of the shares carrying voting
rights of which are at the time owned or controlled directly or indirectly by
the Borrower.
"Taxes" means income taxes on the Borrower's consolidated statement of earnings
determined in accordance with GAAP.
"Total Capital" means Senior Debt plus Consolidated Tangible Net Worth.
"USBR" or "US Base Rate" means the rate of interest per annum, based on a 365
day year, established by the Lender from time to time as a reference rate for
the determination of interest rates that the Lender charges to customers of
varying degrees of creditworthiness for US dollar loans made by it in Canada.
For purposes of this Facility, the US Base Rate will be the higher of the stated
rate by the Lender or the Fed Funds Rate plus 1%.
"Wholly-Owned Subsidiary" means any Subsidiary in which all of the issued and
outstanding voting shares of each class of its capital are owned directly or
indirectly by the Borrower except that director's qualifying shares need not be
so owned.
<PAGE>
AMENDED AND RESTATED
--------------------
EXTENDIBLE REVOLVING TERM CREDIT FACILITY
-----------------------------------------
This Agreement amends and restates in full the Loan Agreement dated March 17,
1995 and the Amended and Restated Extendible Revolving Term Credit Facility
Agreement dated June 28, 1996 between the Borrower and the Lender.
May 29, 1997
BORROWER: Norcen Energy Resources Limited (Norcen).
FACILITY: Extendible Revolving Term Credit Facility.
AMOUNT: Cdn. $100,000,000 or the U.S. dollar equivalent.
PURPOSE: For general corporate purposes, including commercial
paper backstop, capital expenditures, short term
working capital needs, refinancing existing bank
indebtedness and for Permitted Acquisitions.
LENDER: The Toronto-Dominion Bank
AVAILABILITY PERIOD: The Facility will revolve and fluctuate for a period
of 364 days ("Revolving Period"), subject to renewal
as provided below, followed by a 2 year non-revolving
term loan ("Term Period") with a bullet payment at
the end of the Term Period.
REPAYMENT: Revolving Period
The Revolving Period ends May 28, 1998. The Revolving
Period may be extended from time to time at the
Lender's sole discretion for up to 364 days, within
30 days after the Borrower's request which may not be
made more than twice in any 12 month period. The
Borrower's request for extension will include a
restatement of the Representations and Warranties. No
response from the Lender within 30 days of the
request shall mean that an extension is not granted.
<PAGE>
2
Term Period
The Term Period commences on the day after the last
day of the Revolving Period and ends two years
thereafter. Any underdrawn portion of the Facility
will be canceled at the end of the Revolving Period.
Any prepayment during the Term Period will constitute
a permanent reduction of the Facility. For greater
certainty, the rollover of a B/A or Libor Loan does
not constitute a prepayment during the Term Period.
RANKING: All amounts outstanding under the Facility will be
senior unsecured obligations of the Borrower ranking
pari passu with all existing and future Senior Debt
of the Borrower, other than indebtedness secured by
Permitted Encumbrances which under applicable law
ranks in priority thereto. The Facility will at all
times rank senior to any existing or future
Subordinated Indebtedness.
AVAILMENTS: The Facility will be available by way of the
following:
o Canadian dollar prime loans ("Cdn. Prime
Rate Loans");
o US dollar base rate loans ("USBR
Loans");
o Canadian dollar bankers' acceptances
("B/A's");
o US dollar London interbank offer rate loans
("Libor Loans"); and
o US dollar or Canadian dollar letters of
credit or guarantee.
CURRENCY EXCESS: If at any time the Canadian dollar equivalent of all
outstanding advances based on the noon (Toronto time)
Bank of Canada exchange rate exceeds the available
facility amount (a "Currency Excess"), the Borrower
will repay forthwith Cdn. Prime Rate Loans or USBR
Loans until such time as the Currency Excess is
eliminated. If a Currency Excess remains after
repayment of all Cdn. Prime Rate Loans or USBR Loans,
then the Borrower will:
1) collateralize dollar for dollar the Currency
Excess with Canadian or US dollar deposits, or
2) repay any Libor Loans, as well as any expenses
associated with breaking a Libor Loan prior to
maturity, or
<PAGE>
3
3) any combination of the foregoing.
BORROWING AND
NOTICE PROVISIONS: A) The Borrower may borrow as follows:
o Cdn. Prime Rate Loans in minimum
amounts of CSI million and
multiples of $100,000 thereafter;
o USBR Loans in minimum amounts of
US$I million and multiples of
$100,000 thereafter;
o advances of B/A's will, subject to
availability, be issued for periods
of 30,60, 90, 120 or 180 days, or
such other period as is agreed to
by the Lender, in minimum amounts
of C$1 million and multiples of
C$100,000 thereafter unless other
wise determined by the market for
B/A's; and
o Libor Loans, with maturities of 1,
2, 3 or 6 months, or such other
period which as is agreed to by the
Lender, in minimum amounts of US
million and multiples thereof
B) The following notice provisions will apply to
drawdowns, repayments, rollovers and conversions:
Prime Rate/USBR Loans
o up to $10,000,000; by 10:00 a m.
(Calgary time), same Business Day
notice is required;
o between $10,000,000 and
$50,000,000; by 10:00 a.m.(Calgary
time), one Business Day prior
notice is required; and
o over $50,000,000; by 10:00 a.m.
(Calgary time), 2 Business Days
prior notice is required.
<PAGE>
4
B/A's
To the extent that the Borrower markets the
B/A's, no notice is required. Should the Borrower
request the Lender to market the B/A's then the
following notice provisions shall apply:
o same Business Day, 10:00 a.m.
(Calgary time), notice is required.
LIBOR Loans
o 3 banking days (in London and
Calgary) prior notice.
The Borrower may repay any part of the
outstanding amount without penalty subject to
applicable notice periods and provided that B/A's
and Libor Loans may be repaid on maturity dates
only, unless, in the case of Libor Loans, the
Borrower pays the expenses associated with
breaking the Libor Loan prior to maturity.
INTEREST RATES: During Revolving Period: - Libor + 40 bp
- B/A Rate + 40 bp
- USBR
- Canadian Prime
Letters of Credit ("L/C")
and Letters of Guarantee
("L/G"): - Financial L/C and/or L/G -
50 bp
- Non-Financial or
Performance L/C and L/G -
25 bp.
- All L/C and L/G's may be
renewed annually at the
discretion of the Lender
for an additional 1 year
term.
During Term Period: - All rates increase by
12.5 bp
<PAGE>
5
Interest based on Cdn. Prime Rate and USBR Loans
will be calculated on a 365 or 366 day year, as
applicable, and payable monthly in arrears on the
last banking day of the month.
BA fees are payable at the time of endorsement and
are calculated based on a 365-day or 366-day year.
Interest on Libor Loans will be based on the
Telerate screen #3750 rate two days prior to
funding and on a 360-day year. Interest is payable
on rollover dates, or if the period of advance
exceeds 3 months, interest will accrue and be
payable on the day which is 3 months after the
first day of such period, and on the last day of
the Libor Loan.
Any interest rate based on a Period less than a year
expressed as an annual rate for purposes of the
Interest Act (Canada) is equivalent to such
determined rate multiplied by the actual number of
days in the calendar year in which same is to be
ascertained and divided by the number of days in
the period upon which it is based.
The Borrower will pay interest on all overdue
amounts (including overdue interest) at the
Interest Rate specified in this Agreement plus 1%
per annum. All overdue interest is calculated on a
daily basis and will be payable both before and
after default, maturity and judgement.
FEES: Standby Fees of 10 bp will be paid quarterly in
arrears on the undrawn portion of the Facility
during the Revolving Period. For these purposes,
the amount of borrowings outstanding in US Dollars
will be notionally converted to Cdn. Dollars at
the exchange rate in effect on the Business day
prior to the due date for payment of Standby Fees.
EXPENSES: The Borrower will pay all reasonable costs and
expenses (including legal fees) incurred in
connection with the review and preparation of the
Facility Documents, the preservation and/or
enforcement of any of the rights of the Lender
under the Facility, and loss or expenses
(including legal fees) incurred by the Lender as a
consequence of any failure to pay any stamp,
registration or other tax to which the Facility
may be subject.
<PAGE>
6
CONDITIONS
PRECEDENT: A) Conditions precedent to the acceptance and
implementation of this Agreement are the
following:
1) officer's certificate stating that the
Representations and Warranties are true and
accurate in all material respects;
2) internal legal opinion stating that this
Agreement is valid, binding and legally
enforceable against the Borrower.
B) Conditions precedent to subsequent
drawdowns, rollovers and conversions
will be as follows:
1) receipt of applicable notice; and
2) no Event of Default or Potential Event
of Default has occurred or would occur
as a result of such drawdown, rollover
or conversion.
REPRESENTATIONS
AND WARRANTIES: Representations and Warranties are the following:
1) corporate existence of the Borrower;
2) corporate power and legal capacity of
the Borrower to carry on business and
own assets;
3) corporate power and authorization of the
Borrower to execute and deliver the
Facility Documents and to perform
covenants under the Facility Documents;
4) Facility Documents have been duly
executed and delivered by the Borrower;
5) Facility Documents create legal, valid,
binding and enforceable obligations of
the Borrower;
6) the most recent audited consolidated
financial statements of the Borrower
(initially December 31, 1996), fairly
present the consolidated financial
condition of the Borrower, as at such
date and the results of operations for
the year ended, in accordance with GAAP
consistently applied, and since the most
recent audited financial statements of
the Borrower, there has been no material
adverse change in the
<PAGE>
7
consolidated financial position or business
operations of the Borrower;
7) the Borrower has in full force and
effect such insurance policies in
amounts covering the properties and
operations of the Borrower as are
customarily held by similar corporations
engaged in the same or similar
businesses in the localities where the
Borrower's properties and operations are
located;
8) no pending or threatened action, suit,
litigation, judgement or proceeding that has a
reasonable likelihood of materially adversely
affecting the Borrower's ability to repay or
perform its obligations under the Facility
Documents other than as disclosed in writing by
the Borrower on or prior to the execution of the
Facility Documents;
9) no known material environmental liability,
actual or contingent which has not been provided
for in the financial statements of Borrower in
accordance with GAAP; compliance with
environmental laws in all material respects; all
necessary material permits, licenses and other
consents required under environmental laws have
been received and are in good standing, and
properties are not the subject of any outstanding
or threatened order or judgement alleging
violation of Environmental Laws which if enforced
against the Borrower would have a material
adverse effect on the financial condition,
operations or business of the Borrower;
10) unencumbered ownership and clear title to
assets except for Permitted Encumbrances;
11) all amounts outstanding under the Facility
rank at least pari passu in right of payment with
the Borrower's other most senior unsecured
Indebtedness, other than Indebtedness which is a
preferred claim arising by operation of law or a
Permitted Encumbrance; and
12) no Event of Default or Potential Event of
Default has occurred and is continuing.
GENERAL COVENANTS: The Borrower will:
1) pay all amounts owing under the Facility when
due;
<PAGE> 8
2) perform its obligations under the Facility
Documents;
3) maintain its corporate existence;
4) supply to the Lender on a regular basis:
a) annual audited consolidated financial
statements of the Borrower prepared in
accordance with GAAP, as soon as
available but in any event within 120
days of the end of each fiscal year;
b) quarterly unaudited consolidated
financial statements of the Borrower
prepared in accordance with GAAP, as
soon as available but in any event
within 90 days of the end of the first
3-fiscal quarters of each fiscal year,
in all cases stating comparative figures
for the corresponding date and period in
the previous fiscal year;
c) a compliance certificate as per Exhibit
A within 120 days of the fiscal year end
and within 90 days of the end of the
first 3 quarters of each fiscal year
showing the calculation of all Financial
Ratios and including an officer's
certificate stating that no Event of
Default or Potential Event of Default
has occurred;
d) Annual information forms or notices of
material change which are required to be
filed by the Borrower with any
regulatory authority or securities
exchange;
5) maintain the Interest Coverage Ratio and the
Senior Debt to Capital Ratio (the "Financial
Ratios") as follows:
a) Interest Coverage Ratio on a rolling 4
quarter basis to be greater than 2.50
times;
b) Senior Debt to Total Capital Ratio to be
maintained below.60:1,
all Financial Ratios to be calculated quarterly
on a consolidated basis, in accordance with GAAP;
<PAGE>
9
6) carry on and conduct its business in a
proper and efficient manner and in
compliance with applicable laws in all
material respects;
7) maintain insurance policies covering
its material properties and operations as is
customarily maintained by similar corporations
engaged in the same or similar business;
8) not liquidate, dissolve or wind-up or take any
steps or proceedings in connection therewith;
9) not permit a merger with or into, or a
consolidation or amalgamation with, or transfer
all or substantially all its assets to, another
entity, other than a merger or amalgamation
between the Borrower and a Wholly-Owned
Subsidiary, or between Wholly-Owned Subsidiaries:
a) if an Event of Default or Potential
Event of Default exists or would occur
and be continuing immediately before and
after giving effect to the transaction;
and
b) unless the successor corporation:
i) agrees to be bound by the Facility
Documents;
ii) acknowledges the continuing validity and
enforceability of the Facility
Documents;
iii) represents and warrants that the
transaction wi11 not adversely affect
the rights and benefits afforded the
Lender under the Facility Documents;
iv) represents that the creditworthiness of
the resulting, surviving or transferee
entity is not materially weaker than the
Borrower prior to such action; and
v) provides legal opinions confirming the
matters set forth in paragraphs i), ii),
and iii) above.
<PAGE>
10
10) not permit any lien, mortgage, charge, hypothec,
pledge or any other security interest or
encumbrance on its property or assets, except for
Permitted Encumbrances, unless at the same time
or prior to securing any other Indebtedness, the
Borrower grants security for this Facility which
ranks equally and rateably with the other
Indebtedness.
EVENTS OF DEFAULT: Events of Default are as follows:
1) nonpayment of principal when due;
2) nonpayment of interest or stamping fees due to
the Lender for 5 days after the due date, and
non-payment of standby fees, letter of credit
fees or other fees due to the Lender in either
case for 5 days after notice of nonpayment.
3) nonpayment of other amounts under the Facility
within 30 days after notice from the Lender;
4) breach of covenant under the Facility which
remains unremedied for 30 days after notice;
5) materially incorrect or misleading
representation or warranty under the Facility
when given;
6) cross default to any defaulted Indebtedness of
the Borrower in excess of C$25 million and any
applicable period of grace has expired;
7) bankruptcy, insolvency, cessation of business
or other dissolution proceedings of the Borrower
(30 day cure period if involuntary bankruptcy
applies);
8) final judgement or order in excess of C$25
million is rendered against the Borrower which is
not, within 60 days after entry thereof, bonded,
discharged or stayed pending appeal, or is not
discharged within 60 days after the expiration of
such stay; or
9) a lien or security interest in excess of $25
million is enforced against the property of the
Borrower or a Wholly-Owned Subsidiary.
<PAGE>
11
Upon the occurrence and continuance of an Event of
Default: the Lender may declare all Indebtedness
under the Facility to be due and payable, and the
Leader will have no obligation to make further
advances, rollovers or conversions; the Lender
will have right of set off upon the occurrence and
continuance of an Event of Default; all Libor
Loans and USBR Loans may, at the Lender's sole
discretion, be converted to Cdn Prime Rate Loans
at any time and B/A's and letters of credit must
be collateralized by the Borrower in an escrow
account; interest will be calculated at the
default rate of 1% per annum above the Applicable
Credit Spread; and, upon the occurrence and
continuance of an Event of Default the Lender may
arrange for an environmental audit at the expense
of the Borrower.
INCREASED COSTS
AND CHANGE OF LAW: Increased costs to the Lender in providing and
maintaining the Facility including those costs
arising from capital adequacy requirements and
change of law to be for the account of the
Borrower. The Lender will not be obliged to
provide advances if rendered illegal.
ASSIGNMENT: The Lender reserves the right to sell, assign,
transfer or grant participation in the Facility,
in whole or in part, with the consent of the
Borrower (such consent not to be unreasonably
withheld) provided that consent of the Borrower
will not be required after an Event of Default or
Potential Event of Default. Assignments will be
permitted in minimum amounts equal to the lesser
of (i) C$10,000,000; and (ii) the remaining
commitment of the Lender.
The Borrower agrees to execute such further
documentation as the Lender may request for the
purpose of any assignment, sale or transfer of the
Facility.
CANCELLATION: The undrawn portion of the Credit Facility may be
cancelled without penalty upon 3 Business Days
notice.
GOVERNING LAW: Governing law will be the laws of the Province of
Alberta and Canada applicable therein.
<PAGE>
12
In witness whereof the parties hereto, by executing this document, are agreeable
to the terms and conditions as presented herein; Dated on, the 29 day of May,
1997.
THE TORONTO-DOMINION BANK
Per: /s/ Dean Ariss
--------------
Dean Ariss
Per: /s/
--------------
NORCEN ENERGY RESOURCES LIMITED
Per: /s/ Robert J. Waters
--------------------
Robert J. Waters, Treasurer
Per: /s/
--------------------
<PAGE>
13
DEFINITIONS
"Applicable Credit Spread" means:
- with respect to Canadian Prime Rate Loans...... nil
- with respect to USBR Loans..................... nil
- with respect to Libor Loans.................... 40 bp
- with respect to B/A's.......................... 40 bp (stamping fee)
"B/A Rate" means the discount rate at which the Lender's B/A's are purchased by
the Lender or sold into the market by the Borrower.
"Business Day" is a day, other than a Saturday or Sunday, on which the Lender is
open for business in Calgary, Alberta, Toronto, Ontario and New York, New York,
and with respect to Libor Loans, in London England.
"Cashflow" means, in respect of the Borrower, the aggregate of Consolidated Net
Earnings, Consolidated Interest Expense, Taxes and Non-Cash Items, all without
duplication and determined in accordance with GAAP.
"Cdn. Prime" means the rate of interest per annum, based on a 365 day year,
established and reported by the Lender to the Bank of Canada from time to time
as its reference rate of interest for determination of interest rates which the
Lender charges to customers of varying degrees of creditworthiness in Canada for
Canadian dollar loans made by it in Canada. For purposes of this Facility, the
Cdn. Prime will be the higher of the stated rate by the Lender or CDOR plus the
Applicable Credit Spread.
"CDOR" means the average yield to maturity for bankers' acceptances which is
quoted on Reuters Canadian Discount Offer Rate screen at 10:00 a.m. Toronto
time on the applicable date of advance for B/A's having a term to maturity of 1
month.
"Consolidated Interest Expense" means consolidated interest, whether expensed or
capitalized, in respect of Indebtedness determined in accordance with GAAP.
"Consolidated Net Earnings" means consolidated net income or loss as reported on
the Borrower's consolidated statement of earnings excluding income from
discontinued operations determined in accordance with GAAP.
"Consolidated Tangible Net Worth" means, on a consolidated basis determined in
accordance with GAAP, at any time, the sum of:
a) the Borrower's total shareholder equity; and
b) Subordinated Indebtedness;
less:
c) any amounts of goodwill attributable to the Borrower.
<PAGE>
14
"Facility Documents" means:
a) this letter agreement between the Borrower and the Lender; and
b) such other documents and certificates which in the opinion
of the Lender, acting reasonably, are required to fully
document or satisfy the terms and conditions herein contained.
"Fed Funds Rate" means the rate set forth in the Federal Reserve Bank of New
York weekly statistical release designated at H.15(519), opposite the caption
"Federal Funds (Effective)".
"Funded Debt" means all Indebtedness payable more than one year from the date of
creation thereof including current maturities of such Indebtedness and
Indebtedness which by its terms is renewable to a due date beyond one year;
excluding Subordinated Indebtedness.
"GAAP" means generally accepted accounting principles which are in effect from
time to time in Canada.
"Guarantees" means an undertaking to become liable for indebtedness for borrowed
money as presented on consolidated financial statements of Borrower.
"Hostile Acquisition" means an offer to acquire shares of a corporation, which
is required to be reported to an applicable securities regulatory authority,
where the board of directors of the target corporation has not approved such
offer nor recommended to the shareholders of the corporation that they sell
their shares pursuant to the proposed offer,
"Indebtedness" means all items in the consolidated financial statements of the
Borrower classified as liabilities for money borrowed in accordance with GAAP
(and will include capitalized leases, and Guarantees or endorsements (other than
of notes, bills and checks presented to banks for collection or deposit in the
ordinary course of business) of indebtedness of others by the Borrower or a
Wholly-Owned Subsidiary, to the extend required by GAAP).
"Interest Coverage Ratio" means Cashflow divided by Consolidated Interest
Expense.
"Libor" means the rate of interest per annum based on a 360 day year at which
the Lender makes available United States dollars which are obtained by the
Lender in the Interbank Euro Currency Market, London, England at approximately
10:00 a.m. (New York time) on the second Business Day before the first day of,
and in an amount similar to, and for the period similar to the interest period
of such advance.
"Non-Cash Items" means depreciation, depletion, amortization, foreign exchange
translation gains or losses and other non-cash items included in the calculation
of Consolidated Net Earnings as reported on the Borrower's consolidated
statement of earnings as determined in accordance with GAAP.
<PAGE>
15
"Permitted Acquisition" means a direct or indirect acquisition by the
Borrower which is not a Hostile Acquisition.
"Permitted Encumbrances" means:
a) any security interest, except on fixed assets or on shares
of any Subsidiary or affiliate, given in the ordinary course
of business to any bank or other financial institution, to
secure indebtedness payable on demand or maturing within 12
months of the date that such indebtedness is originally
incurred provided that the total indebtedness so secured
does not exceed $25 million;
b) any Purchase Money Mortgage;
c) Risk Management Liens where the aggregate value of all cash
and securities will not at any time exceed $25 million;
d) any security interest on any petroleum and natural gas
right, tangible assets associated therewith or the products
derived therefrom or the proceeds of sale of such products,
to secure production payments, royalties, carried interests
and similar obligations or to secure obligations in
connection with or necessarily incidental to commitments or
purchase and sale of, or the transportation or distribution
of, products derived from the petroleum and natural gas
right, including without limitation forward sales;
e) any security interest on any resource property of the
Borrower that has not been in commercial production during
the 12-month period ending on the date hereof, or has not
been in commercial production during the 12-month period
ending at the time of the imposition of such security to
secure any indebtedness incurred for the development or
improvement thereof or the development or improvement of any
other resource property of the Borrower that has not been
in commercial production during the 12-month period ending
on the date hereof or has not been in commercial production
during the 12-month period ending at the time of the
imposition of such security;
f) any security interest in favor of the government of any
country in which the Borrower owns assets or carries on
business or the government of any province, state,
municipality or other political subdivision in any such
country, or any department or agency of any such government,
given pursuant to a contract, concession, lease, license,
franchise, grant, permit or other instrument pertaining to
such assets or business or required by applicable laws;
<PAGE>
16
g) liens for taxes, assessments or other governmental charges
not yet due or, if due, the validity of which is being
contested in good faith, and liens for the excess of the
amount of any past due taxes for which a final assessment
has not been received over the amount of such taxes as
estimated and paid by the Borrower;
h) unless it constitutes an Event of Default, the lien of any
judgement rendered or claim filed against the Borrower,
which is being contested in good faith by the Borrower;
i) undetermined or inchoate liens and charges (including
builders', mechanics', warehousemen's carriers' and other
similar liens) incidental to construction or current
operations which relate to obligations not due or delinquent
or which are being contested in good faith by the Borrower;
j) liens incurred or created in the ordinary course of business
on any particular petroleum and natural gas right and or on
any tangible assets associated therewith as security, in
favour of any other person who is conducting the
exploration, exploitation, development or operation of the
property or asset to which such petroleum and natural gas
right relates, to secure payment by the Borrower of its
proportion of the costs and expenses of such exploration,
exploitation, development or operation incurred by such
other person;
k) any security interest given by the Borrower to a public utility or
municipality or governmental or other public authority when
required by such utility or municipality or other authority in
connection with utility or municipal services required for the
operations of the Borrower in the ordinary course of its business;
1) any security interest on a lease or other instrument permitting the
extraction of substances other than crude oil, natural gas, natural
gas liquids and related products by the Borrower, provided that any
such lease does not interfere with the enjoyment by the Borrower of
any petroleum and natural gas right;
m) any renewal, refunding or extension of any security interest or
encumbrance referred to in the foregoing clauses a) or 1) or of any
security interest or encumbrance on any property in existence at
the time of acquisition thereof, in which the indebtedness thereby
secured after such renewal, refunding or extension is not increased
and the security interest or encumbrance is limited in its recourse
to the property originally subject thereto and any improvements
thereon; and
n) any security interest or encumbrance, other than those referred to
in the foregoing clauses a) to m), created by the Borrower if,
after giving effect to the creation of such security interest or
encumbrance, the aggregate principal amount of the indebtedness
secured thereby would not be greater than C$25,000,000.
<PAGE>
17
"Potential Event of Default" means an event that would constitute an Event of
Default with the giving of notice, lapse or time or both.
"Purchase Money Mortgage" means any mortgage, charge, hypothec, pledge or other
security or encumbrance created upon any real or personal property acquired by
the Borrower after the date hereof (or previously acquired and substantially
unimproved) to secure or securing the whole or any part of the purchase price of
such property (or, in the case of previously acquired and substantially
unimproved property, the cost of the improvement thereof) or the repayment of
money borrowed to pay the whole or any part of such purchase price or cost, or
any vendor's privilege or lien on such property securing all or any part of such
purchase price or cost, including title retention agreements and leases in the
nature of title retention agreements.
"Risk Management Liens" means liens on cash or marketable securities of the
Borrower granted in connection with any interest rate, foreign exchange or
commodity risk management
arrangements provided:
a) the Borrower reasonably expects to produce sufficient
commodities of the type in question in the ordinary course of
business to fulfill such contracts; and
b) the obligations secured by such Hens are not due and delinquent.
"Senior Debt" means all Funded Debt that ranks senior to Subordinated
Indebtedness.
"Senior Debt to Total Capital Ratio" means, Senior Debt divided by Total
Capital.
"Subordinated Indebtedness" means Indebtedness that is subordinate in all
circumstances including bankruptcy, in right of payment to Indebtedness under
this Facility and Senior Debt.
"Subsidiary" means any corporation a majority of the shares carrying voting
rights of which are at the time owned or controlled directly or indirectly by
the Borrower.
"Taxes" means income taxes on the Borrower's consolidated statement of earnings
determined in accordance with GAAP.
"Total Capital" means Senior Debt plus Consolidated Tangible Net Worth.
"USBR" or "US Base Rate" means the rate of interest per annum, based on a 365
day year, established by the Lender from time to time as a reference rate for
the determination of interest rates that the Lender charges to customers of
varying degrees of creditworthiness for US dollar loans made by it in Canada.
For purposes of this Facility, the US Base Rate will be the higher of the stated
rate by the Lender or the Fed Funds Rate plus 1%.
<PAGE>
18
"Wholly-Owned Subsidiary" means any Subsidiary in which all of the issued and
outstanding voting shares of each class of its capital are owned directly or
indirectly by the Borrower except that director's qualifying shares need not be
so owned.
* * * *
<PAGE>
AMENDED AND RESTATED
--------------------
EXTENDIBLE REVOLVING TERM CREDIT FACILITY
-----------------------------------------
This Agreement amends and restates in full the Loan Agreement dated April 19,
1995 and the Amended and Restated Extendible Revolving Term Credit Facility
dated June 28, 1996 between the Borrower and the Lender.
May 29, 1997
BORROWER: Norcen Energy Resources Limited (Norcen).
- ---------
FACILITY: Extendible Revolving Term Credit Facility.
- --------
AMOUNT: Cdn. $50,000,000 or the U.S. dollar equivalent.
- ------
PURPOSE: For general corporate purposes, including commercial paper
- ------- backstop, capital expenditures, short term working capital needs,
refinancing existing bank indebtedness and for Permitted
Acquisitions.
LENDER: Union Bank of Switzerland (Canada) ("UBS")
- ------
AVAILABILITY
PERIOD: The Facility will revolve and fluctuate for a period of 364 days
- ------------ ("Revolving Period"), subject to renewal as provided below,
followed by a 2 year non-revolving term loan ("Term Period") with
a bullet payment at the end of the Term Period.
REPAYMENT: Revolving Period
- --------- ----------------
The Revolving Period ends May 28, 1998. The Revolving Period may
be extended from time to time at the Lender's sole discretion for
up to 364 days, within 30 days after the Borrower's request which
may not be made more than twice in any 12 month period. The
Borrower's request for extension will include a restatement of the
Representations and Warranties. No response from the Lender within
30 days of the request shall mean that an extension is not
granted.
<PAGE>
2
Term Period
-----------
The Term Period commences on the day after the last day of the
Revolving Period and ends two years thereafter. Any undrawn
portion of the Facility will be canceled at the end of the
Revolving Period. Any prepayment during the Term Period will
constitute a permanent reduction of the Facility. For greater
certainty, the rollover of a B/A or Libor Loan does not constitute
a prepayment during the Term Period.
RANKING: All amounts outstanding under the Facility will be senior
- ------- unsecured obligations of the Borrower ranking pari passu with all
existing and future Senior Debt of the Borrower, other than
indebtedness secured by Permitted Encumbrances. The Facility will
at all times rank senior to any existing or future Subordinated
Indebtedness.
AVAILMENTS: The Facility will be available by way of the following:
- ----------
o UBS Canadian dollar prime loans ("Cdn. Prime Rate
Loans");
o UBS US dollar base rate loans ("USBR Loans")'
o Canadian dollar bankers' acceptances ("B/A's");
o US dollar London interbank offer rate loans ("Libor
Loans"); and
CURRENCY
EXCESS: If at any time the Canadian dollar equivalent of all outstanding
- -------- advances based on the noon (Toronto time) Bank of Canada exchange
rate exceeds the available facility amount (a "Currency Excess"),
the Borrower will repay forthwith Cdn. Prime Rate Loans or USBR
Loans until such time as the Currency Excess is eliminated. If a
Currency Excess remains after repayment of all Cdn. Prime Rate
Loans or USBR Loans, then the Borrower will:
1) collateralize dollar for dollar the Currency Excess with
Canadian or US dollar deposits, or
<PAGE>
2) repay any Libor Loans, as well as any expenses associated-with
breaking a Libor Loan, prior to maturity; or
3) any combination of the foregoing.
BORROWING
AND NOTICE
PROVISIONS: A) The Borrower may borrow as follows:
- ----------
o Cdn. Prime Rate Loans in minimum amounts of C$1
million and multiples of $100,000 thereafter;
o USBR Loans in minimum amounts of US$1 million and
multiples of $100,000 thereafter;
o advances of B/A's will, subject to availability, be
issued for periods of 30, 60, 90, 120 or 180 days, or
such other period as is agreed to by the Lender, in
minimum amounts of C$1 million and multiples of
C$100,000 thereafter unless otherwise determined by
the market for B/A's; and
o Libor Loans, with maturities of 1, 2, 3 or 6 months,
or such other period which as is agreed to by the
Lender, in minimum amounts of US$1 million and
multiples thereof
B) The following notice provisions will apply to drawdowns,
repayments, rollovers and conversions:
Prime Rate/USBR Loans
o up to $20,000,000: same Business Day 9:00 a.m. notice
is required; and
o over $20,000,000: 9:00 a.m. one Business Day prior
notice is required.
<PAGE>
4 B/A's
To the extent that the Borrower markets the B/A's, no notice is
required. Should the Borrower request the Lender to market the
B/A's then the following notice provisions shall apply:
o same Business Day 9:00 a.m. notice is required.
o one Business Day 9:00 a.m. notice is required for the
rollover of B/A's, regardless of size.
LIBOR Loans
o 3 banking days (in London and Calgary) prior notice.
The Borrower may repay any part of the outstanding amount without
penalty subject to applicable notice periods and provided that
B/A's and Libor Loans may be repaid on maturity dates only,
unless, in the case of Libor Loans, the Borrower pays the expenses
associated with breaking the Libor Loan prior to maturity.
INTEREST
RATES: During Revolving Period: - Libor + 40 bp
- -------- - BA Rate + 40 bp
- UBS USBR
- UBS Canadian Prime
During Term Period: - All rates increase by 12.5 bp
Interest based on Cdn. Prime Rate and USBR Loans (except when
interest on such loans is based on the Fed Funds Rate) will be
calculated on a 365 or 366 day year, as applicable, and payable
monthly in arrears on the last banking day of the month.
Interest on USBR Loans based on the Fed Funds Rate will be
calculated on a 360 day year.
BA fees are payable at the time of endorsement and are calculated
based on a 365-day or 366-day year.
<PAGE>
5
Interest on Libor Loans will be based on the Telerate screen #3750
rate two days prior to funding and on a 360-day year. Interest is
payable on rollover dates, or if the period of advance exceeds 6
months, interest will accrue and be payable on the day which is 6
months after the first day of such period, and on the last day of
the Libor Loan.
Any interest rate based on a period less than a year expressed
as an annual rate for purposes of the Interest Act (Canada) is
equivalent to such determined rate multiplied by the actual number
of days in the calendar year in which same is to be ascertained
and divided by the number of days in the period upon which it is
based.
The Borrower will pay interest on all overdue amounts (including
overdue interest) at the Interest Rate specified in this Facility
Agreement plus 1% per annum. All overdue interest is calculated on
a daily basis and will be payable both before and after default,
maturity and judgement.
FEES: Standby Fees of 10 bp will be paid quarterly in arrears on the
- ---- undrawn portion of the Facility during the Revolving Period. For
these purposes the amount of borrowings outstanding in US Dollars
will be notionally converted to Cdn. Dollars at the exchange rate
in effect on the Business Day prior to the due date for payment.
EXPENSES: The Borrower will pay all reasonable costs and expenses (including
- -------- legal fees) incurred in connection with the review of the Facility
Documents, the preservation and/or enforcement of any of the
rights of the Lender under the Facility, and loss or expenses
(including legal fees) incurred by the Lender as a consequence of
any failure to pay any stamp, registration or other tax to which
the Facility may be subject.
CONDITIONS
PRECEDENT: A) Conditions precedent to implementation of the terms and
- ---------- conditions herein contained are the following:
1) officer's certificate stating that the Representations
and Warranties are true and accurate in all material
respects;
2) internal legal opinion stating that this Facility
Agreement is valid, binding and legally enforceable.
<PAGE>
6
B) Conditions precedent to subsequent drawdowns, rollovers and
conversions will be as follows:
1) receipt of applicable notice; and
2) no Event of Default or Potential Event of Default has
occurred or would occur as a result of such drawdown,
rollover or conversion.
REPRESENTATIONS
AND WARRANTIES: Representations and Warranties are the following:
- ---------------
1) corporate existence of the Borrower;
2) corporate power and legal capacity of the Borrower to
carry on business and own assets;
3) corporate power and authorization of the Borrower to
execute and deliver the Facility Documents and to perform
covenants under the Facility Documents;
4) Facility Documents have been duly executed and delivered
by the Borrower;
5) Facility Documents create legal, valid, binding and
enforceable obligations of the Borrower;
6) the most recent audited consolidated financial statements of
the Borrower (initially December 31, 1996), fairly present
the consolidated financial condition of the Borrower, as at
such date and the results of operations for the year ended,
in accordance with GAAP consistently applied, and since the
most recent audited financial statements of the Borrower,
there has been no material adverse change in the
consolidated financial position or business operations of
the Borrower;
<PAGE>
7
7) the Borrower has in full force and effect such insurance
policies in amounts covering the properties and operations
of the Borrower as are customarily held by similar
corporations engaged in the same or similar businesses in
the localities where the Borrower's properties and
operations are located;
8) no pending or threatened action, suit, litigation,
judgement or proceeding that has a reasonable likelihood of
materially adversely affecting the Borrower's ability to
repay or perform its obligations under the Facility
Documents other than as disclosed in writing by the
Borrower on or prior to the execution of the Facility
Documents;
9) no known material environmental liability, actual or
contingent which has not been provided for in the financial
statements of Borrower in accordance with GAAP; compliance
with environmental laws in all material respects; all
necessary material permits, licenses and other consents
required under environmental laws have been received and are
in good standing, and properties are not the subject of any
outstanding or threatened order or judgement alleging
violation of Environmental Laws which if enforced against
the Borrower would have a material adverse effect on the
financial condition, operations or business of the Borrower;
10) unencumbered ownership and clear title to assets except
for Permitted Encumbrances;
11) all amounts outstanding under the Facility rank at least
pari passu in right of payment with the Borrower's other
most senior unsecured Indebtedness, other than Indebtedness
which is a preferred claim arising by operation of law or a
Permitted Encumbrance;
12) no Event of Default or Potential Event of Default has
occurred and is continuing; and,
13) neither the execution and delivery of the Facility
Documents nor compliance with the terms and provisions
thereof will conflict with, result in a breach of, or
constitute a default under any law or regulation, any court
order, judgement or decree, or any agreement or instrument
binding upon the Borrower.
<PAGE>
8
GENERAL COVENANTS: The Borrower will:
- -----------------
1) pay all amounts owing under the Facility when due;
2) perform its obligations under the Facility Documents;
3) maintain its corporate existence;
4) supply to the Lender on a regular basis:
a) annual audited consolidated financial statements of
the Borrower prepared in accordance with GAAP, as soon
as available but in any event within 120 days of the
end of each fiscal year;
b) quarterly unaudited consolidated financial
statements of the Borrower prepared in accordance with
GAAP, as soon as available but in any event within 90
days of the end of the first 3 fiscal quarters of each
fiscal year, in all cases stating comparative figures
for the corresponding date and period in the previous
fiscal year;
c) a compliance certificate as per Exhibit A within
120 days of the fiscal year end and within 90 days of
the end of the first 3 quarters of each fiscal year
showing the calculation of all Financial Ratios and
including an officer's certificate stating that no
Event of Default or Potential Event of Default has
occurred;
d) Annual information forms or notices of material
change which are required to be filed by the Borrower
with any regulatory authority or securities exchange;
5) maintain the Interest Coverage Ratio and the Senior Debt
to Capital Ratio (the "Financial Ratios") as follows:
a) Interest Coverage Ratio on a rolling 4 quarter
basis to be greater than 2.50 times;
b) Senior Debt to Total Capital Ratio to be
maintained below 60:1,
all Financial Ratios to be calculated quarterly on a
consolidated basis, in accordance with GAAP;
<PAGE>
9
6) carry on and conduct its business in a proper and
efficient manner and in compliance with applicable laws
in all material respects;
7) maintain insurance policies covering its material
properties and operations as is customarily maintained
by similar corporations engaged in the same or similar
business;
8) not liquidate, dissolve or wind-up or take any steps or
proceedings in connection therewith;
9) not permit a merger with or into, or a consolidation
or amalgamation with, or transfer all or substantially
all its assets to, another entity, other than a merger or
amalgamation between the Borrower and a Wholly-Owned
Subsidiary, or between Wholly-Owned Subsidiaries:
a) if an Event of Default or Potential Event of Default
exists or would occur and be continuing immediately
before and after giving effect to the transaction; and
b) unless the successor corporation:
i) agrees to be bound by the Facility Documents;
ii) acknowledges the continuing validity and
enforceability of the Facility Documents;
iii) represents and warrants that the transaction
will not adversely affect the rights and benefits
afforded the Lender under the Facility Documents;
iv) represents that the creditworthiness of the
resulting, surviving or transferee entity is not
materially weaker than the Borrower prior to such
action; and
v) provides legal opinions confirming the matters
set forth in paragraphs i), ii), and iii) above.
<PAGE>
10
10) not permit any lien, mortgage, charge, hypothec, pledge
or any other security interest or encumbrance on its
property or assets, except for Permitted Encumbrances,
unless at the same time or prior to securing any other
Indebtedness, the Borrower grants security for this
Facility which ranks equally and rateably with the other
Indebtedness.
EVENTS OF DEFAULT: Events of Default are as follows:
- -----------------
1) nonpayment of principal when due;
2) nonpayment of interest or stamping fees due to the
Lender for 5 days after the due date. Non-payment of
standby fees or other fees due to the Lender in either
case for 5 days after notice of nonpayment.
3) nonpayment of other amounts under this Facility within
30 days after notice from the Lender;
4) breach of covenant under this Facility which remains
unremedied for 30 days after notice;
5) materially incorrect or misleading representation or
warranty under this Facility when given;
6) cross default to any defaulted Indebtedness of the
Borrower in excess of C$25 million and any applicable
period of grace has expired;
7) bankruptcy, insolvency, cessation of business or other
dissolution proceedings of the Borrower (30 day cure
period if involuntary bankruptcy applies);
8) final judgement or order in excess of C$25 million is
rendered against the Borrower which is not, within 60
days after entry thereof, bonded, discharged or stayed
pending appeal, or is not discharged within 60 days after
the expiration of such stay; or
9) a lien or security interest in excess of $25 million
is enforced against the property of the Borrower or a
Wholly-Owned Subsidiary.
<PAGE>
11
Upon the occurrence and continuance of an Event of
Default: the Lender may declare all Indebtedness under
the Facility to be due and payable, and the Lender will
have no obligation to make further advances, rollovers or
conversions; the Lender will have right of set off upon
the occurrence and continuance of an Event of Default;
all Libor Loans and USBR Loans may, at the Lender's sole
discretion, be converted to Cdn Prime Rate Loans at any
time and B/A's and letters of credit must be
collateralized by the Borrower in an escrow account;
interest will be calculated at the default rate of 1% per
annum above the Applicable Credit Spread; and, upon the
occurrence and continuance of an Event of Default the
Lender may arrange for an environmental audit at the
expense of the Borrower.
INCREASED COSTS
AND CHANGE OF LAW: Increased costs and compensation for reduced returned to
- ------------------ the Lender in providing and maintaining the Facility
including those costs arising from capital adequacy
requirements and change of law to be for the account of
the Borrower. The Lender will not be obliged to provide
advances if rendered illegal.
ASSIGNMENT: The Lender reserves the right to sell, assign, transfer
- ----------- or grant participation in the Facility, in whole or in
part, with the consent of the Borrower (such consent not
to be unreasonably withheld) provided that consent of the
Borrower will not be required after an Event of Default
or Potential Event of Default. Assignments will be
permitted in minimum amounts equal to the lesser of (i)
C$10,000,000; and (ii) the remaining commitment of the
Lender.
The Borrower agrees to execute such further documentation
as the Lender may request for the purpose of any
assignment, sale or transfer of the Facility.
CANCELLATION: The undrawn portion of the Credit Facility may be
- ------------- cancelled without penalty upon three Business Days
notice.
GOVERNING LAW: Governing law will be the laws of the Province of Alberta
- -------------- and Canada applicable therein.
<PAGE>
12
In witness whereof the parties hereto, by executing this document, are agreeable
to the terms and conditions as presented herein; Dated on 29th day of May, 1997.
UNION BANK OF SWITZERLAND (CANADA)
Per: ILLEGIBLE
--------------------------
Per: /s/ L. J. MALONEY
--------------------------
L. J. MALONEY
Vice President
NORCEN ENERGY RESOURCES LIMITED
Per: /s/ Robert J. Waters
--------------------------
Robert J. Waters
Treasurer
Per: ILLEGIBLE
--------------------------
<PAGE>
13
DEFINITIONS
-----------
"Applicable Credit Spread" means:
- with respect to Canadian Prime Rate Loans .... nil
- with respect to USBR Loans.................... nil
- with respect to Libor Loans................... 40 bp
- with respect to B/A's......................... 40 bp (the stamping fee)
"B/A Rate" means the discount rate at which the Lender's B/A's are purchased by
the Lender or sold into the market by the Borrower. To the extent that the
Borrower requests the Lender to market the B/A's, then the B/A Rate will be the
prevailing CDOR rate for the relevant maturity plus 5 bp.
"Business Day" is a day, other than a Saturday or Sunday, on which the Lender is
open for business in Calgary, Alberta, Toronto, Ontario and New York, New York,
and with respect to Libor Loans, in London England.
"Cashflow" means, in respect of the Borrower, the aggregate of Consolidated Net
Earnings, Consolidated Interest Expense, Taxes and Non-Cash Items, all without
duplication and determined in accordance with GAAP.
"Cdn. Prime" means the rate of interest per annum, based on a 365 day year,
established and reported by the Lender to the Bank of Canada from time to time
as its reference rate of interest for determination of interest rates which the
Lender charges to customers of varying degrees of creditworthiness in Canada for
Canadian dollar loans made by it in Canada. For purposes of this Facility, the
Cdn. Prime will be the higher of the stated rate by the Lender or CDOR plus the
Applicable Credit Spread.
"CDOR" means the average yield to maturity for bankers' acceptances which is
quoted on Reuter's Canadian Discount Offer Rate screen at 10:00 a.m. Toronto
time on the applicable date of advance for B/A's having a term to maturity of 1
month.
"Consolidated Interest Expense" means consolidated interest, whether expensed or
capitalized, in respect of Indebtedness determined in accordance with GAAP.
"Consolidated Net Earnings" means consolidated net income or loss as reported on
the Borrower's consolidated statement of earnings excluding income from
discontinued operations determined in accordance with GAAP.
<PAGE>
14
"Consolidated Tangible Net Worth" means, on a consolidated basis determined
in accordance with GAAP, at any time, the sum of:
a the Borrower's total shareholder equity; and
b) Subordinated Indebtedness;
less:
c) any amounts of goodwill attributable to the Borrower.
"Facility Documents" means:
a) this letter agreement between the Borrower and the Lender; and
b) such other documents and certificates which in the opinion of the
Lender, acting reasonably, are required to fully document or satisfy
the terms and conditions herein contained.
"Fed Funds Rate" means, for any day, the rate set forth in the Federal Reserve
Bank of New York's weekly statistical release designated at H.15(519), opposite
the caption "Federal Funds (Effective)" for that day, or (if that day is not a
Business Day) for the next preceding Business Day.
"Funded Debt" means, all Indebtedness payable more than one year from the date
of creation thereof including current maturities of such Indebtedness and
Indebtedness which by its terms is renewable to a due date beyond one year;
excluding Subordinated Indebtedness.
"GAAP" means generally accepted accounting principles which are in effect from
time to time in Canada.
"Guarantees" means an undertaking to become liable for indebtedness for borrowed
money as presented on consolidated financial statements of Borrower.
"Hostile Acquisition" means an offer to acquire shares of a corporation, which
is required to be reported to an applicable securities regulatory authority,
where the board of directors of the target corporation has not approved such
offer nor recommended to the shareholders of the corporation that they sell
their shares pursuant to the proposed offer.
"Indebtedness" means all items in the consolidated financial statements of the
Borrower classified as liabilities for money borrowed in accordance with GAAP
(and will include capitalized leases, and Guarantees or endorsements (other than
of notes, bills and cheques presented to banks for collection or deposit in the
ordinary course of business) of indebtedness of others by the Borrower or
Wholly-Owned Subsidiaries, to the extent required by GAAP).
"Interest Coverage Ratio" means Cashflow divided by Consolidated Interest
Expense.
<PAGE>
15
"Libor" means the rate of interest per annum, based on a 360 day year at which
the Lender makes available United States dollars which are obtained by the
Lender in the Interbank Euro Currency Market, London, England at approximately
11:00 a.m. (London time) on the second Business Day before the first day of, and
in an amount similar to, and for the period similar to the interest period of
such advance.
"Non-Cash Items" means depreciation, depletion, amortization, foreign exchange
translation gains or losses and other non-cash items included in the calculation
of Consolidated Net Earnings as reported on the Borrower's consolidated
statement of earnings as determined in accordance with GAAP.
"Permitted Acquisition" means a direct or indirect acquisition by the Borrower
which is not a Hostile Acquisition.
"Permitted Encumbrances" means:
a) any security interest, except on fixed assets or on shares of any
Subsidiary or affiliate, given in the ordinary course of business to
any bank or other financial institution, to secure indebtedness
payable on demand or maturing within 12 months of the date that such
indebtedness is originally incurred provided that the total
indebtedness so secured does not exceed $25 million;
b) any Purchase Money Mortgage;
c) Risk Management Liens where the aggregate value of all cash and
securities will not at any time exceed $25 million;
d) any security interest on any petroleum and natural gas right,
tangible assets associated therewith or the products derived
therefrom or the proceeds of sale of such products, to secure
production payments, royalties, carried interests and similar
obligations or to secure obligations in connection with or
necessarily incidental to commitments or purchase and sale of, or the
transportation or distribution of, products derived from the
petroleum and natural gas right, including without limitation forward
sales;
e) any security interest on any resource property of the Borrower
that has not been in commercial production during the 12-month period
ending on the date hereof, or has not been in commercial production
during the 12-month period ending at the time of the imposition of
such security to secure any indebtedness incurred for the development
or improvement thereof or the development or improvement of any other
resource property of the Borrower that has not been in commercial
production during the 12-month period ending on the date hereof or
has not been in commercial production during the 12-month period
ending at the time of the imposition of such security;
<PAGE>
16
f) any security interest in favour of the government of any country
in which the Borrower owns assets or carries on business or the
government of any province, state, municipality or other political
subdivision in any such country, or any department or agency of any
such government, given pursuant to a contract, concession, lease,
license, franchise, grant, permit or other instrument pertaining to
such assets or business or required by applicable laws;
g) liens for taxes, assessments or other governmental charges not yet
due or, if due, the validity of which is being contested in good
faith, and liens for the excess of the amount of any past due taxes
for which a final assessment has not been received over the amount
of such taxes as estimated and paid by the Borrower;
h) unless it constitutes an Event of Default, the lien of any
judgement rendered or claim filed against the Borrower, which is
being contested in good faith by the Borrower;
i) undetermined or inchoate liens and charges (including builders',
mechanics', warehousemen's carriers' and other similar liens)
incidental to construction or current operations which relate to
obligations not due or delinquent or which are being contested in
good faith by the Borrower;
j) liens incurred or created in the ordinary course of business on any
particular petroleum and natural gas right and or on any tangible
assets associated therewith as security, in favour of any other
person who is conducting the exploration, exploitation, development
or operation of the property or asset to which such petroleum and
natural gas right relates, to secure payment by the Borrower of its
proportion of the costs and expenses of such exploration,
exploitation, development or operation incurred by such other person;
k) any security interest given by the Borrower to a public utility or
municipality or governmental or other public authority when required
by such utility or municipality or other authority in connection with
utility or municipal services required for the operations of the
Borrower in the ordinary course of its business;
l) any security on a lease or other instrument permitting the
extraction of substances other than crude oil, natural gas, natural
gas liquids and related products by the Borrower, provided that any
such lease does not interfere with the enjoyment by the Borrower of
any petroleum and natural gas right;
<PAGE>
17
m) any renewal, refunding or extension of any security interest or
encumbrance referred to in the foregoing clauses a) or l) or of any
security interest or encumbrance on any property in existence at the
time of acquisition thereof, in which the indebtedness thereby
secured after such renewal, refunding or extension is not increased
and the security interest or encumbrance is limited in its recourse
to the property originally subject thereto and any improvements
thereon; and
n) any security interest or encumbrance, other than those referred to
in the foregoing clauses a) to m) created by the Borrower if, after
giving effect to the creation of such security interest or
encumbrance, the aggregate principal amount of the indebtedness
secured thereby would not be greater than C$25,000,000.
"Potential Event of Default" means an event that would constitute an Event of
Default with the giving of notice, lapse or time or both.
"Purchase Money Mortgage" means any mortgage, charge, hypothec, pledge or other
security or encumbrance created upon any real or personal property acquired by
the Borrower after the date hereof (or previously acquired and substantially
unimproved) to secure or securing the whole or any part of the purchase price of
such property (or, in the case of previously acquired and substantially
unimproved property, the cost of the improvement thereof) or the repayment of
money borrowed to pay the whole or any part of such purchase price or cost, or
any vendor's privilege or lien on such property securing all or any part of such
purchase price or cost, including title retention agreements and leases in the
nature of title retention agreements.
"Risk Management Liens" means liens on cash or marketable securities of the
Borrower granted in connection with any interest rate, foreign exchange or
commodity risk management arrangements provided:
a) the Borrower reasonably expects to produce sufficient commodities
of the type in question in the ordinary course of business to fulfill
such contracts; and
b) the obligations secured by such liens are not due and delinquent.
"Senior Debt" means all Funded Debt that ranks senior to Subordinated
Indebtedness.
"Senior Debt to Total Capital Ratio" means, Senior Debt divided by Total
Capital.
"Subordinated Indebtedness" means Indebtedness that is subordinate in all
circumstances including bankruptcy, in right of payment to Indebtedness under
this Facility and Senior Debt.
"Subsidiary" means any corporation a majority of the shares carrying voting
rights of which are at the time owned or controlled directly or indirectly by
the Borrower.
<PAGE>
"Taxes" means income taxes on the Borrower's consolidated statement of earnings
determined in accordance with GAAP.
"Total Capital" means Senior Debt plus Consolidated Tangible Net Worth.
"USBR" or "US Base Rate" means the rate of interest per annum, based on a 365
day year, established by the Lender from time to time as a reference rate for
the determination of interest rates that the Lender charges to customers of
varying degrees of creditworthiness for US dollar loans made by it in Canada.
For purposes of this Facility, the US Base Rate will be the higher of the stated
rate by the Lender or the Fed Funds Rate plus 1%.
"Wholly-Owned Subsidiary" means any Subsidiary in which all of the issued and
outstanding voting shares of each class of its capital are owned directly or
indirectly by the Borrower except that director's qualifying shares need not be
so owned.
* * * *
<PAGE>
AMENDED AND RESTATED
--------------------
EXTENDIBLE REVOLVING TERM CREDIT FACILITY
-----------------------------------------
This Agreement amends and restates in full the Loan Agreement dated
April 19, 1995 and the Amended and Restated Extendible
Revolving Term Credit Facility dated July 2, 1996
between the Borrower and the Lender.
June 9, 1997
BORROWER: Norcen Energy Resources Limited (Norcen).
- ---------
FACILITY: Extendible Revolving Term-Credit Facility.
- ---------
AMOUNT: Cdn. $50,000,000 or the U.S. dollar equivalent.
- -------
PURPOSE: For general corporate purposes, including commercial paper
- ------- backstop, capital expenditures, short term working capital
needs, refinancing existing bank indebtedness and for
Permitted Acquisitions.
LENDER: ABN AMRO Bank Canada ("ABN")
- -------
AVAILABILITY
- ------------
PERIOD: The Facility will revolve and fluctuate for a period of
- ------- 364 days ("Revolving Period"), subject to renewal as provided
below, followed by a 2 year non-revolving term loan ("Term
Period") with a bullet payment at the end of the Term
Period.
REPAYMENT: Revolving Period
- ---------- ----------------
The Revolving Period ends June 8, 1998. The Revolving Period
may be extended from time to time at the Lender's sole
discretion for up to 364 days, within 30 days after the
Borrower's request which may not be made more than twice in
any 12 month period. The Borrower's request for extension will
include a restatement of the Representations and Warranties.
No response from the Lender within 30 days of the request
shall mean that an extension is not granted.
<PAGE>
2
Term Period
-----------
The Term Period commences on the day after the last day of the
Revolving Period and ends on that date which is the first
Business Day following the expiration of two years from the
date of commencement of the Term Period, at which point all
amounts then outstanding under this Facility are immediately
due and payable by the Borrower. Any undrawn portion of the
Facility will be canceled at the end of the Revolving Period.
Any prepayment during the Term Period will constitute a
permanent reduction of the Facility. For greater certainty,
the rollover of a B/A or Libor Loan does not constitute a
prepayment during the Term Period.
RANKING: All amounts outstanding under the Facility will be senior
- -------- unsecured obligations of the Borrower ranking pari passu with
all existing and future Senior Debt of the Borrower, other
than indebtedness secured by Permitted Encumbrances which
under applicable law ranks in priority thereto. The Facility
will at all times rank senior to any existing or future
Subordinated Indebtedness.
AVAILMENTS: The Facility will be available by way of the following:
- -----------
o Canadian dollar prime loans ("Cdn. Prime Rate Loans");
o US dollar base rate loans ("USBR Loans")'
o Canadian dollar bankers' acceptances ("B/A's);
o US dollar London interbank offer rate loans ("Libor
Loans"); and
o US dollar or Canadian dollar letters of credit or
guarantee.
CURRENCY EXCESS: If at any time the Canadian dollar equivalent of all
- ---------------- outstanding advances based on the noon (Toronto time) Bank of
Canada exchange rate exceeds the available facility amount (a
"Currency Excess"), the Borrower will repay forthwith Cdn.
Prime Rate Loans or USBR Loans until such time as the Currency
Excess is
<PAGE>
3
eliminated. If a Currency Excess remains after repayment of
all Cdn. Prime Rate Loans or USBR Loans, then the Borrower
will:
1) collateralize dollar for dollar the Currency Excess with
Canadian or US dollar deposits, or
2) repay any Libor Loans, as well as any expenses associated
with breaking a Libor Loan, prior to maturity; or
3) any combination of the foregoing.
BORROWING
AND NOTICE
PROVISIONS: A) The Borrower may borrow as follows:
- -----------
o Cdn. Prime Rate Loans in minimum amounts of C$1
million and multiples of $ 100,000 thereafter;
o USBR Loans in minimum amounts of US$1 million and
multiples of $ 100,000 thereafter;
o advances of B/A's will, subject to availability, be
issued for periods of 30, 60, 90, 120 or 180 days, or
such other period as is agreed to by the Lender, in
minimum amounts of C$1 million and multiples of
C$100,000 thereafter unless otherwise determined by
the market for B/A's; and
o Libor Loans, with maturities of 1, 2, 3 or 6 months,
or such other period as is agreed to by the Lender, in
minimum amounts of US$1 million and multiples thereof.
B) The following notice provisions will apply to drawdowns,
repayments, rollovers and conversions:
Prime Rate/USBR Loans
o up to $20,000,000: same Business Day 10:00 a.m.
(Calgary time) notice is required; and
o over $20,000,000: 10:00 a.m. (Calgary time) one
Business Day prior notice is required.
<PAGE>
4
B/A's
To the extent that the Borrower markets the B/A's, no
notice is required. Should the Borrower request the Lender
to market the B/A's then the following notice provisions
shall apply:
o up to $20,000,000: same Business Day 10:00 a.m.
(Calgary time) notice is required; and
o over $20,000,000: 10:00 a.m. (Calgary time) one
Business Day prior notice is required.
LIBOR Loans
o 3 banking days (in London and Calgary) prior notice.
The Borrower may repay any part of the outstanding amount
without penalty subject to applicable notice periods and
provided that B/A's and Libor Loans may be repaid on
maturity dates only, unless, in the case of Libor Loans,
the Borrower pays the expenses associated with breaking
the Libor Loan prior to maturity.
INTEREST RATES: The Borrower shall pay interest or fees on all borrowings
- --------------- hereunder at the following rates:
During Revolving Period: - Libor + 40 bp
- BA Rate + 40 bp
- ABN USBR
- ABN Canadian Prime
Letters of Credit ("L/C")
and Letters of Guarantee
("L/G"): - Financial L/C or L/G - 50 bp
- Non-Financial or Performance
L/C and L/G - 25 bp.
- All L/C and L/Gs may be
renewed annually at the
discretion of the
<PAGE>
5
Lender for an additional 1
year term.
During Term Period: - All rates increase by 12.5 bp
Interest based on Cdn. Prime Rate and USBR Loans will be
calculated on a 365 or 366 day year, as applicable, and
payable monthly in arrears on the last banking day of the
month.
B/A fees are payable at the time of endorsement and are
calculated based on a 365-day or 366-day year.
Interest on Libor Loans will be based on the Telerate
screen #3750 rate two days prior to funding and on a
360-day year. Interest is payable on rollover dates, or if
the period of advance exceeds 3 months, interest will
accrue and be payable on the day which is 3 months after
the first day of such period, and on the last day of the
Libor Loan.
Any interest rate based on a period less than a year
expressed as an annual rate for purposes of the Interest
Act (Canada) is equivalent to such determined rate
multiplied by the actual number of days in the calendar
year in which same is to be ascertained and divided by the
number of days in the period upon which it is based.
The Borrower will pay interest on all overdue amounts
(including overdue interest) at the Interest Rate
specified in the Facility plus 1% per annum. All overdue
interest is calculated on a daily basis and will be
payable both before and after default, maturity and
judgement.
FEES: Standby Fees of 10 bp will be paid quarterly in arrears on
- ----- the undrawn portion of the Facility during the Revolving
Period. For these purposes, the amount of borrowings
outstanding in US Dollars will be notionally converted to
Cdn. Dollars at the exchange rate in effect on the
business Day prior to the due date for payment of Standby
Fees.
EXPENSES: The Borrower will pay all reasonable costs and expenses
- --------- (including legal fees) incurred in connection with the
review and preparation of the Facility Documents, the
preservation and/or enforcement of any of the rights of
the Lender under the Facility, and loss or expenses
(including legal fees) incurred by the Lender
<PAGE>
6
as a consequence of any failure to pay any stamp,
registration or other tax to which the Facility may be
subject.
CONDITIONS
PRECEDENT: A) Conditions precedent to implementation of the terms
- ---------- and conditions herein contained are the following:
1) officer's certificate stating that the
Representations and Warranties are true and
accurate in all material respects; and
2) internal legal opinion stating that this Facility
Agreement is valid, binding and legally
enforceable.
B) Conditions precedent to subsequent drawdowns,
rollovers and conversions will be as follows:
1) receipt of applicable notice; and
2) no Event of Default or Potential Event of Default
has occurred or would occur as a result of such
drawdown, rollover or conversion.
REPRESENTATIONS
AND WARRANTIES: Representations and Warranties are the following:
- ---------------
1) corporate existence of the Borrower;
2) corporate power and legal capacity of the Borrower to
carry on business and own assets;
3) corporate power and authorization of the Borrower to
execute and deliver the Facility Documents and to
perform covenants under the Facility Documents;
4) Facility Documents have been duly executed and
delivered by the Borrower;
5) Facility Documents create legal, valid, binding and
enforceable obligations of the Borrower;
6) the most recent audited consolidated financial
statements of the Borrower (initially December 31,
1996), fairly present the consolidated financial
condition of the Borrower, as at such date and the
results of operations for the year ended, in
<PAGE>
7
accordance with GAAP consistently applied, and since
the most recent audited financial statements of the
Borrower, there has been no material adverse change in
the consolidated financial position or business
operations of the Borrower;
7) the Borrower has in full force and effect such
insurance policies in amounts covering the properties
and operations of the Borrower as are customarily held
by similar corporations engaged in the same or similar
businesses in the localities where the Borrower's
properties and operations are located;
8) no pending or threatened action, suit, litigation,
judgment or proceeding that has a reasonable
likelihood of materially adversely affecting the
Borrower's ability to repay or perform its obligations
under the Facility Documents other than as disclosed
in writing by the Borrower on or prior to the
execution of the Facility Documents;
9) no known material environmental liability, actual or
contingent which has not been provided for in the
financial statements of Borrower in accordance with
GAAP; compliance with environmental laws in all
material respects; all necessary material permits,
licenses and other consents required under
environmental laws have been received and are in good
standing, and properties are not the subject of any
outstanding or threatened order or judgement alleging
violation of Environmental Laws which if enforced
against the Borrower would have a material adverse
effect on the financial condition, operations or
business of the Borrower;
10) unencumbered ownership and clear title to assets
except for Permitted Encumbrances;
11) all amounts outstanding under the Facility rank at
least pari passu in right of payment with the
Borrower's other most senior unsecured Indebtedness,
other than Indebtedness which is a preferred claim
arising by operation of law or a Permitted
Encumbrance;
12) no Event of Default or Potential Event of Default has
occurred and is continuing; and,
<PAGE>
8
13) neither the execution and delivery of the Facility
Documents nor compliance with the terms and
provisions thereof will conflict with, result in a
breach of, or constitute a default under any law or
regulation, any court order, judgment or decree, or
any agreement or instrument binding upon the
Borrower.
GENERAL COVENANTS: The Borrower will:
- ------------------
1) pay all amounts owing under the Facility when due;
2) perform its obligations under the Facility Documents;
3) maintain its corporate existence;
4) supply to the Lender on a regular basis:
a) annual audited consolidated financial statements
of the Borrower prepared in accordance with GAAP,
as soon as available but in any event within 120
days of the end of each fiscal year;
b) quarterly unaudited consolidated financial
statements of the Borrower prepared in accordance
with GAAP, as soon as available but in any event
within 90 days of the end of the first 3 fiscal
quarters of each fiscal year, in all cases stating
comparative figures for the corresponding date and
period in the previous fiscal year;
c) a compliance certificate as per Exhibit A within
120 days of the fiscal year end and within 90 days
of the end of the first 3 quarters of each fiscal
year showing the calculation of all Financial
Ratios and including an officer's certificate
stating that no Event of Default or Potential
Event of Default has occurred;
d) Annual information forms or notices of material
change which are required to be filed by the
Borrower with any regulatory authority or
securities exchange;
5) maintain the Interest Coverage Ratio and the Senior
Debt to Capital Ratio (the "Financial Ratios") as
follows:
<PAGE>
9
a) Interest Coverage Ratio on a rolling 4 quarter
basis to be greater than 2.50 times;
b) Senior Debt to Total Capital Ratio to be
maintained below .60:1,
all Financial Ratios to be calculated quarterly on a
consolidated basis, in accordance with GAAP;
6) carry on and conduct its business in a proper and
efficient manner and in compliance with applicable
laws in all material respects;
7) maintain insurance policies covering its material
properties and operations as is customarily maintained
by similar corporations engaged in the same or similar
business;
8) not liquidate, dissolve or wind-up or take any steps
or proceedings in connection therewith,
9) not permit a merger with or into, or a consolidation
or amalgamation with, or transfer all or substantially
all its assets to, another entity, other than a merger
or amalgamation between the Borrower and a
Wholly-Owned Subsidiary, or between Wholly-Owned
Subsidiaries:
a) if an Event of Default or Potential Event of
Default exists or would occur and be continuing
immediately before and after giving effect to the
transaction; and
b) unless the successor corporation:
i) agrees to be bound by the Facility Documents;
ii) acknowledges the continuing validity and
enforceability of the Facility Documents;
iii) represents and warrants that the transaction
will not adversely affect the rights and
benefits afforded the Lender under the
Facility Documents;
iv) represents that the creditworthiness of the
resulting, surviving or transferee entity is
not materially weaker than the Borrower prior
to such action; and
<PAGE>
10
v) provides legal opinions confirming the
matters set forth in paragraphs i), ii), and
iii) above.
10) not permit any lien, mortgage, charge, hypothec,
pledge or any other security interest or encumbrance
on its property or assets, except for Permitted
Encumbrances, unless at the same time or prior to
securing any other Indebtedness, the Borrower grants
security for this Facility which ranks equally and
rateably with the other Indebtedness.
11) Borrower will promptly inform Lender of occurrence of
any Event of Default or Potential Event of Default.
EVENTS OF DEFAULT: Events of Default are as follows:
- ------------------
1) nonpayment of principal when due;
2) nonpayment of interest or stamping fees due to the
Lender for 5 days after the due date and non-payment
of standby fees or other fees due to the Lender in
either case for 5 days after notice of nonpayment.
3) nonpayment of other amounts under the Facility within
30 days after notice from the Lender;
4) breach of covenant under the Facility which remains
unremedied for 30 days after notice;
5) materially incorrect or misleading representation or
warranty under the Facility when given;
6) cross default to any defaulted Indebtedness of the
Borrower in excess of C$25 million and any applicable
period of grace has expired;
7) bankruptcy, insolvency, cessation of business or other
dissolution proceedings of the Borrower (30 day cure
period if involuntary bankruptcy applies);
8) final judgement or order in excess of C$25 million is
rendered against the Borrower which is not, within 60
days after entry thereof, bonded, discharged or stayed
pending appeal, or is not discharged within 60 days
after the expiration of such stay; or
<PAGE>
11
9) a lien or security interest in excess of $25 million
is enforced against the property of the Borrower or a
Wholly-Owned Subsidiary.
Upon the occurrence and continuance of an Event of
Default: the Lender may declare all Indebtedness under the
Facility to be due and payable, and the Lender will have
no obligation to make further advances, rollovers or
conversions; the Lender will have right of set off upon
the occurrence and continuance of an Event of Default; all
Labor Loans and USBR Loans may, at the Lender's sole
discretion, be converted to Cdn Prime Rate Loans at any
time and B/A's and letters of credit must be
collateralized by the Borrower in an escrow account;
additional interest will be calculated at the default rate
of 1% above the Applicable Credit Spread; and, upon the
occurrence and continuance of an Event of Default the
Lender may arrange for an environmental audit at the
expense of the Borrower.
INCREASED COSTS
AND CHANGE OF
- -------------
LAW: Increased costs and compensation for reduced return to the
- ---- Lender in providing and maintaining the Facility including
those costs arising from capital adequacy requirements and
change of law to be for the account of the Borrower. The
Lender will not be obliged to provide advances if rendered
illegal.
ASSIGNMENT: The Lender reserves the right to sell, assign, transfer
- ----------- or grant participation in the Facility, in whole or in
part, with the consent of the Borrower (such consent not
to be unreasonably withheld) provided that consent of the
Borrower will not be required after an Event of Default or
Potential Event of Default. Assignments will be permitted
in minimum amounts equal to the lesser of (i)
C$10,000,000; and (ii) the remaining commitment of the
Lender.
The Borrower agrees to execute such further documentation
as the Lender may request for the purpose of any
assignment, sale or transfer of the Facility.
CANCELLATION: The undrawn portion of the Credit Facility may be
- ------------- cancelled without penalty upon three Business Days notice.
<PAGE>
12
GOVERNING LAW: Governing law will be the laws of the Province of Alberta
- -------------- and Canada applicable therein.
In witness whereof the parties hereto, by executing this document, are agreeable
to the terms and conditions as presented herein; Dated on 10th day of June,
1997.
ABN AMRO BANK CANADA
Per: /s/ Mark Bohn
------------------------
Mark Bohn
Vice President
Per: /s/ P.K. Chan
------------------------
P.K. Chan
Vice President, Credit
NORCEN ENERGY RESOURCES LIMITED
Per: /s/ Robert J. Waters
------------------------
Robert J. Waters
Treasurer
Per: /s/ ?
------------------------
<PAGE>
13
DEFINITIONS
-----------
"Applicable Credit Spread" means:
- with respect to Canadian Prime Rate Loans....nil
- with respect to USBR Loans...................nil
- with respect to Labor Loans..................40 bp
- with respect to B/A's........................40 bp (the stamping fee)
"B/A Rate" means the discount rate at which the Lender's B/A's are purchased by
the Lender or sold into the market by the Borrower.
"Business Day" is a day, other than a Saturday or Sunday, on which the Lender is
open for business in Calgary, Alberta, Toronto, Ontario and New York, New York,
and with respect to Labor Loans, in London England.
"Cashflow" means, in respect of the Borrower, the aggregate of Consolidated
Net Earnings, Consolidated Interest Expense, Taxes and Non-Cash Items, all
without duplication and determined in accordance with GAAP.
"Cdn. Prime" means the rate of interest per annum, based on a 365 day year,
established and reported by the Lender to the Bank of Canada from time to time
as its reference rate of interest for determination of interest rates which the
Lender charges to customers of varying degrees of creditworthiness in Canada for
Canadian dollar loans made by it in Canada. For purposes of this Facility, the
Cdn. Prime will be the higher of the stated rate by the Lender or CDOR plus the
Applicable Credit Spread.
"CDOR" means the average yield to maturity for bankers' acceptances which is
quoted on Reuter's Canadian Discount Offer Rate screen at 10:00 a.m. Toronto
time on the applicable date of advance for B/A's having a term to maturity of 1
month.
"Consolidated Interest Expense" means consolidated interest, whether expensed or
capitalized, in respect of Indebtedness determined in accordance with GAAP.
"Consolidated Net Earnings" means consolidated net income or loss as reported on
the Borrower's consolidated statement of earnings excluding income from
discontinued operations determined in accordance with GAAP.
"Consolidated Tangible Net Worth" means, on a consolidated basis determined in
accordance with GAAP, at any time, the sum of:
a) the Borrower's total shareholder equity, and
b) Subordinated Indebtedness;
less:
c) any amounts of goodwill attributable to the Borrower.
<PAGE>
14
"Facility Documents means:
a) this letter agreement between the Borrower and the Lender; and,
b) such other documents and certificates which in the opinion of the
Lender, acting reasonably, are required to fully document or satisfy
the terms and conditions herein contained.
"Fed Funds Rate" means, for any day, the rate set forth in the Federal Reserve
Bank of New York's weekly statistical release designated at H.15(519), opposite
the caption "Federal Funds (Effective)" for that day, or (if that day is not a
Business Day) for the next preceding Business Day.
"Funded Debt" means, all Indebtedness payable more than one year from the date
of creation thereof including current maturities of such Indebtedness and
Indebtedness which by its terms is renewable to a due date beyond one year;
excluding Subordinated Indebtedness.
"GAAP" means generally accepted accounting principles which are in effect from
time to time in Canada.
"Guarantees" means an undertaking to become liable for indebtedness for borrowed
money as presented on consolidated financial statements of Borrower.
"Hostile Acquisition" means an offer to acquire shares of a corporation, which
is required to be reported to an applicable securities regulatory authority,
where the board of directors of the target corporation has not approved such
offer nor recommended to the shareholders of the corporation that they sell
their shares pursuant to the proposed offer.
"Indebtedness" means all items in the consolidated financial statements of the
Borrower classified as liabilities for money borrowed in accordance with GAAP
(and will include capitalized leases, and Guarantees or endorsements (other than
of notes, bills and cheques presented to banks for collection or deposit in the
ordinary course of business) of indebtedness of others by the Borrower or
Subsidiaries, to the extend required by GAAP).
"Interest Coverage Ratio" means Cashflow divided by Consolidated Interest
Expense.
"Labor" means the rate of interest per annum, based on a 360 day year at which
the Lender makes available United States dollars which are obtained by the
Lender in the Interbank Euro Currency Market, London, England at approximately
11:00 a.m. (London time) on the second Business Day before the first day of, and
in an amount similar to, and for the period similar to the interest period of
such advance.
"Non-Cash Items" means depreciation, depletion, amortization, foreign exchange
translation gains or losses and other non-cash items included in the calculation
of Consolidated Net Earnings as
<PAGE>
15
reported on the Borrower's consolidated statement of earnings as determined in
accordance with GAAP.
"Permitted Acquisition" means a direct or indirect acquisition by the Borrower
which is not a Hostile Acquisition.
"Permitted Encumbrances" means:
a) any security interest, except on fixed assets or on shares of any
Subsidiary or affiliate, given in the ordinary course of business to
any bank or other financial institution, to secure indebtedness
payable on demand or maturing within 12 months of the date that such
indebtedness is originally incurred provided that the total
indebtedness so secured does not exceed $25 million;
b) any Purchase Money Mortgage;
c) Risk Management Liens where the aggregate value of all cash and
securities will not at any time exceed $25 million;
d) any security interest on any petroleum and natural gas right, tangible
assets associated therewith or the products derived therefrom or the
proceeds of sale of such products, to secure production payments,
royalties, carried interests and similar obligations or to secure
obligations in connection with or necessarily incidental to
commitments or purchase and sale of, or the transportation or
distribution of, products derived from the petroleum and natural gas
right, including without limitation forward sales;
e) any security interest on any resource property of the Borrower that
has not been in commercial production during the 12-month period
ending on the date hereof, or has not been in commercial production
during the 12-month period ending at the time of the imposition of
such security to secure any indebtedness incurred for the development
or improvement thereof or the development or improvement of any other
resource property of the Borrower that has not been in commercial
production during the 12-month period ending on the date hereof or has
not been in commercial production during the 12-month period ending at
the time of the imposition of such security;
f) any security interest in favour of the government of any country in
which the Borrower owns assets or carries on business or the
government of any province, state, municipality or other political
subdivision in any such country, or any department or agency of any
such government, given pursuant to a contract, concession, lease,
license, franchise, grant, permit or other instrument pertaining to
such assets or business or required by applicable laws;
<PAGE>
16
g) liens for taxes, assessments or other governmental charges not yet due
or, if due, the validity of which is being contested in good faith,
and liens for the excess of the amount of any past due taxes for which
a final assessment has not been received over the amount of such taxes
as estimated and paid by the Borrower;
h) unless it constitutes an Event of Default, the lien of any judgement
rendered or claim filed against the Borrower, which is being contested
in good faith by the Borrower;
i) undetermined or inchoate liens and charges (including builders',
mechanics', warehousemen's carriers' and other similar liens)
incidental to construction or current operations which relate to
obligations not due or delinquent or which are being contested in good
faith by the Borrower;
j) liens incurred or created in the ordinary course of business on any
particular petroleum and natural gas right and or on any tangible
assets associated therewith as security, in favour of any other person
who is conducting the exploration, exploitation, development or
operation of the property or asset to which such petroleum and natural
gas right relates, to secure payment by the Borrower of its proportion
of the costs and expenses of such exploration, exploitation,
development or operation incurred by such other person;
k) any security interest given by the Borrower to a public utility or
municipality or governmental or other public authority when required
by such utility or municipality or other authority in connection with
utility or municipal services required for the operations of the
Borrower in the ordinary course of its business;
1) any security interest on a lease or other instrument permitting the
extraction of substances other than crude oil, natural gas, natural
gas liquids and related products by the Borrower, provided that any
such lease does not interfere with the enjoyment by the Borrower of
any petroleum and natural gas right;
m) any renewal, refunding or extension of any security interest or
encumbrance referred to in the foregoing clauses a) or 1) or of any
security interest or encumbrance on any property in existence at the
time of acquisition thereof, in which the indebtedness thereby secured
after such renewal, refunding or extension is not increased and the
security interest or encumbrance is limited in its recourse to the
property originally subject thereto and any improvements thereon; and
n) any security interest or encumbrance, other than those referred to in
the foregoing clauses a) to m), created by the Borrower if, after
giving effect to the creation of such security interest or
encumbrance, the aggregate principal amount of the indebtedness
secured thereby would not be greater than C$25,000,000.
<PAGE>
17
"Potential Event of Default" means an event that would constitute an Event of
Default with the giving of notice, lapse or time or both.
"Purchase Money Mortgage" means any mortgage, charge, hypothec, pledge or other
security or encumbrance created upon any real or personal property acquired by
the Borrower after the date hereof (or previously acquired and substantially
unimproved) to secure or securing the whole or any part of the purchase price of
such property (or, in the case of previously acquired and substantially
unimproved property, the cost of the improvement thereof) or the repayment of
money borrowed to pay the whole or any part of such purchase price or cost, or
any vendor's privilege or lien on such property securing all or any part of such
purchase price or cost, including title retention agreements and leases in the
nature of title retention agreements.
"Risk Management Liens" means liens on cash or marketable securities of the
Borrower granted in connection with any interest rate, foreign exchange or
commodity risk management arrangements provided:
a) the Borrower reasonably expects to produce sufficient commodities
of the type in question in the ordinary course of business to fulfill
such contracts; and
b) the obligations secured by such liens are not due and delinquent.
"Senior Debt" means all Funded Debt that ranks senior to Subordinated
Indebtedness.
"Senior Debt to Total Capital Ratio" means, Senior Debt divided by Total
Capital.
"Subordinated Indebtedness" means Indebtedness that is subordinate in all
circumstances including bankruptcy, in right of payment to Indebtedness under
this Facility and Senior Debt.
"Subsidiary" means any corporation a majority of the shares carrying voting
rights of which are at the time owned or controlled directly or indirectly by
the Borrower.
"Taxes" means income taxes on the Borrower's consolidated statement of earnings
determined in accordance with GAAP.
"Total Capital" means Senior Debt plus Consolidated Tangible Net Worth.
"USBR" or "US Base Rate" means the rate of interest per annum, based on a 365
day year, established by the Lender from time to time as a reference rate for
the determination of interest rates that the Lender charges to customers of
varying degrees of creditworthiness for US dollar loans made by it in Canada.
For purposes of this Facility, the US Base Rate will be the higher of the stated
rate by the Lender or the Fed Funds Rate plus 1%.
"Wholly-Owned Subsidiary" means any Subsidiary in which all of the issued and
outstanding voting shares of each class of its capital are owned directly or
indirectly by the Borrower except that director's qualifying shares need not be
so owned.
<PAGE>
November 20, 1997
Norcen Energia Venezuela, S.A.
Fifth Avenue Place
P.O. Box 2595 STN M
425 -1 Street S. W.
Calgary, AB
T2P 4V4
CANADA
Attention: Mr. Robert J. Waters
Dear Sirs:
We are pleased to confirm that subject to acceptance by you, we have approved
credit facilities to be provided by CIBC West Indies Offshore Banking
Corporation (the Lender), for the use of Norcen Energia Venezuela, S A. (the
Borrower) on, and subject to, the following terms and conditions:
Borrower: Norcen Energia Venezuela, S. A.
- ---------
Lender: CIBC West Indies Offshore Banking Corporation
- -------
Amount/Availment: US$150,000,000 - (one hundred and fifty million dollars,
- ----------------- United States currency)
Type: Demand loan
- -----
Purpose: To assist the company in its South American exploration and
- -------- development activities.
Advances: Subject to compliance by the Borrower with terms and
- --------- conditions of this letter.
Repayment: The facility is repayable on demand.
- ----------
The Borrower will pay interest quarterly in arrears on March
31, June 30, September 30 and December 31 on the basis of a
year of 360 days.
Interest Rates: Interest on the outstanding principal amount, and interest
- --------------- on overdue interest compounded monthly, will be payable at
the rate of LIBOR plus 70 basis points per annum on the
basis of a 360 day year
Any interest collected will be net of the Venezuelan
withholding or other taxes.
<PAGE>
November 20, 1997 Page 2
Mr. Robert J. Waters
Treasurer
Norcen Energia Venezuela, S.A.
- ------------------------------
Fees: With respect to the first US$50,000,000
- -----
A negotiation fee of US$25,000.00 (twenty five thousand
dollars, United States currency) will be payable to the
Lender at first drawdown, with US$9,000 (nine thousand
dollars, United States currency) being payable annually
thereafter for as long as the agreement is in effect.
With respect to the next US$100,000,000
A negotiation fee of US$35,000.00 (thirty five thousand
dollars, United States currency) will be payable to the
Lender at first drawdown, with US$11,000 (eleven thousand
dollars, United States currency) being payable annually
thereafter for as long as the agreement is in effect.
Any fees collected will be net of the Venezuelan withholding
or other taxes.
Security: Norcen Energy Resources (Barbados) Limited will maintain, at
- --------- all times, United States dollar cash deposits with the
Lender equal to the advances under this facility (the
Security). Norcen Energy Resources (Barbados) Limited will
execute a Hypothecation Agreement substantially in the form
of Exhibit A, and provide the Lender with corporate
resolutions consenting to the Hypothecation Agreement
Interest will be paid on the Security by the Lender to
Norcen Energy Resources (Barbados) Limited at the same rate
and on the same terms as interest paid by the Borrower to
the Lender on advances under this facility.
Conditions
- ----------
precedent: Prior to any advances being made under the facility, the
- ---------- Lender shall have obtained the Security together with all
the necessary documentation, resolutions and legal opinions
which shall be satisfactory to the Lender and its counsel.
The form of hypothecation [deposits of Norcen Energy
Resources (Barbados) Limited being pledged to directly
secure loans to the Borrower] will be reviewed by local
legal counsel for the Lender and a legal opinion provided to
confirm that:
I) Norcen Energy Resources (Barbados) Limited has the
<PAGE>
November 20, 1997 Page 3
Mr. Robert J. Waters
Treasurer
Norcen Energia Venezuela, S.A.
- ------------------------------
necessary powers to pledge assets to secure loans to a
third party (and/or) a related company.
ii) The Lender will have the ability to utilize the deposit
to retire the loan in the event this should become
necessary at some future date.
Covenants: The Borrower, its subsidiaries, parent company and/or
- ---------- co-subsidiaries will conduct its business and maintain all
the property of the Borrower in compliance with all material
local, international, environmental statutes, regulations
and by-laws.
The Lender reserves the right to off-set the hypothecated
deposits against loans drawn, should there be in the
Lender's opinion, any perceived risk to its position whether
by way of environmental, legal, security, loan default or
any other reasonable cause/factor/concern so deemed by the
Lender.
The Borrower will indemnify and hold harmless each of the
Lender or its affiliates and its directors, officers,
employees and agents in respect of any costs, losses,
damages, expenses, judgments, suits, claims, awards, fines,
sanctions and liabilities whatsoever (including costs or
expenses of defending or denying the same and including the
costs or expenses for preparing any necessary environmental
assessment report or other such reports) arising out of, in
respect of (1) any release, deposit, discharge or disposal
of any hazardous or toxic materials, contaminants, wastes or
other substance in connection with the Borrower's property
or business, and (ii) the remedial action (if any) taken by
the Lender or of its subsidiaries or affiliates in respect
of any such release, deposit, discharge or disposal. This
facility will survive the repayment or cancellation of any
facility or termination of this agreement.
Reporting
- ---------
Requirements: The following statements, reports and information shall be
- ------------- provided by the Borrower so long as the facilities remains
outstanding:
1) Unaudited financial statements within 90 days of each
fiscal year-end
2) Unaudited interim financial statements within 90 days
each of the first, second and third quarter-ends.
<PAGE>
November 20, 1997 Page 4
Mr. Robert J. Waters
Treasurer
Norcen Energia Venezuela, S.A.
- ------------------------------
3) Audited annual consolidated financial statements of the
parent company, Norcen Energy Resources Limited; within
120 days of each fiscal year-end.
Other: If the Lender's cost of maintaining the loan described above
- ------ increases as a result of a change of any applicable law or
the interpretation or the enforcement thereof by any court
or governmental agency, the Borrower, after having received
10 days prior written notice, may either 1) pay the Lender
on demand such additional amount sufficient to compensate
the Lender for the increased cost calculated effective from
the date of such notice; or ii) repay all principle and
interest and terminate this agreement without any
additional costs.
Judgment Currency: In order to obtain judgments, the Lender can convert
- ------------------ currencies to United States Dollars on a customary basis.
Cancellation: The Borrower has the right to repay the advances outstanding
- ------------- under this facility on the giving of 10 days prior notice in
writing by the Borrower.
The Borrower has the right to cancel the facility described
herein at its discretion, provided there are no advances
outstanding under the facility to be canceled.
Events of Default: The following events of default shall apply:
- ------------------
1) Failure to pay interest, fees and/or principal when due
hereunder upon receipt of notice demanding payment.
2) Breach of any material representation, condition or
covenant hereunder and if such default or breach is not
remedied within 10 business days following receipt of a
notice to that effect.
3) Default under any instrument for borrowed money in
excess of CDN$25,000,000 (twenty five million dollars,
Canadian currency) of the Borrower or any of their
wholly-owned or controlled subsidiaries or affiliates
and any applicable grace period has expired.
4) If an order is made or an effective resolution passed
for the winding-up, liquidation or dissolution of the
Borrower.
<PAGE>
November 2O, 1997 Page 5
Mr. Robert J. Waters
Treasurer
Norcen Energia Venezuela, S.A.
- ------------------------------
5) If the Borrower becomes insolvent, or institutes
proceedings for its winding-up or dissolution, or to be
adjudicated a voluntary bankrupt, or files an
application seeking reorganization, arrangement,
composition or any other similar relief under any
bankruptcy, arrangement or other similar law, or makes
an arrangement for the benefit of creditors, or applies
for the appointment of a receiver or receiver-manager
over any of its property, or admits in writing its
inability to pay its debts generally as they become
due, or suspends transaction of its usual business, or
consents to any proceeding in 6) below.
6) Any application is filed or proceeding instituted
against the Borrower to have it adjudged a bankrupt or
insolvent or seeking reorganization, arrangement,
composition or other similar relief under any
bankruptcy, arrangement or any other similar law in
respect of the Borrower, or seeking the appointment of
a receiver or receiver-manager, administrator,
liquidator, trustee or assignee in bankruptcy or
insolvency of the Borrower or its property, or for the
winding-up or dissolution of its affairs, and such
application or proceeding remain in force undischarged
or unstayed for a period of 30 days or more.
7) If the Borrower cease to carry on the ordinary course
of its business or a substantial part thereof.
8) If effective control of the Borrower passes from the
person or persons who presently exercise effective
control to any other person or persons.
9) If there occurs any material adverse change to the
financial condition, operation or capital of the
Borrower.
No Waiver;
- ----------
Remedies: No failure on the part of the Lender to exercise and no
- --------- delay in exercising any right hereunder will operate as a
waiver thereof, nor will any single or partial exercise of
any right hereunder preclude any other or further exercise
thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any
remedies provided by law.
Applicable Law: This agreement shall be governed by and construed in
- --------------- accordance with the laws of Barbados.
<PAGE>
November 2O, 1997 Page 6
Mr. Robert J. Waters
Treasurer
Norcen Energia Venezuela, S.A.
- ------------------------------
Severability: In case any of the provisions of this agreement shall for
- ------------- any reason be held to be invalid, illegal or unenforceable,
such invalidity, illegality or unenforceability shall not
affect any other provisions hereof and this agreement shall
be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
Expenses and Legal
- ------------------
Fees: All reasonable costs incurred by the Lender, including legal
- ----- opinions or any legal fees, in completing or attempting to
complete this transaction, plus any costs of subsequent
discharges, are for the Borrower's account.
Review: The facility is subject to review at any time.
- -------
Acceptance: If the foregoing terms and conditions are acceptable to you,
- ----------- please indicate to us your acceptance of this offer by
signing and returning to this office the enclosed copy of
this letter on or before November 30, 1997. If unaccepted by
this date, our offer shall be considered null and void
unless extended in writing by the Lender.
CIBC WEST INDIES OFFSHORE BANKING CORPORATION
Per: /s/ Shastrie Ablack
------------------------
Shastrie Ablack
Director
Per: /s/ Gregory E. Hinkson
------------------------
Gregory E. Hinkson
General Manager
<PAGE>
November 20, 1997 Page 7
Mr. Robert J. Waters
Treasurer
Norcen Energia Venezuela, S.A.
- ------------------------------
We hereby accept the above terms and conditions of financing
NORCEN ENERGIA VENEZUELA, S.A.
Per: /s/ Robert J. Waters
------------------------
Robert J. Waters
Treasurer
Per: /s/ Doug Palmer
------------------------
Doug Palmer
Date: November 25, 1997
-----------------------
NORCEN ENERGY RESOURCES (BARBADOS) LIMITED
Per: /s/
------------------------
Per: /s/
------------------------
Date: November 25, 1997
-----------------------
<PAGE>
Exhibit A
HYPOTHECATION OF BANK BALANCES
- ------------------------------
For Valuable Consideration, Norcen Energy Resources (Barbados) Limited
(Norcen Barbados) hereby authorizes CIBC West Indies Offshore Banking
Corporation (hereinafter called "the Bank") to retain and hold the sum of One
Hundred and Fifty Million Dollars, United States currency (US$150,000,000) now
or hereafter standing to the credit of Norcen Barbados in Deposit Account Number
____________________ or any substitutions therefor as a general and continuing
collateral security for the payment of the present and future indebtedness and
liability of Norcen Energia Venezuela, S.A. (the Borrower) to the Bank
wheresoever and howsoever incurred and any ultimate unpaid balance thereof.
Norcen Barbados agree(s) with the Bank that:
(1) That in the event of any default in such payment and with written
notice to Norcen Barbados, the said sum (or any part thereof from time to time)
may, as and when the Bank thinks fit, be appropriated to and applied on such
parts of said indebtedness and liability as to the Bank seems best, without
prejudice to the Bank's claims upon the Borrower for any deficiency;
(2) That the Bank may grant extensions of time and other indulgences, take
and give up securities, accept compositions, grant releases and discharges and
otherwise deal with the Borrower and with other parties and securities as the
Bank may see fit, without prejudice to the Bank's right to hold and/or deal with
the said sum or any part thereof as herein provided;
(3) That any loss other than a loss resulting from an act of gross
negligence on the part of the Bank or its agents or representatives of or in
respect of any securities received by the Bank from the Borrower or any other
person, whether occasioned through the fault of the Bank or otherwise, shall not
pro tanto or otherwise limit or lessen the Bank's right to hold and/or deal with
the said sum or any part thereof as herein provided;
(4) That until the said sum is appropriated and applied by the Bank as
aforesaid, the Bank may refuse to honor any cheque or withdrawal made by Norcen
Barbados or any of them, if more than one, on the said account unless there are
funds to the credit of the said account, in addition to the said sum, sufficient
to pay any such cheque or withdrawal;
(5) That should the Bank, in its discretion from time to time, permit
Norcen Barbados or any one of them, if more than one, to withdraw by cheque or
otherwise all or any part of the said sum, then any amounts so withdrawn shall
be replaced by further deposits to be made by Norcen Barbados to the credit of
the said account and such deposits shall, to the extent required, replace any
amount or amounts so withdrawn and shall be subject to the provisions of this
agreement so that the amount of the said sum as hereinbefore provided shall be
maintained by Norcen Barbados in the said account;
(6) To the extent that the said sum retained on deposit at the Bank exceeds
the indebtedness to the Bank, Norcen Barbados shall have the right to either i)
retain the excess funds on deposit with the Bank free from hypothecation, or ii)
withdraw the excess funds at no cost. Excess funds will be subject to prevailing
deposit rates;
(7) The Bank will pay interest to Norcen Barbados on all amounts retained
on deposit at the Bank. For the equivalent hypothecated deposit, interest will
be paid at a rate of LIBOR plus 70 basis points per annum, payable quarterly in
arrears on March 31, June 30, September 30 and December 31 on the basis of a
year of 360 days;
(8) This security is in addition and without prejudice to any other
security now or hereafter held by the Bank.
Dated at this day of , 19
---------------------- ----- ------------ -----
NORCEN ENERGY RESOURCES (BARBADOS) LIMITED
- ----------------------------------- ---------------------------------
<PAGE>
HYPOTHECATION OF BANK BALANCES
- ------------------------------
For Valuable Consideration, Norcen Energy Resources (Barbados) Limited
(Norcen Barbados) hereby authorizes CIBC West Indies Offshore Banking
Corporation (hereinafter called "the Bank") to retain and hold the sum of 0ne
Hundred and Fifty Million Dollars, United States currency (US$150,000,000) now
or hereafter standing to the credit of Norcen Barbados in Deposit Account Number
____________________ or any substitutions therefor as a general and continuing
collateral security for the payment of the present and future indebtedness and
liability of Norcen Energia Venezuela, S.A. (the Borrower) to the Bank
wheresoever and howsoever incurred and any ultimate unpaid balance thereof.
Norcen Barbados agree(s) with the Bank that:
(1) That in the event of any default in such payment and with written
notice to Norcen Barbados, the said sum (or any part thereof from time to time)
may, as and when the Bank thinks fit, be appropriated to and applied on such
parts of said indebtedness and liability as to the Bank seems best, without
prejudice to the Bank's claims upon the Borrower for any deficiency;
(2) That the Bank may grant extensions of time and other indulgences, take
and give up securities, accept compositions, grant releases and discharges and
otherwise deal with the Borrower and with other parties and securities as the
Bank may see fit, without prejudice to the Bank's right to hold and/or deal with
the said sum or any part thereof as herein provided;
(3) That any loss other than a loss resulting from an act of gross
negligence on the part of the Bank or its agents or representatives of or in
respect of any securities received by the Bank from the Borrower or any other
person, whether occasioned through the fault of the Bank or otherwise, shall not
pro tanto or otherwise limit or lessen the Bank's right to hold and/or deal with
the said sum or any part thereof as herein provided;
(4) That until the said sum is appropriated and applied by the Bank as
aforesaid, the Bank may refuse to honor any cheque or withdrawal made by Norcen
Barbados or any of them, if more than one, on the said account unless there are
funds to the credit of the said account, in addition to the said sum, sufficient
to pay any such cheque or withdrawal;
(5) That should the Bank, in its discretion from time to time, permit
Norcen Barbados or any one of them, if more than one, to withdraw by cheque or
otherwise all or any part of the said sum, then any amounts so withdrawn shall
be replaced by further deposits to be made by Norcen Barbados to the credit of
the said account and such deposits shall, to the extent required, replace any
amount or amounts so withdrawn and shall be subject to the provisions of this
agreement so that the amount of the said sum as hereinbefore provided shall be
maintained by Norcen Barbados in the said account;
(6) To the extent that the said sum retained on deposit at the Bank exceeds
the indebtedness to the Bank, Norcen Barbados shall have the right to either i)
retain the excess funds on deposit with the Bank free from hypothecation, or ii)
withdraw the excess funds at no cost. Excess funds will be subject to prevailing
deposit rates;
(7) The Bank will pay interest to Norcen Barbados on all amounts retained
on deposit at the Bank. For the equivalent hypothecated deposit, interest will
be paid at a rate of LIBOR plus 70 basis points per annum, payable quarterly in
arrears on March 31, June 30, September 30 and December 31 on the basis of a
year of 360 days;
(8) This security is in addition and without prejudice to any other
security now or hereafter held by the Bank.
Dated at Calgary and Barbados this 25th day of November , 1997
--------------------- -------- -------------- --
NORCEN ENERGY RESOURCES (BARBADOS) LIMITED
/s/ /s/
- ----------------------------------- ---------------------------------
<PAGE>
Deposit Agreement Between
CIBC West Indies Offshore Banking Corporation ("CIBC")
and
Norcen Energy Resources (Barbados) Limited ("Norcen")
November 25, 1997
Wherein Norcen has agreed to deposit funds with the CIBC pursuant to the
Hypothecation of Bank Balances Agreement dated November 20, 1997 (the
"Hypothecation Agreement"); and
Wherein the CIBC has agreed to lend funds to Norcen Energia Venezuela S.A.
("NEVSA") pursuant to a demand loan agreement dated November 20, 1997 (the "Loan
Agreement"),
The CIBC agrees that, to the extent that Norcen is entitled to withdraw all or
part of its deposit pursuant to the Hypothecation Agreement between Norcen and
CIBC and the CIBC defaults or otherwise fails to return that part of the deposit
to Norcen, then upon the expiry of ten (10) business days from the said default
or failure, Norcen may apply at its discretion, that part of the deposit amount
against the indebtedness and liability to the CIBC by NEVSA pursuant to the Loan
Agreement.
Acknowledged and agreed by:
CIBC West Indies Offshore Banking Corporation ("CIBC")
/s/ Gregory Hinkson
- ---------------------------------------
/s/
- ---------------------------------------
date: December 2, 1997
------------------
Norcen Energy Resources (Barbados) Limited
/s/
- ---------------------------------------
/s/
- ---------------------------------------
date: Nov. 25, 1997
------------------
<PAGE>
[LETTERHEAD OF ROYAL BANK OF CANADA]
July 14, 1997
Basic Petroleum International Limited
6a Avenida 0-28, Zona 10
Guatemala City, Guatemala 01010
Central America
Dear Sirs:
Further to our discussions, this letter agreement sets forth the terms and
conditions of our extension of a US$25 million loan to Basic Petroleum
International Limited.
TRANSACTION
SUMMARY: Royal Bank of Canada ("RBC" or the "Bank") will extend for a
period of 364 days, a revolving loan (the "Loan") to Basic
Petroleum International Limited, a Bahamian corporation.
Norcen Energy Resources (Bahamas) Limited, a Bahamian
corporation will guarantee such loan and will deposit funds
in US dollars with RBC's Foreign Banking Centre in Nassau,
Bahamas. This deposit will be pledged to the Bank as security
for the Loan and guarantee. The Bank is under no obligation
to advance funds in excess of the principal amount of the
deposit.
BORROWER: Basic Petroleum International Limited.
GUARANTOR/ Norcen Energy Resources (Bahamas) Limited.
DEPOSITOR:
LENDER: Royal Bank of Canada through its Nassau Branch (the "Branch of
Account").
DEPOSIT AND
LOAN AMOUNT: Up to a maximum of US$25 million.
DEPOSIT AND
LOAN TERM: Three hundred and sixty-four (364) days. The Borrower will
have the option from time to time to prepay all or a portion
(in a minimum amount of (US$100,000.00) of the Loan with
five (5) days' written notice to the Bank and the Depositor
and the depositor will be required to withdraw all or such
portion of its deposit on the day the Bank received the
payment.
<PAGE>
Basic Petroleum International Limited Page 2
July 14, 1997
LENDING RATE: The Borrower will pay the Bank interest at a rate of Libor (as
defined in the Note (or hereinafter defined)) plus 350 basis
points per annum on the Loan and as otherwise provided in the
Note.
For the purposes only of the Interest Act (Canada), the
annual rates to which the foregoing rates are equivalent are
the foregoing rates multiplied by the actual number of days in
the year divided by 360.
FEES: A negotiation fee of US$15,000.00 will be payable to the
Lender at the first drawdown, with US$5,000.00 being payable
annually thereafter for as long as this agreement is in
effect. In addition, a fee of US$50.00 will be payable for
each transaction under this agreement.
REPRESENTATIONS
AND WARRANTIES
CONCERNING THE
BORROWER: The Borrower represents and warrants to the Bank that:
a) the Borrower is a corporation validly incorporated and
existing under the laws of the Bahamas, and is duly
registered or qualified to carry on business in all
jurisdictions where the character of the properties owned
by it or the nature of its business transacted makes such
registration or qualification necessary;
b) the execution, delivery and performance of this letter
agreement and the Note by the Borrower have been duly
authorized by all necessary action and do not (i) violate
any law or regulation or any provision of the charter of
the Borrower nor (ii) result in a breach of, a default
under, or the creation of any encumbrance on the
properties and assets of the Borrower pursuant to any
contract or other agreement to which the Borrower is a
party;
c) the financial statements of the Borrower for the fiscal
year ended December 31, 1996 are materially correct and
complete in all respects, and since the date of such
financial statements there has been no material adverse
change in the financial condition, business or assets of
the Borrower (subsequent to the Borrower's most recent
fiscal year end, the Borrower has been acquired indirectly
by Norcen Energy Resources Limited);
d) no event has occurred which constitutes an Event of
Default hereunder or a default having a material adverse
effect on the financial condition of the Borrower under or
in respect of any agreement, undertaking or instrument to
which the Borrower or any of its properties or assets may
be subject;
e) the obligations of the Borrower under the Loan are
direct, general and unconditional obligations of the
Borrower and rank and will rank at least pari passu with
all other present and future unsecured obligations of the
Borrower
<PAGE>
Basic Petroleum Intentional Limited Page 3
July 14, 1997
(including contingent obligations) in respect of
indebtedness of the Borrower; and
f) this agreement constitutes, and when duly executed and
delivered the Note will constitute the legal, valid and
binding obligation of the Borrower, enforceable in
accordance with is terms.
CONDITIONS
OF CLOSING: Closing is subject to delivery of the following items to the
Bank:
a) a duly executed copy of this letter agreement;
b) a promissory note, in substantially the form of Exhibit A
hereto (the "Note"), duly executed by the Borrower;
c) a cash deposit (the "Deposit") by the Depositor with the
Branch of Account in an amount equal to the Loan and for a
term at least equal to the term of the Loan;
d) a duly executed Guarantee and a Collateral Security
Agreement, in substantially the forms of Exhibit B hereto
(collectively, the "Pledge Agreement") pledging the
deposit to the Bank, as security for the Loan;
e) corporate documentation of the Borrower to evidence, to
the Bank's satisfaction, the due incorporation of the
Borrower and its authority to enter into this letter
agreement and the Note, and the authority of the
representatives acting on the Borrower's behalf to execute
this letter agreement and the Note;
f) corporate documentation of the Depositor to evidence, to
the Bank's satisfaction, the due incorporation of the
Depositor and its authority to enter into the Pledge
Agreement, and the authority of the representatives acting
on the Depositor's behalf to execute the Pledge Agreement
and that the Bank's full rights to set-off are in effect;
and
g) the Borrower's financial statements as at December 31,
1996.
EVENTS
OF DEFAULT: The occurrence of any of the following shall constitute an
Event of Default, the happening of which shall entitle the
Bank, in its sole discretion, without any period of notice
which might otherwise be required by law, to declare the Loan,
accrued interest and other amounts owing to the Bank under
this letter agreement and the Note to be immediately due and
payable without further notice or demand, presentment or
protest (all of which are hereby waived) and to exercise all
remedies available to it under the Pledge Agreement and
applicable law, including the right of set-off against the
Deposit:
<PAGE>
Basic Petroleum International Limited Page 4
July 14, 1997
a) non-payment of principal, interest, fee or any other
amount when due under this letter agreement or the Note
for a period of two (2) business days (as defined in the
Note) following due date;
b) failure of the Borrower and/or the Depositor to observe or
perform any other covenant or provision of this letter
agreement, the Pledge Agreement, or any other agreement
with the Bank for a period of thirty (30) days after
notice of same from the Bank;
c) if the Borrower or the Depositor becomes insolvent or
commits an act of bankruptcy or makes an unauthorized
assignment or bulk sale of its assets or if proceedings
for the dissolution, liquidation or winding up of the
Borrower or the Depositor or the suspension of the
operation of the Borrower's or Depositor's business is
commenced, provided that involuntary proceedings brought
by another party shall not be an Event of Default if
dismissed within sixty (60) days; or
d) if any representation or warranty made herein, or in the
Pledge Agreement shall have been false or inaccurate in
any materially adverse respect when made.
EXPENSES: All reasonable legal costs, fees and expenses incurred in
connection with the operation of this letter agreement,
including the enforcement of the Bank's rights under this
letter agreement, the Note and the Pledge Agreement (in the
case of legal fees, on a solicitor/client basis) will be for
the account of the Borrower.
TAXES: All payments to be made by the Borrower under this letter
agreement or the Note or under any document provided for
hereunder shall be made in full, without set-off or
counterclaim and free and clear of and without deduction or
withholding for or on account of any tax imposed by any taxing
jurisdiction (including any penalty or interest payable in
connection with any failure to pay or any delay in paying any
tax) as set forth in the Note, including Guatemalan or
Bahamian withholding tax with respect to interest payable on
the Note. The Borrower will gross up any payment subject to
any such tax, penalty, or interest such that net payment made
to the Bank will equal the amount otherwise due.
PAYMENT
INSTRUCTIONS: Payments must be made to the order of Royal Bank of Canada,
Nassau, by crediting the account number 001-1-188-448
maintained by the Bank at The Chase Manhattan Bank, ABA
#021000021, 4 Metrotech Center, 7th Floor, Brooklyn, New York,
11245, USA.
<PAGE>
Basic Petroleum International Limited Page 5
July 14, 1997
NOTICES: Any notice given hereunder shall be given in writing and
mailed, telecommunicated or delivered to the address set forth
below or such other address as shall be designated by notice
to the other party hereto.
To the Bank: to the Borrower:
Royal Bank of Canada Basic Petroleum International
Royal Bank House, 2nd Floor Limited
East Hill Street 6a Avenida 0-28, Zona 10
P.O. Box N-7141 Guatemala City, Guatemala 01010
Central America
Nassau, N.P. Bahamas Attention: Finance Manager
Attention, Manager Tax: (502) 331-6922
Fax: (242) 322-5824
with a copy to: with a copy to:
Royal Bank of Canada Norcen Energy Resources Limited
Corporate Banking- 400, 425 - 1 Street SW
Multinational PO Box 2595, Station M
335 - 8th Avenue S.W., Calgary, Alberta Canada T2P 4V4
23rd Floor Attention: Treasurer
PO Box 2534, Station M Fax: (403) 231-0312
Calgary, Alberta T2P 2N5
Attention: Mr. D.K. MacLaren
Fax: (403) 292-3234
JURISDICTION: The parties hereto submit to the jurisdiction of the Courts of
the Province of Alberta, for any matters related to the
interpretation and enforcement hereof, waiving any
jurisdiction to which they may be entitled by reason of their
present or future domicile; provided, however, that the above
shall in no event impair the right of the Bank to bring suit
against the Borrower in any other jurisdiction where the
domicile or assets of the Borrower may be found.
GOVERNING
LAW: This letter agreement shall be governed by the laws of the
Province of Alberta, Canada.
WAIVER OF
JURY TRIAL: EACH PARTY TO THIS LETTER AGREEMENT HEREBY WAIVES ANY RIGHTS
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION
BASED HEREON OR ON THE NOTE.
WAIVER AND
MODIFICATION: No failure on the Bank's part to exercise, and no delay in
exercising, any right, power or remedy under this letter
agreement or the Note or the Pledge Agreement shall operate as
a waiver thereof. No modification or waiver of any provision
of this letter
<PAGE>
Basic Petroleum International Limited Page 6
July 14, 1997
agreement or the Note shall be effective unless it is in
writing and signed by the Bank.
ENTIRE
AGREEMENT: This letter agreement and the Note constitute the entire
agreement among the parties hereto with respect to the subject
matter hereof
Should you find the above terms and conditions to be acceptable, please indicate
your agreement thereto by signing and returning this agreement.
Yours truly,
ROYAL BANK OF CANADA
/s/ D.C. Gale
- -----------------------------
D.C. Gale
Vice President
Bahamas & Cayman Islands
We agree to the terms and conditions of this
agreement this 14 day of July , 1997.
---- -------
BASIC PETROLEUM INTERNATIONAL LIMITED
By: /s/ Robert Waters By: /s/ Theresia R. Reisch
------------------------- -----------------------
Robert Waters Theresia R. Reisch
Title: Treasurer Title: Assistant Secretary
---------------------- --------------------
<PAGE>
EXHIBIT 'A'
PROMISSORY NOTE
FOR VALUE RECEIVED, Basic Petroleum International Limited (the "Borrower"), a
corporation organized and existing under the laws of the Bahamas, by this
promissory note unconditionally promises to pay to the order of ROYAL BANK OF
CANADA (the "Bank") by crediting the account number 001-1-188-448 maintained by
the Bank with The Chase Manhattan Bank, New York, N.Y., U.S.A., or such other
account in the U.S.A. as the Bank may specify to the Borrower in writing, the
principal sum of ______________________ United States Dollars, which sum shall
be fully payable on July 7, 1998 (the "Principal Payment Date") unless
otherwise renewed or extended in writing.
The Borrower promises also to pay interest on the unpaid principal amount hereof
until final maturity (whether by acceleration or otherwise), payable at a rate
per annum which shall be equal to the sum of Libor and 350 basis points. Such
applicable rate per annum is herein called the "Rate of Borrowing". Interest
shall be calculated on the basis of the actual number of days elapsed divided by
360. Interest in respect hereof shall be due and payable quarterly in arrears
and on the Principal Payment Date. The Borrower also promises to pay interest in
respect of the overdue principal amount hereof and (to the extent permitted by
law) overdue interest with respect hereto payable on demand, at a rate per annum
which shall be equal to the sum of (a) the higher of (i) the rate announced by
the Bank in New York City as its United States dollar prime commercial lending
rate and (ii) the overnight federal funds rate charged to the Bank plus 1/2%. As
used herein the term "business day" shall mean a day in The City of New York,
N.Y., U.S.A., Nassau, Bahamas on which banking transactions are effected and on
which transactions are carried out in the London Interbank Market. Interest
shall accrue and be payable both before and after maturity, default and
judgement.
The note may be prepaid in accordance with the terms in the letter agreement
dated July 10, 1997 between the Borrower and the Bank.
All payments of principal of and interest on this Note shall be effectively made
in the Bank in lawful money of the United States of America (in freely
transferable U.S. dollars) and in immediately available funds (or such other
funds as may from time to time be customary for the settlement of international
banking transactions in dollars), as the Bank may direct, to the account
identified above. Such payments shall be made without set-off or counter-claim
and free and clear of and without deduction or withholding for or an account of
any present or future taxes, levies, imports, duties or other charges of
whatsoever nature imposed, levied, assessed, collected or required to be
withheld by any government or political subdivision or taxing authority
thereof.
For everything related to this Note the Borrower designates its domicile to be:
The Bahamas. Any judicial action in respect hereto may be brought before the
Courts of the Province of Alberta, Canada, or in the competent courts of the
domicile of the Borrower, with an express waiver to any objection which may
effect such jurisdictions.
This Note shall be government by and construed in accordance with the laws of
the Province of Alberta, Canada.
Dated this day of , 1997.
---- -------------
BASIC PETROLEUM INTERNATIONAL LIMITED
By:
------------------------------------
Title:
---------------------------------
By:
------------------------------------
Title:
---------------------------------
<PAGE>
EXHIBIT 'B'
COLLATERAL SECURITY AGREEMENT
To: ROYAL BANK OF CANADA
FOR VALUABLE CONSIDERATION, receipt whereof is hereby acknowledged, the
undersigned hereby agrees with ROYAL BANK OF CANADA (hereinafter called the
"Bank") as follows concerning the moneys or amounts now and hereafter on deposit
in the account designated Norcen Energy Resources (Bahamas) Limited "Collateral
Account" maintained in the name of the undersigned at ROYAL BANK OF CANADA,
Foreign Banking Center, Nassau and hereby assigns and grants a continuing
security interest in the same to the Bank:
1. The Bank is hereby authorized and shall be entitled to retain and hold the
said moneys or amounts on deposit in the Collateral Account, together with any
and all additions and accretions thereto, as general and continuing collateral
security for the payment and fulfillment of all debits, liabilities and
obligations, present or future, direct or indirect, absolute or contingent,
matured or not, of Basic Petroleum International Limited (the "Customer") to the
Bank under the letter agreement dated July ____, 1997 between the Customer and
the Bank (as in effect from time to time, the "Letter Agreement"), and the
undersigned's guarantee of such obligations dated July ___, 1997, in each case,
whether arising within or outside the Commonwealth of the Bahamas (such debts,
liabilities and obligations being hereinafter called the "Liabilities").
2. Except as provided in paragraph 5 below, whenever and so long as any
Liabilities exist, the Bank will not be indebted or liable to the undersigned in
respect of the moneys or amounts now or, hereafter on deposit in the Collateral
Account, and the undersigned shall have no right to withdraw any such moneys or
amounts now or hereafter on deposit in the Collateral Account or to draw any
checks or drafts or other orders for the payment of money to be charged against
the Collateral Account, or to assign, transfer or otherwise deal with such
moneys or amounts now or hereafter on deposit in the Collateral Account, or any
part thereof.
3. If an Event of Default under the Letter Agreement shall occur and be
continuing, then upon the happening of any such event (a) all the Liabilities
shall thereupon be and become immediately payable, (b) the Bank shall be
entitled as and when it thinks fit and without prior notice to the undersigned,
and is hereby irrevocably authorized and empowered, to apply within thirty (30)
days all or any portion or portions of the moneys or amounts on deposit in the
Collateral Account against and in reduction or extinction of all or any part or
parts of the Liabilities, all as the Bank may see fit, and to debit the
Collateral Account accordingly; provided that if the Liabilities and the moneys
or amounts on deposit in the Collateral account are not in equal amounts, then
the greater shall be extinguished only to the extent of the lesser and the
excess shall remain owing and payable.
4. The Bank may grant time, renewals, extensions, indulgences, releases and
discharges to, take securities (which word as used herein includes other
guarantees) from and give the same and any or all existing securities up to,
abstain from taking securities from or from perfecting securities of, cease or
refrain from giving credit or making loans or advances to, accept compositions
from the otherwise deal with the Customer or any other party and with all
securities as the Bank may see fit, and may apply all moneys at any time
received from the Customer or any other party or from securities upon such part
of the debts or liabilities of the Customer or such other party to the Bank as
the Bank deems best and change any such application in whole or in part from
time to time as the Bank may see fit, the whole without in any way limiting or
lessening the rights and powers of the Bank to hold and deal with the said
moneys or amounts now and hereafter on deposit in the Collateral Account in the
manner provided for herein.
5. Upon receipt of any prepayment of the Liabilities by the Customer, the Bank
shall withdraw from the Collateral Account and pay over to the undersigned, and
the undersigned shall accept, such amount as is equal to the principal amount of
the Liabilities prepaid or, if the Liabilities shall be paid or prepaid in full,
the full amount on deposit in the Collateral Account and interest shall cease to
accrue on the amount so withdrawn and paid over.
6. No loss of or in respect of any securities received by the Bank from the
undersigned or any other party; whether occasioned by the fault of the Bank or
otherwise, shall in any way limit or lessen the rights and powers of the Bank
to hold and deal with the said moneys or amounts now and hereafter on deposit in
the Collateral Account in the manner provided for herein.
7. The Bank shall not be bound to exercise any of its rights or remedies against
the Customer or other party or in respect of any securities that it may at any
time hold before being entitled to appropriate and apply any or any portion or
portions of the moneys or amounts now or hereafter on deposit in the Collateral
Account for the purpose and in the manner provided for herein.
8. In the event that at any time or from time to time the moneys or amounts on
deposit in the Collateral Account are in currency different from the currency of
any of the Liabilities then for the purposes of this agreement the rate of
exchange between the currencies shall be the relative rate of exchange of the
Bank in effect on the date of conversion.
9. So long as the moneys or amounts on deposit are held under this agreement and
not applied in payment of the Liabilities the moneys or amounts on deposit shall
bear interest at a rate per annum equal to the sum of LIBOR plus 350 basis
points, calculated on a 360 day year for the actual days elapsed in the same
currency as the moneys or amounts on deposit. Said interest shall be paid
quarterly in arrears to the undersigned unless an Event of Default exists, in
which case the interest shall be credited in the Collateral Account and held by
the Bank as additional collateral security under this agreement.
10. The undersigned represents and warrants to the Bank that: (a) the
undersigned is a corporation validly incorporated and existing under the laws of
the Bahamas and is duly registered or qualified to carry on business in all
jurisdictions where the character of the properties owned by it or the nature of
its business transacted makes such registration or qualification necessary, (b)
the execution, delivery and performance of this agreement have been duly
authorized by all necessary corporate action and do not (i) violate any law or
regulation or any provision of the charter of the undersigned, nor (ii) result
in breach of, a default under, or the creation of any encumbrance on the
properties and assets of the undersigned pursuant to any contract or other
agreement to which the undersigned is a party, except the lien created by this
agreement; (c) no event has occurred which constitutes an Event of Default
under the Letter Agreement or a default having a material adverse effect on the
financial condition of the undersigned under or in respect of any agreement,
undertaking or instrument to which the
<PAGE>
undersigned or any of its properties or assets may be subject; and (d) this
agreement constitutes the legal, valid and binding obligation of the
undersigned, enforceable in accordance with its terms.
11. Any notice given hereunder shall be given in writing and mailed,
telecommunicated or delivered to the address set forth below or such other
address as shall be designated by notice to the other party herein.
To the Bank: With a copy to:
Royal Bank of Canada Royal Bank of Canada
Royal Bank House, 2nd Floor Corporate Banking-Multinational
East Hill Street 335 - 8th Avenue SW, 23rd Floor
PO Box N-7141 PO Box 2534, Station M
Nassau, N.P., Bahamas Calgary, Alberta T2P 2N5
Attention: Manager Attention: Mr. D.K. MacLaren
Fax: (242) 322-5824 Fax: (403) 292-3234
To the undersigned: With a copy to:
Norcen Energy Resources (Bahamas) Limited Basic Petroleum International Limited
c/o Norcen Energy Resources Limited 6a Avenida 0-28, Zona 10
400, 425 - 1 Street SW Guatemala City, Guatemala 01010
PO Box 2595, Station M Central America
Calgary, Alberta Canada T2P 4V4 Attention: Finance Manager
Attention: Treasurer Fax: (502) 331-6922
Fax: (403) 231-0312
12. The undersigned submits to the non-exclusive jurisdiction of the Courts
of the Province of Alberta, Canada, for any matters related to the
interpretation and enforcement hereof, waiving any jurisdiction to which it may
be entitled by reason of its present or future domicile; provided, however,
that the above shall in no event impair the Bank's right to bring suit against
the undersigned in The Bahamas or any other jurisdiction where the domicile or
assets of the undersigned may be found.
13. EACH OF THE UNDERSIGNED AND, BY ITS ACCEPTANCE HEREOF, THE BANK HEREBY
WAIVES ANY RIGHTS IT MAY HAVE TO TRIAL BY JURY IN RESPECT TO ANY LITIGATION
BASED HEREON.
14. No failure on the Bank's part to exercise, and no delay in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof. No
modification or waiver of any provision of this agreement shall be effective
unless it is in writing and signed by the Bank.
15. This agreement shall be a continuing agreement and shall have effect
whenever and so often as any Liabilities exist.
16. This agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of The Bahamas in which the Collateral Account is
located.
17. This agreement shall extend to and enure to the benefit of the Bank and its
successors and assigns, and shall be binding upon the undersigned and the heirs,
executors, administrators, legal representatives and assigns of the
undersigned and each of them.
18. The undersigned hereby waives any presentment, protest or notice prior to
the Bank enforcing or using its security hereunder.
19. The Manager for the time being of any Branch of the Bank at which the said
money or amounts on deposit in the Collateral Account may be kept is hereby
appointed the irrevocable attorney of the undersigned with full powers of
substitution from time to time to endorse or transfer such Collateral Account
to the Bank or its nominee.
IN WITNESS WHEREOF the undersigned has hereunto duly executed this agreement the
_____________________day of _____________ A.D., 1997.
SIGNED AND DELIVERED
NORCEN ENERGY RESOURCES (BAHAMAS) LIMITED
By:
-------------------------------------
Title:
----------------------------------
By:
-------------------------------------
Title:
----------------------------------
<PAGE>
PROMISSORY NOTE
FOR VALUE RECEIVED, Basic Petroleum International Limited (the "Borrower"), a
corporation organized and existing under the laws of the Bahamas, by this
promissory note unconditionally promises to pay to the order of ROYAL BANK OF
CANADA (the "Bank") by crediting the account number 001-1-188-448 maintained by
the Bank with The Chase Manhattan Bank, New York, N.Y., U.S.A., or such other
account in the U.S.A. as the Bank may specify to the Borrower in writing, the
principal sum of $17,354,800.00 United States Dollars, which sum shall be fully
payable on July 7, 1998 (the "Principal Payment Date") unless otherwise renewed
or extended in writing.
The Borrower promises also to pay interest on the unpaid principal amount hereof
until final maturity (whether by acceleration or otherwise), payable at a rate
per annum which shall be equal to the sum of Libor and 350 basis points. Such
applicable rate per annum is herein called the "Rate of Borrowing". Interest
shall be calculated on the basis of the actual number of days elapsed divided by
360. Interest in respect hereof shall be due and payable quarterly in arrears
and on the Principal Payment Date. The Borrower also promises to pay interest in
respect of the overdue principal amount hereof and (to the extent permitted by
law) overdue interest with respect hereto payable on demand, at a rate per annum
which shall be equal to the sum of (a) the higher of (i) the rate announced by
the Bank in New York City as its United States dollar prime commercial lending
rate and (ii) the overnight federal funds rate charged to the Bank plus 1/2%. As
used herein the term "business day" shall mean a day in The City of New York,
N.Y., U.S.A., Nassau, Bahamas on which banking transactions are effected and on
which transactions are carried out in the London Interbank Market. Interest
shall accrue and be payable both before and after maturity, default and
judgement.
The note may be prepaid in accordance with the terms in the letter agreement
dated July 10, 1997 between the Borrower and the Bank.
All payments of principal of and interest on this Note shall be effectively made
in the Bank in lawful money of the United States of America (in freely
transferable U.S. dollars) and in immediately available funds (or such other
funds as may from time to time be customary for the settlement of international
banking transactions in dollars), as the Bank may direct, to the account
identified above. Such payments shall be made without set-off or counter-claim
and free and clear of and without deduction or withholding for or an account of
any present or future taxes, levies, imports, duties or other charges of
whatsoever nature imposed, levied, assessed, collected or required to be
withheld by any government or political subdivision or taxing authority thereof.
For everything related to this Note the Borrower designates its domicile to be:
The Bahamas. Any judicial action in respect hereto may be brought before the
Courts of the Province of Alberta, Canada, or in the competent courts of the
domicile of the Borrower, with an express waiver to any objection which may
effect such jurisdictions.
This Note shall be government by and construed in accordance with the laws of
the Province of Alberta, Canada.
Dated this 14 day of July, 1997.
BASIC PETROLEUM INTERNATIONAL LIMITED
By: /s/ Robert Waters
------------------------------------
Robert Waters
Title: Treasurer
By: /s/ Theresia R. Reisch
------------------------------------
Theresia R. Reisch
Title: Assistant Secretary
<PAGE>
COLLATERAL SECURITY AGREEMENT
TO: ROYAL BANK OF CANADA
FOR VALUABLE CONSIDERATION, receipt whereof is hereby acknowledged, the
undersigned hereby agrees with ROYAL BANK OF CANADA (hereinafter called the
"Bank") as follows concerning the moneys or amounts now and hereafter on deposit
in the account designated Norcen Energy Resources (Bahamas) Limited "Collateral
Account" maintained in the name of the undersigned at ROYAL BANK OF CANADA,
Foreign Banking Center, Nassau and hereby assigns and grants a continuing
security interest in the same to the Bank:
1. The Bank is hereby authorized and shall be entitled to retain and hold the
said moneys or amounts on deposit in the Collateral Account, together with any
and all additions and accretions thereto, as general and continuing collateral
security for the payment and fulfillment of all debits, liabilities and
obligations, present or future, direct or indirect, absolute or contingent,
matured or not, of Basic Petroleum International Limited (the "Customer") to the
Bank under the letter agreement dated July 14, 1997 between the Customer and the
Bank (as in effect from time to time, the "Letter Agreement"), and the
undersigned's guarantee of such obligations dated July 14, 1997, in each case,
whether arising within or outside the Commonwealth of the Bahamas (such debts,
liabilities and obligations being hereinafter called the "Liabilities").
2. Except as provided in paragraph 5 below, whenever and so long as any
Liabilities exist, the Bank will not be indebted or liable to the undersigned in
respect of the moneys or amounts now or, hereafter on deposit in the Collateral
Account, and the undersigned shall have no right to withdraw any such moneys or
amounts now or hereafter on deposit in the Collateral Account or to draw any
cheques or drafts or other orders for the payment of money to be charged against
the Collateral Account, or to assign, transfer or otherwise deal with such
moneys or amounts now or hereafter on deposit in the Collateral Account, or any
part thereof.
3. If an Event of Default under the Letter Agreement shall occur and be
continuing, then upon the happening of any such event (a) all the Liabilities
shall thereupon be and become immediately payable, (b) the Bank shall be
entitled as and when it thinks fit and without prior notice to the undersigned,
and is hereby irrevocably authorized and empowered, to apply within thirty (30)
days all or any portion or portions of the moneys or amounts on deposit in the
Collateral Account against and in reduction or extinction of all or any part or
parts of the Liabilities, all as the Bank may see fit, and to debit the
Collateral Account accordingly; provided that if the Liabilities and the moneys
or amounts on deposit in the Collateral account are not in equal amounts, then
the greater shall be extinguished only to the extent of the lesser and the
excess shall remain owing and payable.
The Bank may grant time, renewals, extensions, indulgences, releases
and discharges to, take securities (which word as used herein includes other
guarantees) from and give the same and any or all existing securities up to,
abstain from taking securities from or from perfecting securities of, cease or
refrain from giving credit or making loans or advances to, accept compositions
from the otherwise deal with the Customer or any other party and with all
securities as the Bank may see fit, and may apply all moneys at any time
received from the Customer or any other party or from securities upon such part
of the debts or liabilities of the Customer or such other party to the Bank as
the Bank deems best and change any such application in whole or in part from
time to time as the Bank may see fit, the whole without in any way limiting or
lessening the rights and powers of the Bank to hold and deal with the said
moneys or amounts now and hereafter on deposit in the Collateral Account in the
manner provided for herein.
5. Upon receipt of any prepayment of the Liabilities by the Customer, the Bank
shall withdraw from the Collateral Account and pay over to the undersigned, and
the undersigned shall accept, such amount as is equal to the principal amount of
the Liabilities prepaid or, if the Liabilities shall be paid or prepaid in full,
the full amount on deposit in the Collateral Account and interest shall cease to
accrue on the amount so withdrawn and paid over.
6. No loss of or in respect of any securities received by the Bank from the
undersigned or any other party; whether occasioned by the fault of the Bank or
otherwise, shall in any way limit or lessen the rights and powers of the Bank to
hold and deal with the said moneys or amounts now and hereafter on deposit in
the Collateral Account in the manner provided for herein.
7. The Bank shall not be bound to exercise any of its rights or remedies against
the Customer or other party or in respect of any securities that it may at any
time hold before being entitled to appropriate and apply any or any portion or
portions of the moneys or amounts now or hereafter on deposit in the Collateral
Account for the purpose and in the manner provided for herein.
8. In the event that at any time or from time to time the moneys or amounts on
deposit in the Collateral Account are in currency different from the currency of
any of the Liabilities then for the purposes of this agreement the rate of
exchange between the currencies shall be the relative rate of exchange of the
Bank in effect on the date of conversion.
9. So long as the moneys or amounts on deposit are held under this agreement and
not applied in payment of the Liabilities the moneys or amounts on deposit shall
bear interest at a rate per annum equal to the sum of LIBOR plus 350 basis
points, calculated on a 360 day year for the actual days elapsed, in the same
currency as the moneys or amounts on deposit. Said interest shall be paid
quarterly in arrears to the undersigned unless an Event of Default exists, in
which case the interest shall be credited in the Collateral Account and held by
the Bank as additional collateral security under this agreement.
10. The undersigned represents and warrants to the Bank that: (a) the
undersigned is a corporation validly incorporated and existing under the laws of
the Bahamas and is duly registered or qualified to carry on business in all
jurisdictions where the character of the properties owned by it or the nature of
its business transacted makes such registration or qualification necessary, (b)
the execution, delivery and performance of this agreement have been duly
authorized by all necessary corporate action and do not (i) violate any law or
regulation or any provision of the charter of the undersigned, nor (ii) result
in breach of, a default under, or the creation of any encumbrance on the
properties and assets of the undersigned pursuant to any contract or other
agreement to which the undersigned is a party, except the lien created by this
agreement; (c) no event has occurred which constitutes an Event of Default under
the Letter Agreement or a default having a material adverse effect on the
financial condition of the undersigned under or in respect of any agreement,
undertaking or instrument to which the
<PAGE>
undersigned or any of its properties or assets may be subject; and (d) this
agreement constitutes the legal, valid and binding obligation of the
undersigned, enforceable in accordance with its terms.
Any notice given hereunder shall be given in writing and mailed,
telecommunicated or delivered to the address set forth below or such
other address as shall be designated by notice to the other party herein.
To the Bank: With a copy to:
Royal Bank of Canada Royal Bank of Canada
Royal Bank House, 2nd Floor Corporate Banking-Multinational
East Hill Street 335 - 8th Avenue SW, 23rd Floor
PO Box N-7141 PO Box 2534, Station M
Nassau, N.P., Bahamas Calgary, Alberta T2P 2N5
Attention: Manager Attention: Mr. D.K. MacLaren
Fax: (242) 322-5824 Fax: (403) 292-3234
To the undersigned: With a copy to:
Norcen Energy Resources (Bahamas) Limited Basic Petroleum International Limited
c/o Norcen Energy Resources Limited 6a Avenida 0-28, Zona 10
400, 425 - 1 Street SW Guatemala City, Guatemala 01010
PO Box 2595, Station M Central America
Calgary, Alberta Canada T2P 4V4 Attention: Finance Manager
Attention: Treasurer Fax: (502) 331-6922
Fax: (403) 231-0312
12. The undersigned submits to the non-exclusive jurisdiction of the Courts of
the Province of Alberta, Canada, for any matters related to the interpretation
and enforcement hereof, waiving any jurisdiction to which it may be entitled by
reason of its present or future domicile; provided, however, that the above
shall in no event impair the Bank's right to bring suit against the undersigned
in The Bahamas or any other jurisdiction where the domicile or assets of the
undersigned may be found.
13. EACH OF THE UNDERSIGNED AND, BY ITS ACCEPTANCE HEREOF, THE BANK HEREBY
WAIVES ANY RIGHTS IT MAY HAVE TO TRIAL BY JURY IN RESPECT TO ANY LITIGATION
BASED HEREON.
14. No failure on the Bank's part to exercise, and no delay in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof. No
modification or waiver of any provision of this agreement shall be effective
unless it is in writing and signed by the Bank.
15. This agreement shall be a continuing agreement and shall have effect
whenever and so often as any Liabilities exist.
16. This agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of The Bahamas in which the Collateral Account
is located.
17. This agreement shall extend to and enure to the benefit of the Bank and its
successors and assigns, and shall be binding upon the undersigned and the heirs,
executors, administrators, legal representatives and assigns of the
undersigned and each of them.
18. The undersigned hereby waives any presentment, protest or notice prior to
the Bank enforcing or using its security hereunder.
19. The Manager for the time being of any Branch of the Bank at which the said
money or amounts on deposit in the Collateral Account may be kept is hereby
appointed the irrevocable attorney of the undersigned with full powers of
substitution from time to time to endorse or transfer such Collateral Account to
the Bank or its nominee.
IN WITNESS WHEREOF the undersigned has hereunto duly executed this agreement the
14 day of July A.D., 1997.
SIGNED AND DELIVERED
NORCEN ENERGY RESOURCES (BAHAMAS) LIMITED
By: /s/ Robert Waters
---------------------------------------
Robert Waters
Title: Treasurer
-----------------------------------
By: /s/ Ronald A. Ronneberg
---------------------------------------
Ronald A. Ronneberg
Title: Assistant Treasurer
-----------------------------------
<PAGE>
[LOGO] Robert J. Waters
Treasurer
Direct Telephone: (403) 231-0671
Direct Facsimile: (403) 231-0312
E-Mail: [email protected]
September 26, 1997
Via Courier
Royal Bank of Canada
Foreign Banking Centre
Royal Bank House
East Hill Street, PO Box N7141
Nassau, N.P., Bahamas
Attention: Mrs. Betty Ranson
Dear Mrs. Ranson,
Please find enclosed a revised Promissory Note to attach as Exhibit "A" to the
Loan Agreement dated July 14, 1997 between Basic Petroleum International Limited
and the Royal Bank of Canada. We are sending you this Promissory Note in trust,
with the understanding that you will return the original Promissory Note to my
attention by return courier.
The revised note reflects minor modifications as agreed by Ms. Sonia Tibbatts of
the Royal Bank of Canada in Calgary after consultation with your office.
I trust everything is in order.
Thank you for your assistance in this matter.
Yours truly,
/s/ Robert J. Waters
----------------
Robert J. Waters
Treasurer
cc: Ms. Sonia Tibbatts: fax 292-3234
- ----------------------------------------------------------------------------
Fifth Avenue Place 425 1st Street S.W. General Telephone: (403)231-0111
P.O. Box 2595 STN M General Facsimile: (403) 231-0187
CALGARY, AB T2P 4V4
CANADA
<PAGE>
PROMISSORY NOTE
FOR VALUE RECEIVED, Basic Petroleum International Limited (the "Borrower"), a
corporation organized and existing under the laws of the Bahamas, by this
promissory note unconditionally promises to pay to the order of Royal Bank of
Canada acting through its Foreign Banking Centre, Royal Bank House, East Hill
Street P.O. Box N7141, Nassau, N.P., Bahamas (the "Bank") the sum of U.S.
$17,354,800.00 (seventeen million three hundred and fifty four thousand, eight
hundred United States Dollars) which sum shall be fully payable on July 7, 1998
(the "Principal Payment Date") unless otherwise renewed or extended in writing.
The Borrower promises also to pay interest on the unpaid principal amount hereof
until final maturity (whether by acceleration or otherwise), payable at a rate
per annum which shall be equal to the sum of 12 month Libor on July 7, 1998 and
350 basis points. Such applicable rate per annum is herein called the "Rate of
Borrowing". Interest shall be calculated on the basis of the actual number of
days elapsed divided by 360. Interest in respect hereof shall be due and payable
quarterly in arrears and on the Principal Payment date. The Borrower also
promises to pay interest in respect to the overdue principal amount hereof and
(to the extent permitted by law) overdue interest with respect hereto payable on
demand, at a rate per annum which shall be equal to the sum of (a) the higher of
(i) the rate announced by the Bank of New York City as its United States dollar
prime commercial lending rate and (ii) the overnight Federal Funds rate charges
to the Bank plus 1/2%. As used herein the term "business day" shall mean a day
in The City of New York, N.Y. U.S.A., Nassau, Bahamas on which a banking
transaction are effected and which transactions are carried out in the London
Interbank Market. Interest shall accrue and be payable both before and after
maturity, default and judgement.
All payments of principal of and interest on this Note shall be effectively made
in the Bank in lawful money of the United States of America (in freely
transferable U.S. dollars) and in immediately available funds, as the Bank may
direct. Such payments shall be made without set-off or counter claim and free
and clear of and without deduction or withholding for or and account of any
present or future taxes, levies, imports, duties or other charges of whatsoever
nature imposed, levied, assessed, collected or required to be withheld by any
government or political subdivision or taxing authority thereof.
For everything related to this Note the Borrower designates its domicile to be:
The Bahamas. Any judicial action in respect hereto may be brought before the
courts of the province of Alberta, Canada, or in the competent courts of the
domicile of the borrower, with the express waiver to any objection which may
effect such jurisdiction.
This Note shall be governed by and construed in accordance with the laws of the
Province of Alberta, Canada.
Dated this 14th day of July, 1997
BASIC PETROLEUM INTERNATIONAL LIMITED
By: /s/ Robert J. Waters By: /s/ Ronald A. Ronneberg
-------------------------------- ----------------------------
Robert J. Waters, Ronald A. Ronneberg,
Treasurer Assistant Treasurer
<PAGE>
[LETTERHEAD OF ROYAL BANK OF CANADA]
October 16, 1996
Superior Propane Inc.
425 - 1st Street S.W.
PO Box 2595, Station M
Calgary, AB T2P 4V4
Attention: Mr. W. Mark Schweitzer
Vice President Finance & CFO
-----------------------------------------
Dear Sirs:
Royal Bank of Canada (the "Bank) is pleased to offer Superior Propane Inc.
(the "Borrower") a revolving demand facility (the "Credit Facility")
through its branch at 339 - 8th Avenue S.W., Calgary, Alberta T2P 1C4 (the
"Branch of Account"), subject to the terms and conditions below:
SCHEDULES: The attached Schedules are incorporated in this agreement by
reference as if set out in full herein; collectively this
Agreement and all Schedules are referred to as the
"Agreement".
AMOUNT: The amount available under the Credit Facility shall not
exceed $1O,5OO,OOO.OO, or the Equivalent Amount in US
Dollars (the "Amount").
PURPOSE: The Borrower shall use the Credit Facility to finance its
general operating requirements. The Borrower shall not use
the Credit Facility to finance a Hostile Take-Over Bid
without the prior written consent of the Bank.
CREDIT
FACILITY: The Credit Facility is available by way of:
(a) RBP based loans and overdrafts in Canadian Dollars
("RBP Loans").
(b) RBUSBR based loans and overdrafts in US Dollars
("RBUSBR Loans").
(c) L/C's and/or L/G's.
Each use of the Credit Facility by way of any of the
foregoing methods is referred to as a "Borrowing". The
face amount of each Borrowing
<PAGE>
Superior Propane Inc. Page 2
October 16, 1996
outstanding shall be used to determine the amount of
Borrowings outstanding under the Credit Facility at any
time.
INTEREST
RATES AND
FEES: The following rates of interest and fees shall apply to the
Credit Facility:
RBP Loans - RBP + 0% per annum
RBUSBR Loans - RBUSBR + 0% per annum
L/C's and/or L/G's - 1/2% per annum.
Minimum $75.00
AVAILABILITY/
REPAYMENT: The Credit Facility is available at the sole discretion of
the Bank. The Bank may, at any time and from time to time
without notice, cancel any undrawn portion of the Amount.
All Borrowings outstanding shall be due and payable on
demand by the Bank and upon such demand, the Bank shall
have no obligation to honour cheques or other orders for
payment.
CALCULATION
AND PAYMENT
OF INTEREST
AND FEES: (a) RBP and RBUSBR Loans
--------------------
Interest on each RBP Loan and on each RBUSBR Loan will
accrue daily on the basis of a year of 365 days, and
will be calculated, payable and compounded monthly on
such day of the month as the Bank shall specify. Any
change in RBP or RBUSBR shall be effective as of the
opening of business on the day such change takes place.
(b) L/C's and/or L/G's
------------------
L/C or L/G fees will be calculated and payable in the
manner set forth in Schedule B.
(c) Interest Act (Canada)
---------------------
The annual rates of interest or fees to which the rates
calculated in accordance with this Agreement are
equivalent, are the rates so calculated multiplied by
the actual number of days in the calendar year in which
such calculation is made and divided by 365. In no
event will interest exceed the rate permitted by law.
<PAGE>
Superior Propane Inc. Page 3
October 16, 1996
TIME AND
PLACE OF
PAYMENT: All amounts due by the Borrower pursuant to this Agreement
shall be paid at the Branch of Account in immediately
available funds for value on the day such amount is due in
Canadian Dollars or US Dollars in the case of Borrowings
denominated in US Dollars, or as otherwise provided herein.
If a day on which an amount is due is not a Business Day
such amount shall be deemed for all purposes of this
Agreement to be due on the Business Day next following such
day and all interest and other fees shall continue to accrue
until payment. Interest and fees payable under this
Agreement are payable both before and after any or all of
default, demand and judgement.
EVIDENCE OF
INDEBTEDNESS: The Bank shall open and maintain at the Branch of Account
accounts and records evidencing the principal amount of each
Borrowing, the payment of principal and interest and all
other amounts owing to the Bank under this Agreement. The
Bank's accounts and records constitute, in the absence of
manifest error, conclusive evidence of the indebtedness of
the Borrower to the Bank.
EXPENSES: The Borrower shall pay the reasonable fees, including,
without limitation, all documentation fees charged by the
Bank for use of its internal legal counsel, and expenses
incurred by the Bank in connection with the preparation,
negotiation, documentation and operation of the Credit
Facility including the enforcement of the Bank's rights
hereunder and under any other document delivered pursuant to
this Agreement, whether or not any amounts are advanced
hereunder.
NOTICES: Any notice or demand hereunder shall be given by telecopier
or letter. A telecopier communication shall be deemed
received on the Business Day following its transmission. A
letter shall be deemed received when hand delivered to the
receiving party, at the address shown herein. Each party
shall be bound by any notice given hereunder and entitled to
act in accordance therewith.
AMENDMENTS
AND WAIVERS: No amendment, modification or waiver of any provision of
this Agreement or consent to any departure by the Borrower
from any provision of this Agreement will in any event be
effective unless it is in writing and then the amendment,
modification, waiver or consent will be effective only in
the specific instance, and for the specific purpose and
<PAGE>
Superior Propane Inc. Page 4
October 16, 1996
length of time for which it is given by the Bank. No failure
to exercise and no delay in exercising on the part of the
Bank, any right, power or privilege hereunder shall operate
as a waiver thereof nor shall any single or partial exercise
of any right, power or privilege preclude any other right,
power or privilege.
SEVERABILITY: If any provision of this Agreement is or becomes prohibited
or unenforceable in any jurisdiction, such prohibition or
unenforceability shall not invalidate or render
unenforceable the provision concerned in any other
jurisdiction nor invalidate, affect or impair any of the
remaining provisions hereof
GOVERNING
LAW: This Agreement shall be construed in accordance with and
governed by the laws of the Province of Alberta and of
Canada applicable therein.
WHOLE
AGREEMENT: This Agreement or any agreements delivered pursuant to or
referred to in this Agreement constitute the whole and
entire agreement between the parties in respect of the
Credit Facility.
SUCCESSORS
AND ASSIGNS: This Agreement shall be binding upon and enure to the
benefit of the Bank and the Borrower and their respective
successors and permitted assigns.
EFFECTIVE
DATE: The date on which this Agreement becomes effective is the
date appearing on the first page hereof.
EXPIRY DATE: This offer is open for acceptance until close of business at
the Branch of Account on November 15, 1996 unless extended
in writing by the Bank.
<PAGE>
Superior Propane Inc. Page 5
October 16, 1996
Please acknowledge your acceptance of the above terms and conditions by
signing the attached copy of this letter in the space provided below and
returning it to the undersigned.
Yours truly,
ROYAL BANK OF CANADA
/s/ D.K. MacLaren
-----------------------------
D.K. MacLaren
Senior Account Manager
Acknowledged and Accepted this
22 day of October , 1996.
----- ----------
SUPERIOR PROPANE INC. 425 - 1st Street S.W.
PO Box 2595, Station M
By: /s/ Robert J. Waters Calgary, Alberta T2P 4V4
--------------------------
Title: Robert J. Waters Tel: (403)231-0111
----------------------- Fax: (403)231-0187
Treasurer
By: /s/
--------------------------
Title: Assistant Treasurer
----------------------
<PAGE>
Schedule "A" to the Agreement dated as of the 16th day of October, 1996,
between Superior Propane Inc. as the Borrower and Royal Bank of Canada as
the Bank.
DEFINITIONS
-----------
For purposes of the foregoing agreement and the Schedules attached
thereto, the following terms and phrases shall have the following
meanings:
"Business Day" means a day, excluding Saturday, Sunday and any other day
which is a legal holiday in the City of Calgary or on a day on which
banking institutions are closed.
"Canadian Dollars", "Cdn $" and "Cdn Dollars" each means lawful money of
Canada.
"Equivalent Amount" means, with respect to any given amount of any
currency, the amount of any other currency required to purchase that
amount of the first currency through the Bank in Calgary at the Bank's
noon spot rate, in accordance with normal banking procedures, only needed
if Borrowing is in currency other than Cdn$.
"Hostile Take-Over Bid" means a take-over bid, as defined by applicable
law, by the Borrower or in which the Borrower is involved, in respect of
which the board of directors of the target company has not recommended
acceptance of such take-over bid to the target company's shareholders.
"L/C" means a documentary credit issued by the Bank on behalf of the
Borrower for the purpose of paying suppliers of goods pursuant to the
terms and conditions of Uniform Customs and Practice for Documentary
Credits, 1993 revision, International Chamber of Commerce Publication No.
500 or successor publication;
"L/G" means a letter of guarantee and/or standby letter of credit issued
by the Bank on behalf of the Borrower for the purpose of providing
security to a third party that the Borrower will perform a contractual or
financial obligation owed to such third party.
"RBP" and "Royal Bank Prime" means the annual rate of interest announced
by the Bank from time to time as being a reference rate then in effect for
determining interest rates on Canadian Dollar commercial loans made in
Canada.
"RBUSBR" and "Royal Bank US Base Rate" means the annual rate of interest
announced by the Bank from time to time as being a reference rate then in
effect for determining interest rates on US Dollar commercial loans made
in Canada.
"US Dollars" and "US$" each means lawful money of the United States of
America in same day immediately available funds or, if such funds are not
available, the form of money of the United States of America that is
customarily used in the settlement of international banking transactions
on the relevant date.
<PAGE>
Schedule "B" to the Agreement dated as of the 16th day of October 1996,
between Superior Propane Inc. as the Borrower and Royal Bank of Canada as
the Bank.
L/C AND L/C CONDITIONS
----------------------
The Borrower may borrow by way of L/C's and/or L/G's subject to the
following conditions:
(a) the Bank may, in its sole discretion, refuse to issue L/C's or L/G's
at any time;
(b) each L/C and/or L/G shall expire on a Business Day and shall have a
term of not more than 365 days;
(c) prior to the issue of an L/C and/or L/G, the Borrower shall execute a
duly authorized application and/or indemnity with respect to such L/C
or L/G in form and substance satisfactory to the Bank, and each L/C
and L/G shall be governed by the terms and conditions of the relevant
application and/or indemnity for such instrument;
(d) the Borrower shall pay an L/C fee on the date of any payment made by
the Bank pursuant to a drawing under such L/C in the currency in
which such payment is made. If the total amount available under any
L/C has not been drawn prior to the expiry date of such L/C the
Borrower shall pay an L/C fee calculated on the undrawn portion of
such L/C on the expiry date thereof in the currency in which such L/C
was issued;
(e) the Borrower shall pay an L/G fee on the date of issuance of such L/G
in Canadian Dollars. The fee shall be calculated on the face amount
of the L/G issued (converted into the equivalent Amount thereof in
Canadian Dollars) and based on the number of days in the term thereof
and a year of 365 days;
(f) the Borrower shall, by not later than 12:00 noon on any day on which
a drawing is made under an L/C or L/G, pay to the Bank at the Branch
of Account an amount equal to the face amount of such drawing, and if
the Borrower fails to make such payment, the face amount of such
drawing shall be converted into an RBP Loan if the drawing is in
Canadian Dollars and into an RBUSBR Loan if the drawing is in US
Dollars; and
(g) in the event that there is any inconsistency at any time between the
terms of this Agreement and the terms of the application and/or
indemnity for L/C's or L/G's, the terms thereof shall govern.
<PAGE>
AMENDMENT NO. 1
TO AMENDED AND RESTATED
1976 COAL PURCHASE CONTRACT
BETWEEN COMMONWEALTH EDISON COMPANY
AND BLACK BUTTE COAL COMPANY
This Amendment No. 1 shall be effective as of January 1, 1996 and
is made and entered into by and between Commonwealth Edison Company
("Buyer" or "Edison") and Black Butte Coal Company ("Seller" or "Black
Butte").
WHEREAS, Edison and Black Butte are parties to an Amended and
Restated 1976 Coal Purchase Contract entered into as of January
1, 1993 (the "Contract"); and
WHEREAS, Edison and Black Butte desire to amend Section 1 of the
Contract.
NOW THEREFORE, Edison and Black Butte agree to amend the Contract as
set forth below.
1. Section 1 is replaced by the following new Section 1.
Section 1. Source of Coal
Section 1.01 The coal to be delivered prior to 1993 pursuant to
this Agreement shall be produced from the Black Butte Mine (such mine and
any other mine from which coal to be delivered under this Agreement is to
be produced being hereinafter referred to as
<PAGE>
the "Mine"). Subject to the terms and conditions contained herein, Black Butte
has the right to deliver coal from one or more alternate source mines
("Alternate Source Mine(s)"). Each of the contracts for the provision of coal
under this Agreement from an Alternate Source Mine is referred to as an
"Alternate Source Contract," Black Butte has elected to provide all coal to be
delivered hereunder after 1992 from the Caballo Rojo Mine, the Antelope Mine and
the Rochelle Mine, each in Wyoming and such other Mines as may be provided for
in an Alternate Source Contract. Edison has negotiated and approved each of the
Alternate Source Contracts in effect as of January 1, 1996 or prior thereto and
accepts the terms and conditions thereof. Black Butte agrees that it shall
exercise all of its elections, decisions and other rights under any Alternate
Source Contract as directed by Edison. Edison will hold Black Butte harmless for
all claims of a vendor under an Alternate Source Contract arising out of any
such direction by Edison. Black Butte shall have no right to amend an Alternate
Source Contract or settle any dispute thereunder without Edison's prior written
consent. Black Butte's right to deliver coal from any other Alternate Source
Mine or the Black Butte Mine after 1992, shall be limited to the rights granted
Black Butte in Sections 9 and 12(7).
Section 1.02. Coal from an Alternate Source Mine (i) shall be
weighed in accordance with the terms of the applicable Alternate
Source Contract; (ii) shall conform to the coal quality
- 2 -
<PAGE>
specifications in the applicable Alternate Source Contract; (iii) shall
be warranted with respect to coal quality in accordance with the terms of
the applicable Alternate Source Contract; and (iv) shall be sampled and
analyzed for conformance to the applicable coal quality specifications
and warranties in accordance with the applicable Alternate Source
Contract. Edison will perform all of the vendee's obligations relating to
the provision of unit trains and other equipment for the receipt of coal
under any Alternate Source Contract and, without limiting the generality
of Section 12(4), Edison shall be entitled to any compensation payable to
the vendee in respect of any failure to load timely any such equipment.
The provisions of the last grammatical paragraph of Section 8.03 shall
not apply to billing adjustments under this Agreement that result from
adjustments to billings to Black Butte under any Alternate Source
Contract. If Edison acknowledges in writing that it has negotiated and
accepts the terms of the Alternate Source Contract, Black Butte will
enter into such Alternate Source Contracts as Edison may from time to
time request for the purpose of enabling Black Butte to supply coal under
this Agreement, unless Black Butte determines that the vendor thereunder
is unlikely to provide coal as provided for in the Alternate Source
Contract. The fact that Black Butte enters any Alternate Source Contract
pursuant to Edison's request shall not imply that Black Butte has made
any determination or representation with respect to the vendor,
-3-
<PAGE>
including but not limited to the vendor's ability to perform or its performance
thereunder.
2. Except as set forth in this Amendment No. 1, the provisions of the
Contract remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused their authorized representatives
to execute this First Amendment as of the day and year first above written.
COMMONWEALTH EDISON COMPANY
By: /s/ Jatmall
-------------------------
Vice President
BLACK BUTTE COAL COMPANY
By: /s/
---------------------------------
Title: Member of Management Committee
- 4 -
<PAGE>
AMENDMENT NO. 2
TO AMENDED AND RESTATED 1976 COAL PURCHASE CONTRACT
BETWEEN
COMMONWEALTH EDISON COMPANY AND BLACK BUTTE COAL COMPANY
This Amendment No. 2 ("Amendment") shall be effective as of January 1, 1997 and
is made and entered into by and between Commonwealth Edison Company ("Edison")
and Black Butte Coal Company ("Black Butte").
WHEREAS, Edison and Black Butte entered into a contract entitled "Amended and
Restated 1976 Coal Purchase Contract between Commonwealth Edison Company and
Black Butte Coal Company" dated January 1, 1993 (such agreement as heretofore
amended being referred to herein as the "Agreement") and
WHEREAS, Edison and Black Butte desire to amend the Agreement in certain
respects as provided herein.
NOW THEREFORE, for good and valuable consideration, the parties agree as
follows:
Section 2.01 of the Agreement is amended to read in its entirety as
follows:
Section 2.01. In each of the years 1993 through and including 2000.
Buyer shall purchase and take delivery from Seller and Seller shall sell and
deliver to Buyer quantities of coal in the years indicated below ("Base I
Coal"):
-----------------------------------------
Base I Coal
(Tons)
-----------------------------------------
1993 4,049,065
1994 3,740,742
1995 3,969,907
1996 4,652,726
1
CONFIDENTIAL AGREEMENT
<PAGE>
If Buyer purchases more coal in the period 1993 through 2000 than the aggregate
amount it is required to purchase in that period, the excess shall be deemed to
be Base II Coal."
2. Except as set forth in this Amendment, the provisions of the Agreement
shall remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment effective as of the
date first written above.
BLACK BUTTE COAL COMPANY
By: /s/
--------------------------------
Member Management Committee
COMMONWEALTH EDISON COMPANY
By: /s/
- ------------------------------------
Vice President
2
<PAGE>
Exhibit 12
UNION PACIFIC RESOURCES GROUP INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Amounts in Thousands, Except Ratios)
(Unaudited)
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings from continuing operations before income taxes(a) $466,434 $472,575 $457,979 $520,703 $440,077
Add (deduct) distributions greater (to extent less) than
income of unconsolidated affiliates...................... (3,790) (4,147) 2,263 (5,449) 1,323
Fixed charges from below...................................... 64,473 57,702 27,566 11,841 10,809
Capitalized interest included in fixed charges................ (3,846) (157) (972) (909) (1,475)
-------- -------- -------- -------- --------
Earnings available for fixed charges................. $523,270 $525,973 $486,836 $526,186 $450,734
======== ======== ======== ======== ========
Fixed charges:
Interest expense, including amortization of debt
expense/discount(b).................................... $ 53,108 $ 50,582 $ 19,143 $ 4,612 $ 3,143
Portion of rentals representing an interest factor....... 7,519 6,693 7,451 6,320 6,191
Interest capitalized..................................... 3,846 157 972 909 1,475
-------- -------- -------- -------- --------
Total fixed charges.................................. $ 64,473 $ 57,702 $ 27,566 $ 11,841 $ 10,809
======== ======== ======== ======== ========
Ratio of earnings to fixed charges............................ 8.1 9.1 17.7 44.4 41.7
=== === ==== ==== ====
</TABLE>
(a) Before cumulative effect of changes in accounting principles of $59,032 in
1993.
(b) Beginning in 1995, interest expense includes the effects of debt incurred in
October 1995 in connection with the Company's asset restructuring and
initial public offering and debt incurred in October and November 1996 to
refinance such initial debt (see Note 2 to the Consolidated
Financial Statements).
<PAGE>
UNION PACIFIC RESOURCES GROUP INC. AND SUBSIDIARIES
UNION PACIFIC RESOURCES GROUP INC.
Big Island Trona Company
Bitter Creek Coal Company
Elk Mountain Coal Company
Hanna Basin Coal Company
Kanda Development Company
Prospect Point Coal Company
Quality Aggregate Company
Resources Holding, Inc.
Union Pacific Resources Company
CPC Resources Corporation
Harbor Service Stations, Inc.
Highlands Gas Corporation
Highlands NGL Pipeline Company
United LP Gas Corporation
Rocky Mountain Energy Company
Union Pacific Austin Chalk Company
Union Pacific Energy Company
Union Pacific Fuels, Inc.
Fuels NGL Pipelines, Inc.
Fuels Pipeline, Inc.
Fuels Storage, Inc.
Fuels WMC Corporation
Power Fuels, Inc.
South Jersey Resources Group LLC
Union Pacific Intrastate Pipeline Company
Union Pacific Wyoming Intrastate Pipeline
Company
Union Pacific Gas Processing Co.
Union Pacific Highlands Gathering and Processing
Company
Union Pacific International Petroleum Company
Union Pacific Petroleum Ecuador Ltd.
Union Pacific Petroleum Suez Ltd.
Union Pacific Petroleum Suez Production Ltd.
Union Pacific Malaysia, Inc.
Union Pacific Oil and Gas Holding Company
Union Pacific Oil and Gas Company
Beaver Pipeline Company
Peach Ridge Pipeline Inc.
Union Pacific Gas Gathering, Inc.
Rio Bravo Gas Systems, Inc.
<PAGE>
Union Pacific Petrochemicals, Inc.
Union Pacific Pipeline, Inc.
Union Pacific Refining, Inc.
Union Pacific Resources Inc.
Norcen Energy Resources Limited
Basic Resources International
(Bahamas) Limited
Norcen Energia Venezuela, S.A.
Norcen Argentina, S.A.
Norcen Explorer Inc.
Union Pacific Caroline Resources Inc.
Union Pacific Resources Indonesia, Inc.
Union Pacific Resources Pipeline Company
Golden Spike Gathering, Inc.
Union Pacific Texas Gas Pipeline,
Inc.
Union Pacific Wyoming Gathering,
Inc.
High Plains Gas Gathering, Inc.
Masters Creek Louisiana Pipeline, Inc.
Overthrust Pipe Line, Inc.
Panola Pipe Line, Inc.
Union Pacific Arguello Pipeline, Inc.
Union Pacific Condensate Company
Union Pacific Crude Pipeline, Inc.
Union Pacific Gas Pipeline, Inc.
Union Pacific Chalk Pipeline, Inc.
Union Pacific Liquid Pipeline, Inc.
Union Pacific Offshore Gathering, Inc.
Wamsutter Pipeline, Inc.
Union Pacific Trading Company
Union Pacific Wyoming Intrastate Pipeline Company
UPRBC Equities Inc.
UPR Canada Equities Inc.
UPR (Canada) Ltd.
Rock Springs Royalty Company
Union Pacific Realty Company
Upland Industries Corporation
Union Pacific Land Resources Corporation
Upland Industrial Development Company
Upland Equity Projects Company
Winton Coal Company
2
<PAGE>
Exhibit 23(a)
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in Registration Statements No.
333-22655 of Union Pacific Resources Group Inc. on Form S-3 and Nos. 333-22613
and 333-35641 of Union Pacific Resources Group Inc. on Form S-8, of our report
dated January 26, 1998 appearing in this Annual Report on Form 10-K of Union
Pacific Resources Group Inc. for the year ended December 31, 1997.
DELOITTE & TOUCHE, LLP
Fort Worth, Texas
March 26, 1998
<PAGE>
Exhibit 23(b)
[RYDER SCOTT COMPANY PETROLEUM ENGINEERS LETTERHEAD]
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS
We hereby consent to the incorporation of our report dated February 27,
1998 as Exhibit 99 to Union Pacific Resources Group Inc.'s Annual Report on Form
10-K and the references to our firm appearing in "Item 2. Properties" under the
captions "Proved Reserves" and in "Supplemental Financial and Statistical
Information - Unaudited - Proved Reserves" in such Annual Report on Form 10-K.
/s/ RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
------------------------
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Houston, Texas
February 27, 1998
<PAGE>
Exhibit 24
POWER OF ATTORNEY
UNION PACIFIC RESOURCES GROUP INC.
KNOW ALL MEN BY THESE PRESENTS, that H. JESSE ARNELLE, a Director of Union
Pacific Resources Group Inc., a Utah Corporation (the "Corporation"), hereby
appoints JACK L. MESSMAN, JOSEPH A. LASALA, JR., and MARK L. JONES, and each of
them acting individually, his true and lawful attorney, each with power to act
without the other and full power of substitution, to execute, deliver and file,
for and on his behalf, and in his name and in his capacity as Director, an
Annual Report on Form 10-K for the year ended December 31, 1997 (or other
appropriate form) for filing with the Securities and Exchange Commission and any
other documents in support thereof or supplemental or amendatory thereto, hereby
granting to such attorneys and each of them full power and authority to do and
perform each and every act and thing whatsoever as such attorney or attorneys
may deem necessary or advisable to carry out fully the intent of the foregoing
as the undersigned might or could do personally or in his capacity as Director,
hereby ratifying and confirming all acts and things which such attorney or
attorneys may do or cause to be done by virtue of this power of attorney.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of this 19th day of February, 1998.
/s/ H. Jesse Arnelle
-----------------------
H. JESSE ARNELLE
<PAGE>
Exhibit 24
POWER OF ATTORNEY
UNION PACIFIC RESOURCES GROUP INC.
KNOW ALL MEN BY THESE PRESENTS, that LYNN V. CHENEY, a Director of Union
Pacific Resources Group Inc., a Utah Corporation (the "Corporation"), hereby
appoints JACK L. MESSMAN, JOSEPH A. LASALA, JR., and MARK L. JONES, and each of
them acting individually, his true and lawful attorney, each with power to act
without the other and full power of substitution, to execute, deliver and file,
for and on his behalf, and in his name and in his capacity as Director, an
Annual Report on Form 10-K for the year ended December 31, 1997 (or other
appropriate form) for filing with the Securities and Exchange Commission and any
other documents in support thereof or supplemental or amendatory thereto, hereby
granting to such attorneys and each of them full power and authority to do and
perform each and every act and thing whatsoever as such attorney or attorneys
may deem necessary or advisable to carry out fully the intent of the foregoing
as the undersigned might or could do personally or in his capacity as Director,
hereby ratifying and confirming all acts and things which such attorney or
attorneys may do or cause to be done by virtue of this power of attorney.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of this 19th day of February, 1998.
/s/ Lynn V. Cheney
---------------------
LYNN V. CHENEY
<PAGE>
POWER OF ATTORNEY
UNION PACIFIC RESOURCES GROUP INC.
KNOW ALL MEN BY THESE PRESENTS, that PRESTON M. GEREN III, a Director of
Union Pacific Resources Group Inc., a Utah Corporation (the "Corporation"),
hereby appoints JACK L. MESSMAN, JOSEPH A. LASALA, JR., and MARK L. JONES, and
each of them acting individually, his true and lawful attorney, each with power
to act without the other and full power of substitution, to execute, deliver and
file, for and on his behalf, and in his name and in his capacity as Director, an
Annual Report on Form 10-K for the year ended December 31, 1997 (or other
appropriate form) for filing with the Securities and Exchange Commission and any
other documents in support thereof or supplemental or amendatory thereto, hereby
granting to such attorneys and each of them full power and authority to do and
perform each and every act and thing whatsoever as such attorney or attorneys
may deem necessary or advisable to carry out fully the intent of the foregoing
as the undersigned might or could do personally or in his capacity as Director,
hereby ratifying and confirming all acts and things which such attorney or
attorneys may do or cause to be done by virtue of this power of attorney.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of this 19th day of February, 1998.
/s/ Preston M. Geren III
--------------------------
PRESTON M. GEREN III
<PAGE>
POWER OF ATTORNEY
UNION PACIFIC RESOURCES GROUP INC.
KNOW ALL MEN BY THESE PRESENTS, that LAWRENCE M. JONES, a Director of Union
Pacific Resources Group Inc., a Utah Corporation (the "Corporation"), hereby
appoints JACK L. MESSMAN, JOSEPH A. LASALA, JR., and MARK L. JONES, and each of
them acting individually, his true and lawful attorney, each with power to act
without the other and full power of substitution, to execute, deliver and file,
for and on his behalf, and in his name and in his capacity as Director, an
Annual Report on Form 10-K for the year ended December 31, 1997 (or other
appropriate form) for filing with the Securities and Exchange Commission and any
other documents in support thereof or supplemental or amendatory thereto, hereby
granting to such attorneys and each of them full power and authority to do and
perform each and every act and thing whatsoever as such attorney or attorneys
may deem necessary or advisable to carry out fully the intent of the foregoing
as the undersigned might or could do personally or in his capacity as Director,
hereby ratifying and confirming all acts and things which such attorney or
attorneys may do or cause to be done by virtue of this power of attorney.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of this 19th day of February, 1998.
/s/ Lawrence M. Jones
-----------------------
LAWRENCE M. JONES
<PAGE>
POWER OF ATTORNEY
UNION PACIFIC RESOURCES GROUP INC.
KNOW ALL MEN BY THESE PRESENTS, that DREW LEWIS, a Director of Union
Pacific Resources Group Inc., a Utah Corporation (the "Corporation"), hereby
appoints JACK L. MESSMAN, JOSEPH A. LASALA, JR., and MARK L. JONES, and each of
them acting individually, his true and lawful attorney, each with power to act
without the other and full power of substitution, to execute, deliver and file,
for and on his behalf, and in his name and in his capacity as Director, an
Annual Report on Form 10-K for the year ended December 31, 1997 (or other
appropriate form) for filing with the Securities and Exchange Commission and any
other documents in support thereof or supplemental or amendatory thereto, hereby
granting to such attorneys and each of them full power and authority to do and
perform each and every act and thing whatsoever as such attorney or attorneys
may deem necessary or advisable to carry out fully the intent of the foregoing
as the undersigned might or could do personally or in his capacity as Director,
hereby ratifying and confirming all acts and things which such attorney or
attorneys may do or cause to be done by virtue of this power of attorney.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of this 19th day of February, 1998.
/s/ Drew Lewis
----------------
DREW LEWIS
<PAGE>
POWER OF ATTORNEY
UNION PACIFIC RESOURCES GROUP INC.
KNOW ALL MEN BY THESE PRESENTS, that CLAUDINE B. MALONE, a Director of
Union Pacific Resources Group Inc., a Utah Corporation (the "Corporation"),
hereby appoints JACK L. MESSMAN, JOSEPH A. LASALA, JR., and MARK L. JONES, and
each of them acting individually, his true and lawful attorney, each with power
to act without the other and full power of substitution, to execute, deliver and
file, for and on his behalf, and in his name and in his capacity as Director, an
Annual Report on Form 10-K for the year ended December 31, 1997 (or other
appropriate form) for filing with the Securities and Exchange Commission and any
other documents in support thereof or supplemental or amendatory thereto, hereby
granting to such attorneys and each of them full power and authority to do and
perform each and every act and thing whatsoever as such attorney or attorneys
may deem necessary or advisable to carry out fully the intent of the foregoing
as the undersigned might or could do personally or in his capacity as Director,
hereby ratifying and confirming all acts and things which such attorney or
attorneys may do or cause to be done by virtue of this power of attorney.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of this 19th day of February, 1998.
/s/ Claudine M. Malone
------------------------
CLAUDINE M. MALONE
<PAGE>
POWER OF ATTORNEY
UNION PACIFIC RESOURCES GROUP INC.
KNOW ALL MEN BY THESE PRESENTS, that JOHN W. PODUSKA, SR., PH.D., a
Director of Union Pacific Resources Group Inc., a Utah Corporation (the
"Corporation"), hereby appoints JACK L. MESSMAN, JOSEPH A. LASALA, JR., and MARK
L. JONES, and each of them acting individually, his true and lawful attorney,
each with power to act without the other and full power of substitution, to
execute, deliver and file, for and on his behalf, and in his name and in his
capacity as Director, an Annual Report on Form 10-K for the year ended December
31, 1997 (or other appropriate form) for filing with the Securities and Exchange
Commission and any other documents in support thereof or supplemental or
amendatory thereto, hereby granting to such attorneys and each of them full
power and authority to do and perform each and every act and thing whatsoever as
such attorney or attorneys may deem necessary or advisable to carry out fully
the intent of the foregoing as the undersigned might or could do personally or
in his capacity as Director, hereby ratifying and confirming all acts and things
which such attorney or attorneys may do or cause to be done by virtue of this
power of attorney.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of this 19th day of February, 1998.
/s/ John W. Poduska, Sr., Ph.D.
----------------------------------
JOHN W. PODUSKA, SR., PH.D.
<PAGE>
POWER OF ATTORNEY
UNION PACIFIC RESOURCES GROUP INC.
KNOW ALL MEN BY THESE PRESENTS, that MICHAEL E. ROSSI, a Director of Union
Pacific Resources Group Inc., a Utah Corporation (the "Corporation"), hereby
appoints JACK L. MESSMAN, JOSEPH A. LASALA, JR., and MARK L. JONES, and each of
them acting individually, his true and lawful attorney, each with power to act
without the other and full power of substitution, to execute, deliver and file,
for and on his behalf, and in his name and in his capacity as Director, an
Annual Report on Form 10-K for the year ended December 31, 1997 (or other
appropriate form) for filing with the Securities and Exchange Commission and any
other documents in support thereof or supplemental or amendatory thereto, hereby
granting to such attorneys and each of them full power and authority to do and
perform each and every act and thing whatsoever as such attorney or attorneys
may deem necessary or advisable to carry out fully the intent of the foregoing
as the undersigned might or could do personally or in his capacity as Director,
hereby ratifying and confirming all acts and things which such attorney or
attorneys may do or cause to be done by virtue of this power of attorney.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of this 19th day of February, 1998.
/s/ Michael E. Rossi
----------------------
MICHAEL E. ROSSI
<PAGE>
POWER OF ATTORNEY
UNION PACIFIC RESOURCES GROUP INC.
KNOW ALL MEN BY THESE PRESENTS, that SAMUEL K. SKINNER, a Director of Union
Pacific Resources Group Inc., a Utah Corporation (the "Corporation"), hereby
appoints JACK L. MESSMAN, JOSEPH A. LASALA, JR., and MARK L. JONES, and each of
them acting individually, his true and lawful attorney, each with power to act
without the other and full power of substitution, to execute, deliver and file,
for and on his behalf, and in his name and in his capacity as Director, an
Annual Report on Form 10-K for the year ended December 31, 1997 (or other
appropriate form) for filing with the Securities and Exchange Commission and any
other documents in support thereof or supplemental or amendatory thereto, hereby
granting to such attorneys and each of them full power and authority to do and
perform each and every act and thing whatsoever as such attorney or attorneys
may deem necessary or advisable to carry out fully the intent of the foregoing
as the undersigned might or could do personally or in his capacity as Director,
hereby ratifying and confirming all acts and things which such attorney or
attorneys may do or cause to be done by virtue of this power of attorney.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of this 19th day of February, 1998.
/s/ Samuel K. Skinner
------------------------
SAMUEL K. SKINNER
<PAGE>
POWER OF ATTORNEY
UNION PACIFIC RESOURCES GROUP INC.
KNOW ALL MEN BY THESE PRESENTS, that JAMES R. THOMPSON, a Director of Union
Pacific Resources Group Inc., a Utah Corporation (the "Corporation"), hereby
appoints JACK L. MESSMAN, JOSEPH A. LASALA, JR., and MARK L. JONES, and each of
them acting individually, his true and lawful attorney, each with power to act
without the other and full power of substitution, to execute, deliver and file,
for and on his behalf, and in his name and in his capacity as Director, an
Annual Report on Form 10-K for the year ended December 31, 1997 (or other
appropriate form) for filing with the Securities and Exchange Commission and any
other documents in support thereof or supplemental or amendatory thereto, hereby
granting to such attorneys and each of them full power and authority to do and
perform each and every act and thing whatsoever as such attorney or attorneys
may deem necessary or advisable to carry out fully the intent of the foregoing
as the undersigned might or could do personally or in his capacity as Director,
hereby ratifying and confirming all acts and things which such attorney or
attorneys may do or cause to be done by virtue of this power of attorney.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of this 19th day of February, 1998.
/s/ James R. Thompson
------------------------
JAMES R. THOMPSON
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27.1
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNION
PACIFIC RESOURCES GROUP INC. CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL
POSITION AT DECEMBER 31, 1997 AND THE RELATED CONDENSED STATEMENT OF
CONSOLIDATED INCOME FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 71
<SECURITIES> 0
<RECEIVABLES> 389
<ALLOWANCES> 4
<INVENTORY> 53
<CURRENT-ASSETS> 577
<PP&E> 7,414
<DEPRECIATION> 3,749
<TOTAL-ASSETS> 4,472
<CURRENT-LIABILITIES> 558
<BONDS> 1,231
0
0
<COMMON> 0
<OTHER-SE> 1,761
<TOTAL-LIABILITY-AND-EQUITY> 4,472
<SALES> 1,864
<TOTAL-REVENUES> 1,925
<CGS> 0
<TOTAL-COSTS> 1,430
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 53
<INCOME-PRETAX> 466
<INCOME-TAX> 133
<INCOME-CONTINUING> 333
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 333
<EPS-PRIMARY> 1.33
<EPS-DILUTED> 1.33
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27.2
THIS RESTATED FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE UNION PACIFIC RESOURCES GROUP INC. CONDENSED STATEMENT OF
CONSOLIDATED FINANCIAL POSITION AT DECEMBER 31, 1996 AND THE RELATED CONDENSED
STATEMENT OF CONSOLIDATED INCOME FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 119
<SECURITIES> 0
<RECEIVABLES> 356
<ALLOWANCES> 5
<INVENTORY> 29
<CURRENT-ASSETS> 586
<PP&E> 6,190
<DEPRECIATION> 3,218
<TOTAL-ASSETS> 3,649
<CURRENT-LIABILITIES> 613
<BONDS> 671
0
0
<COMMON> 0
<OTHER-SE> 1,514
<TOTAL-LIABILITY-AND-EQUITY> 3,649
<SALES> 1,766
<TOTAL-REVENUES> 1,831
<CGS> 0
<TOTAL-COSTS> 1,304
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51
<INCOME-PRETAX> 473
<INCOME-TAX> 152
<INCOME-CONTINUING> 321
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 321
<EPS-PRIMARY> 1.29
<EPS-DILUTED> 1.28
</TABLE>
<PAGE>
RYDER SCOTT COMPANY PETROLEUM ENGINEERS
[GRAPHIC OMITTED]
1100 LOUISIANA
SUITE 3800
HOUSTON, TEXAS 77002-5218
TELEPHONE (713) 651-9191
FAX (713) 651-0849
DON P. ROESLE, P.E.
EXECUTIVE VICE PRESIDENT
February 27, 1998
Union Pacific Resources Group Inc.
801 Cherry Street
Ft. Worth, Texas 76101-0007
Gentlemen:
At your request, Ryder Scott Company Petroleum Engineers
("Ryder Scott") has reviewed estimates of proved hydrocarbon liquid and natural
gas reserves as of December 31, 1997 attributable to interests of Union Pacific
Resources Group Inc. and certain affiliated companies that are wholly owned
subsidiaries of Union Pacific Resources Corporation (collectively, "the
Company") in certain wells or locations. In our opinion, (i) the Company has an
effective system for gathering data and documenting information required to
estimate its reserves, (ii) in making its estimates, the Company used
appropriate engineering and evaluation principles and techniques that are in
accordance with practices generally accepted in the petroleum industry and (iii)
the overall proved reserves for the reviewed properties as estimated by the
Company are reasonable. The estimates of reserves reviewed by Ryder Scott were
prepared by engineers and geologists on the staff of the Company. The wells or
locations for which estimates of reserves were reviewed by Ryder Scott on a well
by well basis were selected by the Company who informed Ryder Scott that these
selected reserves were contained in approximately 7,000 wells and comprised
approximately 74 percent of the total net remaining proved reserves on a
standard cubic feet of natural gas equivalent basis attributable to the total
interests of the Company. The remainder of the proved reserves were reviewed on
a summary level basis by business unit. The summary table below presents the
estimated net remaining proved reserves attributable to the interests of the
Company as of December 31, 1997 prepared by the staff of the Company and
reviewed by Ryder Scott.
SEC CASE
Estimated Net Remaining Proved Reserves
Attributable to the Interests of
The Company
As of December 31, 1997
---------------------------------------
<TABLE>
<CAPTION>
Total-Standard
Natural Crude Oil, Cubic Feet of
Natural Gas Including Natural Gas
Gas Liquids Condensates Equivalent
(BCF) (MMBbl) (MMBbl) (BCFE)
------------- ----------------- ------------------ --------------------
<S> <C> <C> <C> <C>
Proved Developed Reserves 2,217.0 103.3 93.9 3,400.2
Proved Undeveloped Reserves 403.3 14.6 34.9 700.3
-------- ------- ------ --------
Total Proved Reserves 2,620.3 117.9 128.8 4,100.5
</TABLE>
<PAGE>
Union Pacific Resources Group Inc.
February 27, 1998
Page 2
Liquid volumes are expressed in standard 42 gallon barrels.
All natural gas volumes are expressed in billions of cubic feet ("Bcf") at the
official temperature and pressure bases of the areas where the natural gas
reserves are located. The liquid volumes were converted to standard cubic feet
of natural gas equivalent on the basis of 6 Mcf per barrel. Natural gas
imbalances, if any, were not taken into account in the natural gas reserve
estimates reviewed by Ryder Scott. The net reserves shown above do not take into
account changes in the Company's interests due to reversions at payout of
certain wells or locations. The Company has informed Ryder Scott that, in their
opinion, consideration of natural gas imbalances and interest reversions would
have an insignificant effect on estimated reserve quantities.
Review Procedure and Opinion
In our opinion, the Company's estimates of future reserves for
the properties reviewed by Ryder Scott were prepared using appropriate
engineering and evaluation principles and techniques in accordance with
generally accepted procedures for the estimation of future reserves, and we
found no bias in the utilization and analysis of data. On a total Company basis,
we were in agreement with the Company's estimates of net remaining proved
reserves for the properties which we reviewed; however, with respect to
individual properties, Ryder Scott's estimates were higher in some cases and
lower in some cases. In those cases where the variance in Ryder Scott's
estimates and the Company's estimates were greater than acceptable in our
opinion, we used Ryder Scott's estimates. When these adjustments in the
Company's estimates were made, the overall variation between Ryder Scott's
estimates and the Company's estimates of net remaining proved reserves was
insignificant and well within the range of reasonable differences between
reserve estimators who have prepared their estimates without bias.
Certain technical personnel of the Company are responsible for
the preparation of the Company's reserve estimates on new properties and for the
preparation of revised estimates, when necessary, on old properties. These
personnel assembled the necessary data and maintained the data and work papers
in an orderly manner. Ryder Scott consulted with these technical personnel and
had access to their work papers and supporting data in the course of our review.
In performing our review, we relied upon data furnished by the
Company with respect to property interests owned, plant interests, total plant
throughput and residue gas, processing contract terms, production and well tests
from examined wells, current costs for operations and future development,
current prices for the products, geological maps, well logs, core analyses, and
pressure measurements. These data were accepted as authentic and sufficient for
determining the reserves unless, during the course of our examination, a matter
of question came to our attention in which case the data were not accepted until
all questions were satisfactorily resolved. In addition to our examination of
the Company's reserve estimates, data sufficiency, procedures and assumptions,
our review included such tests and procedures as we considered necessary under
the circumstances to render the conclusions set forth herein.
Reserve Estimates
In general, the reserves for the wells and locations reviewed
by Ryder Scott were estimated by performance methods or the volumetric method;
however, other methods were used in certain cases where characteristics of the
data indicated such methods were more appropriate.
The estimates of reserves by the performance method utilized
extrapolations of various historical data in those cases where such data were
definitive. Reserves were estimated by the volumetric method in those cases
where there was inadequate historical data to establish a definitive
<PAGE>
Union Pacific Resources Group Inc.
February 27, 1998
Page 3
trend or where the use of production performance data as a basis for the reserve
estimates was considered to be inappropriate and the volumetric data were
adequate for a reasonable estimate.
The reserves presented herein, as estimated by the Company and
reviewed by Ryder Scott, are estimates only and should not be construed as being
exact quantities. Moreover, estimates of reserves may increase or decrease as a
result of future operations.
The proved reserves, which are attributable to the wells and
locations reviewed by Ryder Scott, conform to the definition as set forth in the
Securities and Exchange Commission's Regulation S-X Part 210.4-10(a) as
clarified by subsequent Commission Staff Accounting Bulletins and are based on
the following definition and criteria:
Proved reserves of crude oil, condensate, natural gas, and natural gas
liquids are estimated quantities that geological and engineering data
demonstrate with reasonable certainty to be recoverable in the future from
known reservoirs under existing operating conditions, i.e., prices and
costs as of the date the estimate is made. Prices include consideration of
changes in existing prices provided only by contractual arrangements, but
not on escalation based on future conditions. Reservoirs are considered
proved if economic producibility is supported by either actual production
or conclusive formation test. In certain instances, proved reserves are
assigned on the basis of a combination of core analysis and electrical and
other type logs which indicate the reservoirs are analogous to reservoirs
in the same field which are producing or have demonstrated the ability to
produce on a formation test. The area of a reservoir considered proved
includes (1) that portion delineated by drilling and defined by fluid
contacts, if any, and (2) the adjoining portions not yet drilled that can
be reasonably judged as economically productive on the basis of available
geological and engineering data. In the absence of data on fluid contacts,
the lowest known structural occurrence of hydrocarbons controls the lower
proved limit of the reservoir. Reserves that can be produced economically
through the application of improved recovery techniques are included in the
proved classification when these qualifications are met: (1) successful
testing by a pilot project or the operation of an installed program in the
reservoir provides support for the engineering analysis on which the
project or program was based, and (2) it is reasonably certain the project
will proceed. Improved recovery includes all methods for supplementing
natural reservoir forces and energy, or otherwise increasing ultimate
recovery from a reservoir, including (1) pressure maintenance, (2) cycling,
and (3) secondary recovery in its original sense. Improved recovery also
includes the enhanced recovery methods of thermal, chemical flooding, and
the use of miscible and immiscible displacement fluids. Proved natural gas
reserves are comprised of non-associated, associated and dissolved gas. An
appropriate reduction in gas reserves has been made for the expected
removal of natural gas liquids, for lease and plant fuel, and for the
exclusion of non-hydrocarbon gases if they occur in significant quantities
and are removed prior to sale. Estimates of proved reserves do not include
crude oil, natural gas, or natural gas liquids being held in underground or
surface storage. Proved reserves are estimates of hydrocarbons to be
recovered from a given date forward. They may be revised as hydrocarbons
are produced and additional data become available.
<PAGE>
Union Pacific Resources Group Inc.
February 27, 1998
Page 4
General
Our opinion on estimated reserves reviewed is based on a
detailed review of data in the Company's and Ryder Scott's files; however, we
have not made any field examination of the properties. In general, the reserve
estimates for the properties reviewed by Ryder Scott are based on data available
through late 1997.
At the Company's request, Ryder Scott's review was limited to
an examination of reserve quantities. We accepted, without independent
verification, the Company's representation that they had applied economic
parameters consistent with the guidelines of the Securities and Exchange
Commission in their estimates of future income from the reserves presented in
this report. The estimated quantities of reserves in this report are related to
hydrocarbon prices; therefore, quantities of reserves actually recovered may
differ significantly from the estimated quantities presented in this report.
Ryder Scott has applied constant price and cost parameters in our evaluation of
these reserves.
Neither we nor any of our employees have any interest in the
subject properties and neither the employment to do this work nor the
compensation is contingent on our estimates of reserves for the properties which
were reviewed.
This report was prepared for the exclusive use and sole
benefit of the Company. The data and work papers used in the preparation of this
report are available for examination by authorized parties in our offices.
Please contact us if we can be of further service.
Very truly yours,
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
/s/ Don P. Roesle, P.E.
Executive Vice President
DPR/sw
