================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
------------------------------------------
COMMISSION FILE NUMBER 0-17389
------------------------------------------
TEJAS GAS CORPORATION
(Exact Name of Registrant As Specified in Its Charter)
------------------------------------------
DELAWARE 76-0263364
(State of Incorporation) (I.R.S. Employer Identification No.)
1301 MCKINNEY, SUITE 700
HOUSTON, TEXAS 77010
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 658-0509
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
Common Stock, $.25 Par Value New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Depositary Shares, each New York Stock Exchange
representing a one-tenth
interest in a share of 9.96%
Cumulative Preferred Stock,
$1.00 Par Value
Depositary Shares, each New York Stock Exchange
representing a one-fifth
interest in a share of 5 1/4%
Convertible Preferred Stock,
$1.00 Par Value
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
TITLE OF EACH CLASS
-------------------
9.96% Cumulative Preferred Stock, $1.00 Par Value
5 1/4% Convertible Preferred Stock, $1.00 Par Value
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 the 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 the 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. [ ]
Aggregate market value of the voting stock held by non-affiliates of the
Registrant on March 17, 1997 was approximately $ 731,900,000 based on the ending
sales price of the Registrant's common stock as reported on the New York Stock
Exchange Composite Tape.
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date.
OUTSTANDING
CLASS MARCH 17, 1997
----- --------------
Common Stock, $.25 Par Value 20,557,026 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement, to be filed with the
Commission within 120 days of December 31, 1996, for its Annual Meeting of
Stockholders to be held on May 8, 1997, are incorporated by reference in Part
III of this Annual Report.
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
PART I
ITEM 1. BUSINESS........................................................ 2
General......................................................... 2
Significant Acquisition in 1996................................. 3
Map of Principal Natural Gas Pipeline Systems,
Storage Facilities, Processing Plants and Treating Plants... 5
Summary of Operations........................................... 6
Natural Gas Pipeline Systems.................................... 7
Natural Gas Transportation...................................... 8
Natural Gas Storage Facilities.................................. 8
Natural Gas Sales and Marketing................................. 9
Natural Gas Supplies............................................ 11
Natural Gas Processing.......................................... 13
Natural Gas Treating............................................ 13
Competition..................................................... 14
Employees....................................................... 14
Regulatory Matters.............................................. 14
ITEM 2. PROPERTIES...................................................... 16
ITEM 3. LEGAL PROCEEDINGS............................................... 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............. 17
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS................................. 18
ITEM 6. SELECTED FINANCIAL DATA......................................... 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................... 20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..................... 29
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE......................... 62
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.............. 63
ITEM 11. EXECUTIVE COMPENSATION.......................................... 63
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.. 63
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................. 63
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. 64
1
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Tejas Gas Corporation ("Tejas") is a major intrastate natural gas pipeline
company engaged in the business of purchasing, gathering, processing, treating,
storing, transporting and marketing natural gas. Tejas' operations are situated
primarily in the major gas producing areas in Oklahoma, South Texas, East Texas
and the Texas and Louisiana Gulf Coast regions, with additional facilities
located in West Virginia. Tejas is a holding company that conducts operations
through four principal second tier subsidiaries, Tejas Gas Corp. ("Tejas Gas"),
Acadian Gas Corporation ("Acadian"), Tejas Natural Gas Company ("TNGC") and,
since June 1996, Transok, Inc. ("Transok"). Tejas-Acadian Holding Company
("TAHC"), a wholly owned first tier subsidiary of Tejas, was organized in
December 1994 and owns the capital stock of each of Tejas Gas, Acadian and TNGC.
Tejas Transok Holding Company ("TTHC"), a wholly owned first tier subsidiary of
Tejas, was organized in May 1996 and owns the capital stock of Transok (see
"SIGNIFICANT ACQUISITION IN 1996" as described in this Item 1.). Tejas Coral
Holding Company ("TCHC"), formerly Tejas Alliance Holding Company, a wholly
owned first tier subsidiary of Tejas, was organized in July 1995 to hold an
interest in Coral Energy, L.P. ("Coral", formerly Coral Energy Resources, L.P.)
an energy marketing joint venture with Shell Oil Company ("Shell"). Unless the
context indicates otherwise, the term "Tejas" includes TAHC, TCHC and TTHC and
their respective subsidiaries.
Tejas, a Delaware corporation, was organized on September 16, 1988 by
Hamilton Oil Corporation ("HOC") for the purpose of holding the capital stock of
Tejas Gas, which had been an indirect, wholly owned subsidiary of HOC or its
predecessor since 1979. Tejas Gas has been engaged in natural gas pipeline
operations and related activities since its inception in 1967. On July 1, 1988,
Tejas Gas purchased all of the outstanding capital stock of Gulf Energy Holding,
Inc. another company engaged through subsidiaries in natural gas pipeline
operations, principally in Texas. On December 27, 1988, Tejas' capital stock was
distributed to the stockholders of HOC in the form of a spin-off. On December
28, 1990, Tejas purchased through a wholly owned subsidiary, Acadian, all of the
capital stock of several corporations comprising the Acadian Gas Group, a group
of companies engaged in natural gas pipeline operations, principally in
Louisiana. On September 15, 1993, Tejas, through a wholly owned subsidiary,
TNGC, acquired from Exxon Corporation ("Exxon") substantially all of Exxon's
Texas and Louisiana intrastate natural gas pipeline operations as well as a
significant natural gas storage facility. Tejas, through subsidiaries of TCHC,
holds a one-half interest in Coral, an energy marketing venture between Tejas
and Shell which commenced operations in November 1995. Coral is a Delaware
limited partnership formed in September 1995 to market natural gas and power for
Tejas and Shell. Prior to January 1997, Coral was owned one-third by
subsidiaries of Tejas and two-thirds by subsidiaries of Shell. Effective January
1997, Tejas purchased from Shell an additional 16 2/3% interest in Coral thereby
increasing its ownership to 50%. Shell Canada Limited of Calgary, Alberta may
acquire an equity interest in Coral in a transaction expected to close in early
1997. This should enhance Coral's ability to expand its operations into Canada.
On June 6, 1996, Tejas, through a newly formed wholly owned subsidiary,
TTHC, acquired from Central and South West Corporation ("CSW") Transok's
intrastate natural gas pipeline operations in Oklahoma, Texas and Louisiana and
a natural gas processing plant and storage facility, both located in Oklahoma.
In connection with the acquisition, Tejas entered into agreements to lease and
operate Transok's seven remaining natural gas processing plants in Oklahoma. See
"SIGNIFICANT ACQUISITION IN 1996" as described in this Item 1.
2
<PAGE>
Tejas is one of the largest independent intrastate gatherers and
transporters of natural gas volumes through company-owned pipelines in the
United States. During 1996, Tejas had an average throughput of 4.3 billion cubic
feet ("Bcf") of natural gas per day through its natural gas sales,
transportation and processing activities. In 1996, Tejas' core business of
purchasing, storing, selling, gathering and transporting natural gas through its
pipeline systems accounted for approximately 95% of its throughput and 82% of
gross profit, with the balance attributable to natural gas processing, treating
and off-system marketing.
The executive offices of Tejas are at 1301 McKinney, Suite 700, Houston,
Texas 77010, and its telephone number is (713) 658-0509.
SIGNIFICANT ACQUISITION IN 1996
On June 6, 1996, Tejas acquired Transok (the "Transok acquisition") from
CSW through a merger of a recently formed wholly owned subsidiary of Tejas into
Transok. Immediately prior to the acquisition, CSW sold seven natural gas
processing plants (the "Transok Plants") to a third party lessor (the "Lessor"),
which in turn leased these facilities (the "Lease") to a subsidiary of Tejas
(the "Lessee").
Transok operates intrastate natural gas pipeline systems in Oklahoma,
Louisiana and Texas and is one of the largest processors of natural gas in
Oklahoma. At the time of the acquisition, Transok's operations included: (i)
approximately 7,000 miles of gathering and transmission pipelines in Oklahoma,
Louisiana and Texas with 2.3 Bcf of natural gas per day of pipeline capacity;
(ii) eight natural gas processing plants, of which seven are being leased to a
subsidiary of Tejas, with total processing capacity of 564 million cubic feet
("MMcf") per day of natural gas; (iii) a 26 Bcf capacity natural gas reservoir
storage facility with 300 MMcf per day of withdrawal and 200 MMcf per day of
injection capacity; and (iv) 1.4 trillion cubic feet of connected third-party
natural gas reserves. As described below, Tejas subsequently sold approximately
2,100 miles of gathering and transmission lines and a processing plant acquired
in the Transok acquisition.
The total purchase price received by CSW at closing was $690 million in
cash, of which $565 million was paid by Tejas and $125 million was paid by the
Lessor to acquire the Transok Plants. In addition, as part of the transaction,
Transok retained $200 million of long-term debt. To finance the cash
requirements for the Transok acquisition, Tejas borrowed (i) $178 million under
its existing credit facilities and (ii) $387 million, net of a $38 million
voluntary prepayment, under a new $425 million credit agreement (the "Transok
Credit Facility"). The outstanding balance under the Transok Credit Facility was
reduced to approximately $196 million by year-end 1996 primarily due to the
application of proceeds received by Tejas subsequent to the Transok acquisition
from the sale of common stock (see Note 12 of "Notes to Consolidated Financial
Statements") and the sale of certain non-strategic assets (see Note 3 of "Notes
to Consolidated Financial Statements"). Prior to year-end, the Transok Credit
Facility was amended (the "Amended Transok Credit Facility"). The principal
changes included extending the maturity date from December 31, 1997 to December
31, 2004, lowering the interest rate margins over the London Interbank Offered
Rate ("LIBOR"), subject to a minimum margin for a limited period of time, and
setting the commitment amount at $275 million. The Amended Transok Credit
Facility bears interest, at Tejas' option, based upon either the prime rate or
LIBOR. Depending upon Transok's funded debt to capitalization ratio, the margins
over LIBOR that Transok must pay vary from a minimum of 0.5% to a maximum of
1.25%. Based upon the December 31, 1996 outstanding balance of approximately
$196 million, the Amended Transok Credit Facility had available borrowings of
approximately $79 million and bore interest, at Tejas' option, of prime or LIBOR
plus 1.0%. Under the terms of the Amended Transok Credit Facility, after two
years, the revolver will, unless extended at the option of the lenders, convert
into a six year reducing revolver. Unless extended, commitment reductions of
approximately $8.6 million per quarter will begin March 31, 1999 with the final
remaining commitment reduction to occur on December 31, 2004.
3
<PAGE>
Nevertheless, based upon the current terms of the Amended Transok Credit
Facility and the outstanding principal balance thereunder at December 31, 1996,
no principal payments are required until 2001.
In connection with the acquisition of Transok, CSW sold seven natural gas
processing plants to the Lessor for $125 million. Tejas, through a wholly owned
subsidiary, leased the Transok Plants from the Lessor for a five-year term with
lease payments adjusted quarterly based upon the Lessor's financing costs. Tejas
has entered into interest rate derivative agreements in a notional amount of
$125 million to hedge the effects of such adjustments on the required minimum
lease payments. In addition, under the Lease, the Lessee has the option to
extend the term of the Lease for up to two additional two year periods, subject
to approval by the Lessor, and to purchase all of the Transok Plants at any time
for $125 million. If by the end of the Lease term the Lessee has not exercised
its option to purchase all of the Transok Plants, it is obligated to pay the
Lessor a termination fee of approximately $106 million. However, the Lease
contains a provision that reduces the termination fee to the extent the proceeds
from the Lessor's subsequent sale of the Transok Plants exceed $19 million. The
Lease also provides the Lessee the option to purchase, at any time during the
Lease term, one or more of the Transok Plants for an aggregate amount not
exceeding $31 million, with corresponding reductions to the $106 million
termination fee and the $19 million threshold amount.
The acquisition of Transok was accounted for as a purchase and the
purchase price was allocated to the acquired assets and liabilities based upon
the estimated fair value of such assets and liabilities as of June 6, 1996. The
Lease is for a five-year term and is accounted for as an operating lease. The
allocation of the purchase price is preliminary, as valuation and other studies
have not been finalized. It is not expected that the final allocation of the
purchase price will produce materially different results from those presented
herein. The results of operations for the assets acquired or leased as a result
of the Transok acquisition are included in the accompanying financial statements
for the period subsequent to June 6, 1996.
During the last quarter of 1996, Tejas completed sales of three
non-strategic assets: a transmission and gathering system located in Northern
Louisiana, a processing plant and its related gathering system in North Central
Oklahoma and an interest in a partnership which owned and operated oil and gas
wells in Western Oklahoma. These transactions, none of which resulted in a gain
or loss, generated cash proceeds of approximately $110 million, most of which
were used to reduce the commitment level and repay indebtedness under the
Transok Credit Facility.
4
<PAGE>
[GRAPHIC OMITTED]
5
<PAGE>
SUMMARY OF OPERATIONS
The following table summarizes Tejas' operations for the most current
three years.
Years Ended December 31, 1996(6) 1995 1994
- --------------------------------------------------------------------------------
Miles of pipeline(1) ............................... 10,563 5,488 5,426
Operating natural gas processing plants(2) ......... 15 8 8
Operating treating plants .......................... 2 2 2
Pipeline capacity in Bcf per day(3) ................ 7.6 5.6 5.6
================================================================================
Average daily throughput in MMcf:
System sales ................................... 1,913 1,515 1,285
Transportation ................................. 2,049 1,469 1,688
Partnership volumes(4) ......................... 142 115 113
- --------------------------------------------------------------------------------
Total system throughput ........................ 4,104 3,099 3,086
Gas processed and other ........................ 208 87 94
- --------------------------------------------------------------------------------
Total throughput ............................ 4,312 3,186 3,180
================================================================================
Natural gas processing data:
Average daily natural gas liquids production in
thousands of gallons ........................ 836 179 190
Average daily inlet volumes in MMcf ............ 351 76 84
Natural gas treating data:
Average daily inlet volumes in MMcf(5) ........ 44 43 53
- --------------------------------------------------------------------------------
(1) Includes 1,087 miles of pipelines owned by joint ventures in which Tejas
has an interest and 902 miles of leased systems for 1996 and 858 miles of
pipelines owned by joint ventures in which Tejas has an interest and 508
miles of leased systems for 1995 and 1994.
(2) Includes the Copano Bay Plant which was sold in February 1997. Seven
plants included in 1996 are leased to and operated by Tejas.
(3) Includes leased systems and Tejas' percentage ownership of capacity in
joint ventures.
(4) Includes Tejas' share of unconsolidated partnerships.
(5) Treated volumes are also included in transportation volumes as such
volumes are handled by Tejas' natural gas pipelines.
(6) Includes Transok Operations subsequent to its acquisition by Tejas in June
1996.
6
<PAGE>
NATURAL GAS PIPELINE SYSTEMS
The following table summarizes Tejas' natural gas pipeline systems for
1996.
================================================================================
GAS PIPELINE SYSTEMS Texas Oklahoma Louisiana Total
================================================================================
Miles of pipeline
Operated by Tejas ................. 4,009 4,258 1,209 9,476
Partnership interests ............. 874 213 -- 1,087
- --------------------------------------------------------------------------------
Total .......................... 4,883 4,471 1,209 10,563
- --------------------------------------------------------------------------------
Compressors ........................... 59 116 10 185
Horsepower ............................ 75,207 142,662 9,240 227,109
Interconnects ......................... 159 81 64 304
Pipeline capacity in Bcf per day ...... 4.5 2.0 1.1 7.6
Average throughput in Bcf per day ..... 2.6 0.9 0.8 4.3
================================================================================
Tejas' natural gas pipelines consist of main lines, lateral lines and
gathering lines which are located within the states of Texas, Oklahoma and
Louisiana, including offshore state waters in Texas. Tejas' pipeline operations
involve gathering and purchasing natural gas from producers and suppliers and
transporting and reselling, through Coral, such natural gas to electric utility
companies, local distribution companies, industrial customers, affiliates of
other pipeline companies, and gas marketing companies as well as transporting
and gathering natural gas for others on a fee basis. Tejas' natural gas pipeline
operations also include natural gas compression and dehydration. Natural gas is
received at numerous interconnections with natural gas producers' facilities and
from third-party pipelines and delivered to customers' facilities and markets in
other areas.
Tejas' natural gas pipeline systems are substantially all located on
properties owned by others. Tejas has obtained easements or rights-of-way for
its natural gas pipeline systems which generally provide for perpetual
possession and use. In certain instances, periodic payments are required to be
made. Where believed required, permits and licenses have been obtained for
natural gas pipeline systems crossing or adjacent to public properties.
Certain easements have been acquired through eminent domain proceedings.
Tejas' pipelines in Texas extend from South Texas near the Mexican border
along the Texas Gulf Coast to the Louisiana border and north from near Houston
to the East Texas producing areas. In addition, Tejas has a system that
traverses the West Texas producing areas and extends north to the Oklahoma
border and a system in the Fort Worth Basin. Tejas' Texas facilities consist of
gathering and transmission pipeline ranging in size from 2 to 36 inches in
diameter. The Texas facilities include three joint venture systems in South
Texas, a partnership system along the Texas Gulf Coast which is operated by
Tejas and a 508 mile leased system in East Texas. The Oklahoma system consists
of 2 to 30 inch diameter gathering and transmission lines extending throughout
the state excluding the panhandle area and provides Tejas access to an abundant
supply of natural gas reserves. Among other producing regions in Oklahoma,
portions of the Oklahoma system are directly located in the Anadarko and Arkoma
Basins. Tejas also has access to the Hugoton, Permian and San Juan Basins
through interconnections with other pipeline systems. The Louisiana systems
consist of 2 to 26 inch diameter gathering and transmission lines and lesser
diameter
7
<PAGE>
lateral lines in North and South Louisiana. For a pictorial presentation of the
pipeline systems described above see the map included on page 5 of this Item 1.
NATURAL GAS TRANSPORTATION
Tejas' business includes transporting natural gas through its pipelines
for others on a fee basis. Tejas receives natural gas from producers, other
pipelines or shippers through system interconnects and redelivers the natural
gas at other points. Transportation agreements provide Tejas with a fee per unit
of volume transported. During 1996 and 1995, Tejas delivered an average of 2,049
MMcf and 1,469 MMcf per day, respectively, under transportation agreements. The
increase in volumes during 1996 is primarily the result of the Transok
acquisition.
NATURAL GAS STORAGE FACILITIES
The following table summarizes Tejas' natural gas storage operations for
1996.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
GAS STORAGE FACILITIES Texas Oklahoma Louisiana Total
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Name of facility ................. West Clear Lake Greasy Creek Grand Bayou(1)
Capacity in Bcf .................. 125 26 4 155
Withdrawal capacity
in MMcf per day ............... 550 300 240 1,090
Injection capacity
in MMcf per day ............... 240 300 80 620
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) Storage facility is leased to Tejas.
Tejas purchased the West Clear Lake Storage Facility ("WCLSF") from Exxon
in September 1993. This storage facility, strategically located near the
Houston Ship Channel, is one of the largest natural gas storage reservoirs in
Texas. Exclusive of $22.5 million of cushion gas expenditures, Tejas' cumulative
WCLSF capital expenditures of $18.1 million (primarily for the addition of
electrical compressors) have increased the availability of natural gas and the
operational flexibility of the WCLSF by increasing injection rates from 80 MMcf
per day to 240 MMcf per day and the withdrawal rates from 220 MMcf per day to
550 MMcf per day. This permits Tejas to sell approximately 25 Bcf of additional
natural gas volumes annually out of the storage facility and to provide
additional volumes to accommodate the seasonal needs of customers. Further
development of the WCLSF is possible and Tejas will continue to monitor and
review the economic benefit of such development.
Tejas owns, as a result of the Transok acquisition, a storage facility in
Oklahoma ("Greasy Creek"). This facility enables Transok to meet demands for
natural gas during periods of peak delivery without incurring peak demand
charges from suppliers of natural gas and provides Transok flexibility in
managing its gas inventory. Tejas is currently in the process of enhancing the
withdrawal and injection capacities of this facility.
8
<PAGE>
In late 1992, Tejas began operation of a leased salt dome ("Grand Bayou")
natural gas storage facility near Napoleonville, Louisiana. The storage facility
is designed to support the supply swing requirements relating to significant
business with electric utility companies and natural gas distribution companies
resulting from contracts entered into with such companies as well as other new
business that may develop in the future. The facility site was obtained under a
10-year lease, under which Tejas has an option to extend the lease term for an
additional 10 years. An affiliate of the lessor has contractual rights to 10% of
the facility's storage and withdrawal capacity. Another company purchased a 25%
interest in the storage project and contributed a proportionate amount of the
construction costs, in order to obtain greater delivery flexibility for its peak
winter requirements. Its rights to total withdrawal capacity is reduced to
approximately 5% during Tejas' peak summer demand period.
The operation of Tejas' natural gas storage facilities is an integral part
of Tejas' business. Tejas typically hedges all or a portion of its natural gas
volumes held in storage utilizing the futures, swaps and options markets.
Natural gas volumes held in storage enable Tejas to respond quickly to changing
market conditions and to take advantage of seasonal price variations and peak
demand periods. This storage capacity creates an opportunity for Tejas to
purchase natural gas at times of lower demand when prices are typically lower
and to make sales during periods of peak demand when prices are typically
higher. To accomplish this strategy, Tejas may purchase gas for injection into
storage, either currently or in future periods, and simultaneously sell
equivalent volumes of gas for delivery in other periods.
NATURAL GAS SALES AND MARKETING
Through Coral, Tejas sells natural gas to electric utilities, local
distribution companies, industrial end-users, marketing affiliates of other
pipeline companies and gas marketing companies. Tejas' electric utility and
industrial customers normally consume the natural gas in their own operations
while local distribution companies, pipeline affiliated customers, and gas
marketing customers generally resell the natural gas. Tejas' natural gas sales
are made pursuant to both long-term contracts which range in term from one to 20
1/2 years and short-term agreements which generally range from one month to one
year in duration. An interest in Tejas' long-term sales contracts has been
contributed to Coral. For further discussion of Coral see "GENERAL" in this Item
1. and Note 8 of "Notes to Consolidated Financial Statements."
Coral conducts natural gas marketing activities for Tejas and Shell. In
addition, Coral has received regulatory approval to market electricity in
wholesale markets and commenced such activities in the third quarter of 1996.
Coral initially began marketing 3.7 Bcf per day of Tejas and Shell natural gas
volumes. As of December 31, 1996, sales of natural gas were in excess of 6.1 Bcf
per day. Tejas provides Coral access to Tejas' natural gas pipelines which have
interconnects with other pipelines serving the U.S. and access to gas supplies
from Tejas' storage facilities and gathering and transmission systems located in
Texas, Oklahoma and Louisiana. Shell dedicates approximately 2 Bcf per day of
gross natural gas production and approximately 5.5 trillion cubic feet of
natural gas reserves. Tejas has committed to Coral substantially all of its
natural gas supply, and Shell has committed to Coral substantially all of its
gas production in the United States (excluding Alaska and Hawaii). Coral was
initially staffed with employees from Tejas and Shell. In addition, Tejas
provides intrastate marketing expertise, and Shell provides interstate marketing
expertise, as well as treasury and administrative support services. Coral has
also entered into a contractual arrangement with Bankers Trust to assist in
providing a variety of specially tailored risk management services.
Tejas and Shell have each contributed cash and economic interests in
natural gas sales contracts to Coral for their respective interests. Each
partner has received equity credit for long-term natural gas contract
commitments to the partnership. If actual volumes and margins from these
contracts fail to meet
9
<PAGE>
targeted contract levels, the responsible partner is subject to make-up
payments. If Coral is unable to take all of the natural gas tendered for
delivery by the parties, Coral is obligated to pay for such natural gas at the
price that would have otherwise been applicable, mitigated by the amount
obtained from any sales of such natural gas to third parties.
LONG-TERM SALES AGREEMENTS
The majority of Tejas' long-term sales agreements provide for minimum
annual volumes to be delivered at market prices, determined monthly, plus a
predetermined margin. A small portion of Tejas' long-term sales are also made
under contracts whereby natural gas produced from a designated geographical
area, and which Tejas elects to purchase, is sold at a fixed price.
Substantially all of Tejas' long-term sales are made to electric utility
companies, local natural gas distribution companies and industrial customers.
The margins available to Tejas from such sales are greater than those currently
available under short-term contracts because of the additional services provided
by Tejas in connection with such sales. These services include aggregation of
supplies, assurance of supplies and the dedication of such Tejas facilities as
are necessary to provide for large swings in the volumes delivered to the
customers as the customers' requirements vary from season to season or from day
to day. Long-term sales contracts comprised approximately 43% and 42% of total
system sales volumes in 1996 and 1995, respectively. As these long-term
contracts expire, the percentage of volumes sold by Tejas under such contracts
will decrease unless Tejas can negotiate renewals or extensions thereof or
obtain new long-term contracts to replace the volumes sold thereunder. There can
be no assurance that Tejas will be able to replace the revenues lost under such
long-term contracts with equally profitable transportation or sales
opportunities.
SHORT-TERM SALES CONTRACTS
Short-term sales agreements generally provide for delivery of negotiated
volumes for a 30-day period at prevailing market prices. Customers for
short-term sales agreements are principally industrial companies, marketing
affiliates of other pipeline companies, and gas marketing companies, but may
also include local distribution companies and electric utilities. Profit margins
for such sales are currently much lower than those made under long-term sales
contracts and vary from month to month since they are affected by competition
for natural gas markets at the time of sale as well as the cost of natural gas
supplies. The cost of supplies will vary depending upon competition for such
supplies and the services provided by Tejas to producers, including gathering of
the natural gas from the producers' wells, compression and dehydration. Tejas
delivered from its systems approximately 57% and 58% under short-term sales
agreements during 1996 and 1995, respectively.
SEASONAL VARIATIONS
Tejas' natural gas sales are affected by seasonal changes in demand for
natural gas because of weather. Tejas has its greatest demands during the winter
heating season and the summer air conditioning season as greater volumes,
revenues and earnings from operations are usually experienced during those
periods of the year. Variations in extremes of weather from year to year have in
the past resulted in significant variations in Tejas' natural gas throughput,
revenues and earnings for those years.
PRINCIPAL CUSTOMERS
Sales to Coral represented 38% and 10% of Tejas' revenues in 1996 and
1995, respectively. No single customer accounted for 10% or more of Tejas'
revenues in 1994.
10
<PAGE>
NATURAL GAS SUPPLIES
Tejas purchases natural gas from a variety of suppliers, ranging from
small independent producers to major oil and gas companies and marketing
affiliates of other pipeline companies, under approximately 4,124 long-term and
short-term natural gas purchase contracts. Tejas does not own any natural gas
reserves.
Natural gas supplies connected to Tejas' pipeline systems in Texas are
concentrated in South Texas, offshore Texas, the onshore Gulf Coast Region of
Texas, the Fort Worth Basin, and in various producing areas in Central and East
Texas. Supplies are also obtained from other producing areas through
interconnections with third-party pipelines.
South Texas is an area in which active drilling and completion of natural
gas wells have continued over the past several years and in which production
levels have, therefore, remained generally constant. Tejas believes active
drilling in this area will continue because of its geological nature and
relatively high rate of successful well completions.
Tejas has access to major producing areas and reserves located in the
South Texas, offshore Texas, onshore Gulf Coast and East Texas areas. Tejas'
pipeline systems are connected to the King Ranch production via the King Ranch
Gas Processing Plant tailgate, with further access to additional third-party
production from the McAllen Ranch area. Tejas also expects to benefit from
access to reserves and production of natural gas from the Wilcox Trend in Webb,
Zapata, Starr and Hidalgo Counties.
The Fort Worth Basin supply is more limited than that of South Texas and
the connected producing wells are subject to greater production rate declines.
While supplies have been relatively stable over the past several years because
of new supplies made available, the maintenance or increase of the supply levels
will be highly dependent upon new drilling in the area.
The East Texas systems have direct connections to numerous natural gas
wells for a majority of their supplies, but a portion of their supplies are
obtained from other sources in the Carthage area through third-party pipelines.
The ability of these systems to maintain or increase the amount of their
supplies is largely dependent upon Tejas' ability to maintain or increase its
sales volumes to customers at market prices which will allow Tejas to be
competitive in bidding for available supplies.
The Transok acquisition provides Tejas with a long-lived source of
dedicated natural gas in the Hugoton and Anadarko Basins located in Oklahoma, as
well as access to natural gas produced in the Permian Basin in West Texas and
the Arkoma Basin located in East Oklahoma and Arkansas. These basins are new
supply regions for Tejas. In the last two years, Transok has connected, through
various projects, over 400 MMcf per day in new natural gas well production to
its pipelines. The majority of this new natural gas has come from existing
drilling areas in North Louisiana and West Oklahoma and a new natural gas field
in Stephens County, Oklahoma.
Additional supplies are purchased principally under short-term contracts
from producers in Southern and offshore Louisiana and offshore Texas through
direct pipeline connections or through interconnections with a number of
third-party pipelines. Tejas also has a direct connection with the Henry Hub, a
major natural gas receipt and delivery point in Southern Louisiana from which
supplies may be obtained from numerous sources. Currently, as well as during the
last several years, natural gas supplies available for purchase on a short-term
basis have been relatively stable and abundant. Tejas foresees no significant
reduction in the availability of such supplies in the near term. However, if
quantities of supplies should diminish in the future, Tejas believes that it can
successfully compete for available supplies because a significant portion of
Tejas' sales will be made under long-term sales contracts which provide for
sales
11
<PAGE>
volumes at market-related prices plus a predetermined margin. This will allow
Tejas to offer suppliers competitive prices as well as a reasonably continuous
market for their supplies.
During 1996, Tejas purchased approximately 52% of its natural gas supplies
under month-to-month purchase contracts. The remaining 48% of its supplies were
obtained from wells which are directly connected to Tejas' systems and which
Tejas considers to be long-term supplies either because of a lack of competing
pipelines being reasonably accessible to such wells or because of contractual
long-term dedications of the wells' production to Tejas' systems. These supplies
are subject to decline through natural depletion of the wells. The maintenance
or increase in the amount of such long-term supplies will depend upon the
drilling and completion of new natural gas wells and upon Tejas' ability to
successfully compete for such newly developed supplies.
Purchases of natural gas from Tejas' five largest suppliers accounted for
approximately 32% of its total purchased volume during 1996 and approximately
34% of its total purchased volume during 1995. The largest single supplier
accounted for approximately 12% and 19% of such total volume for 1996 and 1995,
respectively.
In addition to Tejas' long-term natural gas purchase contract commitments
(at prices approximately equal to prevailing market prices) for volumes covering
approximately 48% of Tejas' 1996 requirements, Tejas has short-term contract
commitments which do not obligate it to purchase fixed quantities of natural gas
and such contracts are effectively terminable by either the buyer or the seller
on relatively short notice (generally 30 to 90 days). However, Tejas is party to
some older, longer-term natural gas purchase contracts under which it is
required, under certain circumstances, to purchase, or to pay for if not taken,
certain minimum volumes of natural gas at set prices (so-called "take-or-pay"
contracts). Possible take-or-pay claims may continue to accrue under such older
contracts until their expiration or renegotiation. Most of these take-or-pay
contracts will expire within the next three years. Payments, if any, made under
these take-or-pay provisions for natural gas not actually taken are sometimes
subject to being recouped out of takes of natural gas in future periods in
accordance with the terms of the contracts. In certain instances, Tejas has
similar take-or-pay provisions in sales contracts with its customers.
Tejas Gas is a defendant in one pending take-or-pay lawsuit for which
alleged damages in excess of $36 million are claimed against Tejas Gas. See
"ITEM 3. LEGAL PROCEEDINGS" herein. Certain other producers have made claims
against Tejas Gas pursuant to take-or-pay provisions. Tejas estimates that such
claims are not material. Management believes that Tejas has adequate defenses or
recourse to third parties relating to such lawsuit and claims, and does not
believe that these matters will have a material adverse effect on Tejas'
financial condition. However, the ultimate outcome of the lawsuit and such
claims is uncertain at the present time.
12
<PAGE>
NATURAL GAS PROCESSING
The following table summarizes Tejas' natural gas processing operations
for 1996.
<TABLE>
<CAPTION>
==============================================================================================
Louisiana West
GAS PROCESSING Texas(1) Oklahoma(2)(3) (45% owned) Virginia(4) Total
==============================================================================================
<S> <C> <C> <C> <C> <C>
Plants ............................ 4 7 1 3 15
Capacity in MMcf per day .......... 69 519 16 55 659
Average daily inlet volumes in MMcf 32 282 1 36 351
Daily processing capacity in
thousands of gallons .......... 242 1,554 48 111 1,955
Average daily liquids produced in
thousands of gallons .......... 91 681 3 61 836
==============================================================================================
</TABLE>
(1) Includes the Copano Bay Plant which was sold in February 1997.
(2) Leased to and operated by Tejas.
(3) The average processed and produced volumes for 1996 are only for the
period subsequent to the Transok acquisition while capacity is based upon
the whole year of operations.
(4) Operated under guaranteed return contracts.
Tejas' natural gas processing operations consist of extracting natural gas
liquids (ethane, propane, butanes and heavier products, collectively, "NGLs")
from natural gas supplied by producers and other pipeline companies, either
through Tejas-owned pipelines or directly from other companies' pipelines. After
processing, the residue natural gas is returned to the pipelines. The NGLs
extracted are transported to third-party fractionation facilities where the
products are separated and then generally sold to wholesalers.
The processing contracts for some of Tejas' natural gas processing plant
operations provide that Tejas receive certain minimum revenues for processing.
The processing contracts for Tejas' other plants generally provide that Tejas
receive all or a portion of the NGLs extracted as its fee for processing, and
the profitability of such plants depends directly upon the volumes and sales
prices of NGLs extracted, the volumes and prices of natural gas consumed in the
processing and the volume of natural gas supplies available for processing.
NATURAL GAS TREATING
Natural gas treating operations involve removing hydrogen sulfide and
carbon dioxide from natural gas to make it marketable. These services are
normally conducted under long-term contracts for a fee per unit of natural gas
volume treated. Tejas owns and operates two natural gas treating plants in Texas
which have an aggregate treating capacity of approximately 100 MMcf of natural
gas per day. During 1996 and 1995, these plants treated an average of 44 MMcf
and 43 MMcf per day, respectively.
13
<PAGE>
COMPETITION
Significant competition exists for Tejas in purchasing, marketing,
transporting, gathering, processing and treating of natural gas in many of its
geographic areas of operations. The ability to offer competitive prices,
reasonable assurances of a continuous market and a favorable performance history
with producers are the principal factors in being competitive for supplies.
Additionally, the extent of direct connections between the producers' wells or
gathering facilities and Tejas' gathering or transmission lines and the
connection of Tejas' lines to substantial direct consumers are important
competitive factors. Successful competition for markets depends primarily upon
the ability to deliver natural gas supplies to customers at competitive prices
and in such quantities as the customer may need from time to time as well as
having a record of reliability in performing the required services.
Currently, a significant portion of Tejas' volumes of natural gas
purchased and resold are under short-term contracts which are subject to
renegotiation of prices and volumes, usually on a monthly basis. Although this
affords Tejas greater flexibility in responding to changing market conditions,
supplies and markets under such contracts are not assured. In addition, excess
supplies in relation to demand causes competition for available markets. Tejas
has numerous competitors in its geographic area of operations, many of which are
larger interstate pipeline companies with more extensive pipeline networks and
greater capital resources. Accordingly, for Tejas to remain competitive it must
continually meet or exceed such competitors' ability to offer reliable services
and competitive pricing. Tejas also faces varying degrees of competition from
the use of alternative energy sources, such as electricity, coal and oil.
EMPLOYEES
As of December 31, 1996, Tejas had 818 employees which includes 418
employees added as a result of the Transok acquisition. None of Tejas' employees
are represented by a union. Management believes that Tejas' relations with its
employees are satisfactory.
REGULATORY MATTERS
Tejas' facilities and operations are subject to regulation by various
governmental agencies at both the federal and state level. Tejas' intrastate
operations in Texas are subject to state regulations issued by the Railroad
Commission of Texas under the Cox Act, the Gas Utilities Regulatory Act and the
Natural Resources Code. The Railroad Commission of Texas regulates intrastate
pipeline companies as to rates, services and safety. Tejas' Louisiana operations
are subject to state regulations issued by the Louisiana Public Service
Commission and the Louisiana Department of Natural Resources. The Louisiana
Public Service Commission regulates Tejas' city gate sales. Within the Louisiana
Department of Natural Resources, the Office of Conservation has the authority to
regulate all pipeline interconnections, transportation and construction or
abandonment of facilities, and the Office of Pipeline Safety monitors the
implementation of U.S. Department of Transportation and Louisiana pipeline
safety regulations. Tejas' Oklahoma operations are subject to rules and
regulations issued by the Oklahoma Corporation Commission. The Conservation
Division within the Oklahoma Corporation Commission has the authority to
regulate the conservation of natural gas, the prevention of pollution in
connection with the transportation, processing and storage of natural gas, and
to prohibit discrimination with respect to commercial terms in connection with
the purchase, transportation and gathering of natural gas. The Oklahoma
Corporation Commission also regulates pipeline safety and the construction and
abandonment of pipeline interconnections and other facilities.
14
<PAGE>
At the federal level, Tejas is subject to regulations of the Federal
Energy Regulatory Commission (the "FERC") under the Natural Gas Policy Act of
1978 and regulations implementing the Federal Natural Gas Pipeline Safety Act of
1968, which concerns pipeline safety. With respect to interstate pipeline
operations, the FERC has promulgated a series of orders that have led to the
restructuring of pipeline services and to the requirements that all interstate
pipelines provide "open access" service to anyone so requesting. While the
detailed "open access" regulations do not apply to intrastate pipelines such as
those of Tejas, the FERC does require that intrastate pipelines which provide
certain interstate services pursuant to Section 311 of the Natural Gas Policy
Act do so on an open and nondiscriminatory basis and make certain filings and
reports in compliance with the regulations. These "open access" regulations are
designed to encourage the transportation of gas on a nondiscriminatory basis to
increase the competitiveness and flexibility of natural gas markets. Several of
Tejas' pipelines are providing Section 311 service and compliance with the FERC
regulations has posed no significant problem. The rates for the pipelines
providing Section 311 service in Texas are reviewed and approved by the Texas
Railroad Commission. The rates for two of the pipelines providing Section 311
service in Louisiana are reviewed and approved by the Louisiana Public Service
Commission, and the maximum rates for a third pipeline and the storage facility
in Louisiana are submitted to the FERC for review and approval. For the two
pipelines and a storage facility in Oklahoma which provide Section 311 service,
maximum rates are submitted to the FERC for review and approval. Tejas has
pipelines which qualify to provide the means to purchase natural gas supplies
from interstate sources for redelivery and sale to intrastate markets without
regulation by the FERC. In addition to the above regulations, the natural gas
industry has historically been subject to numerous other forms of federal and
state regulation, and the effect of future regulations upon Tejas cannot be
predicted.
The operations of Tejas are subject to various federal, state and local
environmental laws which can increase the costs of planning, designing,
installing and operating its facilities. In most instances, the regulatory
requirements relate to water and air pollution control measures. Operations in
Texas are subject to the Texas Clean Air Act as administered by the Texas
Natural Resources Conservation Commission, which Act restricts emissions from
wells, pipelines, compressors, processing plants and treating plants.
Furthermore, the Railroad Commission of Texas has the authority to issue permits
and regulations necessary to prevent environmental pollution by pipeline
operations. The Louisiana operations are subject to regulation by the Louisiana
Conservation Commission and other state agencies. The Oklahoma operations are
subject to regulation by the Department of Environmental Quality and other state
agencies. The operations of Tejas are also subject to regulation on the federal
level by the Federal Environmental Protection Agency. Tejas is also subject to
other federal, state and local laws covering the handling or discharging into
the environment of materials used by Tejas, or otherwise relating to protection
of the environment, safety and health. The exact nature of environmental issues
which Tejas and its subsidiaries may encounter in the future cannot be
predicted. Additional environmental liabilities may result in the future as more
stringent environmental laws and regulations are implemented. The nature of
Tejas' business requires Tejas to monitor its compliance with environmental laws
and regulations and assess the likelihood of Tejas incurring environmental
liabilities, including liabilities associated with remediation. At present, no
estimate of any such liability, or range of liability amounts, can be made.
There can be no assurance that the amount of any such liabilities would not be
material.
Transok leases all of the pipeline facilities of Palo Duro Pipeline
Company (Palo Duro) in Texas. The Palo Duro pipeline system provides
transportation service both in intrastate commerce and under Section 311 of the
Natural Gas Policy Act. On April 29, 1994, Transok filed an Application for
Review of Reasonableness of Transportation Rate for the Palo Duro system with
the Texas Railroad Commission proposing a maximum rate of $0.20 per million
British thermal units ("MMBtu") (plus taxes) plus the shipper's pro rata share
of compressor fuel and lost and unaccounted for volumes. The matter is still
pending before the Texas Railroad Commission and the ultimate outcome of this
filing is unknown at this time.
15
<PAGE>
On November 1, 1995, Transok filed a rate case with the FERC in Docket No.
PR96-2 for approval of maximum cost of service rates for Section 311
transportation on the Transok pipeline system exclusive of acquisitions after
1990 (the "Traditional System"). Transok requested approval of maximum rates of
$2.736 per MMBtu and $0.1751 per MMBtu for firm reservation and firm usage
charges, respectively, $0.265 per MMBtu for interruptible plus the shipper's pro
rata share of compressor fuel and 0.5% of the volumes transported as an
allowance for lost and unaccounted for natural gas. Transok also informed the
FERC in the case that it was ceasing to offer new firm transportation service
and was seeking approval of the above firm rates only for the purpose of
collecting the rates contained in firm transportation contracts still in effect
as of November 1, 1995. Transok is pursuing a settlement of the matter with the
FERC staff and the intervenors in the proceedings.
Transok's Greasy Creek Storage Facility, located on the Traditional
System, is currently approved by the FERC to charge market based rates for up to
4.0 Bcf of the facility's capacity. The rates are effective for an indefinite
time period, subject to Transok informing the FERC if it becomes affiliated with
a local distribution company outside of the State of Oklahoma. The FERC is
reviewing a Section 311 rate filing for market based rates for the Grand Bayou
Storage Facility located in Louisiana.
On May 1, 1996, Transok filed a rate case with the FERC in Docket No.
PR96-7 for approval of cost of service rates for Section 311 transportation on
the Anadarko System. Transok requested approval of maximum rates of $0.2541 per
MMBtu for interruptible plus the shipper's pro rata share of compressor fuel and
0.5% of the volumes transported as an allowance for lost and unaccounted for
natural gas. Transok is pursuing a settlement of the matter with the FERC staff
and the intervenors in the proceedings.
ITEM 2. PROPERTIES
A description of Tejas' properties is included under "ITEM 1. BUSINESS"
above and is incorporated herein by reference. Substantially all of Tejas' net
assets reside at the subsidiary level. The obligations under the Amended Transok
Credit Facility and the assumed $200 million of Medium Term Notes ("MTN's") are
secured by certain intercompany notes, by the capital stock of all of Transok's
subsidiaries and certain partnership interests held by Transok, and are
guaranteed by such subsidiaries. The obligations under the TAHC and TNGC
revolving credit agreements are secured by the capital stock, partnership
interests and various intercompany notes of all material subsidiaries and
partnerships of TAHC (excluding the capital stock of Acadian, but including the
capital stock and partnership interests of the material operating subsidiaries
and partnerships of Acadian) and are guaranteed by such subsidiaries and
partnerships. The notes payable related to Lewis and Pleasants Counties' bonds
are secured by bank letters of credit which in turn are secured by mortgages on
two natural gas processing plants located in West Virginia.
ITEM 3. LEGAL PROCEEDINGS
THE LONG TRUST LITIGATION
Tejas is a defendant or party in various lawsuits that have risen in the
ordinary course of Tejas' business. In particular, a subsidiary of Tejas is a
defendant in THE LONG TRUSTS V. TEJAS GAS CORP. ET. AL., 123rd Judicial District
Court, Panola County, Texas, filed March 1, 1989, in which plaintiffs assert
claims and allege damages for breach of contract and failure to take-or-pay for
natural gas pursuant to three natural gas purchase contracts. Plaintiffs allege
that, in addition to failing to take-or-pay for gas, Tejas breached (a) one of
the contracts by failing to take a minimum quantity of gas and to install and
maintain pipeline facilities sufficient to permit Tejas to meet its quantity
purchase obligations, and (b) all three contracts by
16
<PAGE>
failing to take gas in quantities sufficient to enable plaintiffs to produce
ratably with other producers in a common reservoir. In plaintiffs' Sixth Amended
Original Petition filed June 6, 1995, the plaintiffs are seeking take-or-pay
damages for the ten year period 1984-1994 in excess of $36 million, plus
pre-judgment interest, post-judgment interest, attorneys' fees and court costs
and other unspecified actual damages. In connection with their depositions in
this matter, certain expert witnesses retained by The Long Trusts have presented
damage models purporting to show approximately $60 million in take-or-pay
damages and $70 million for failure to take The Long Trusts' gas ratably.
Management disputes The Long Trusts' claims and believes that The Long Trusts'
damage models are seriously flawed. On January 6, 1993, the court entered an
interlocutory summary judgment order granting in part and denying in part
plaintiffs' motions for summary judgment. The court found, among other things,
as a matter of law that (a) Tejas breached the minimum take obligations under
one of the contracts, (b) Tejas is not entitled to any credits or offsets for
natural gas purchased by third parties, and (c) the "availability" of natural
gas for take-or-pay purposes is established by the delivery capacity testing
procedures in the contracts. Damages, if any, have not been determined. The
effect of this order on Tejas' case is unclear and Tejas has sought
clarification and rehearing, but intends nevertheless to defend its position
aggressively.
Because of the relationship between The Long Trusts contracts and certain
contracts between Tejas and Valero Transmission Company ("VTC"), and in order to
resolve existing and potential claims and disputes, Tejas, VTC and Valero
Transmission, L.P. ("VTLP") entered into an agreement, pursuant to which, among
other things, Tejas, VTC and VTLP would cooperate in the conduct of The Long
Trusts litigation, and VTC and VTLP would bear a substantial portion of the
costs of any appeal and of the amount of any nonappealable final judgment
rendered against Tejas. On April 15, 1994, the plaintiffs named VTC and VTLP
(collectively "Valero") as additional defendants to the lawsuit, alleging that
Valero intentionally and maliciously interfered with the plaintiffs' contracts
with Tejas. In its Sixth Amended Original Petition, plaintiffs are seeking
damages against Valero in an amount in excess of $36 million, and plaintiffs
added a conspiracy claim against Tejas alleging that Tejas conspired with Valero
in interfering with the contracts. Plaintiffs also have added a claim for
exemplary damages treble the amount of the actual damages, if any, found by the
court for the interference and conspiracy claims. Plaintiffs assert that Tejas
should be jointly liable with Valero for the damages plaintiffs have asserted
against Valero. Although Tejas has not obtained a formal opinion, based on
discussions with outside counsel and an internal examination of this lawsuit,
management believes that it has adequate defenses or recourse to third parties
relating to such lawsuit and does not believe this matter will have a material
adverse effect on Tejas' financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of 1996.
17
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The following table sets forth, for the periods indicated, the high and
low sales prices of the Common Stock, as reported on the NYSE Composite Tape.
High Low
- --------------------------------------------------------------
PERIOD:
1995
First Quarter $ 28 55/64 $ 24 35/64
Second Quarter 33 15/16 26 3/4
Third Quarter 35 59/64 30
Fourth Quarter 36 30 1/2
1996
First Quarter $ 35 59/64 $ 29 53/64
Second Quarter 39 32 43/64
Third Quarter 36 7/8 32 1/8
Fourth Quarter 47 5/8 35 3/4
- --------------------------------------------------------------
On March 17, 1997, the last reported sales price for the Common Stock, as
reported on the NYSE Composite Tape, was $44 7/8 per share. On March 17, 1997,
there were 914 stockholders of record of the Common Stock.
On July 19, 1995, Tejas' Board of Directors authorized a stock dividend of
one-tenth of one share of Common Stock for each share of Common Stock
outstanding payable to stockholders of record on July 27, 1995. On April 11,
1996, Tejas' Board of Directors authorized a three-for-two stock split effected
in the form of a stock dividend, effective May 13, 1996 for stockholders of
record as of April 26, 1996. Stock prices used in this Item 5. have been
adjusted to give retroactive effect to the 1995 stock dividend and the 1996
three-for-two stock split for periods prior to April, 1996. Such adjusted prices
may not reflect prices which may actually have occurred had such transactions
been in effect during the periods presented.
On July 22, 1996, Tejas sold 3,075,000 shares of its Common Stock in an
underwritten public offering. Net proceeds to Tejas from the sale of the Common
Stock, approximately $103 million, were used to reduce indebtedness under the
Transok Credit Facility (see Note 12 of "Notes to Consolidated Financial
Statements").
No cash dividends have been paid on the Common Stock by Tejas since its
shares were publicly distributed, and Tejas does not currently intend to pay
cash dividends on its Common Stock. Such policy will be reviewed by the Board of
Directors of Tejas from time to time in light of, among other things, Tejas'
earnings and financial position, capital requirements and limitations imposed by
its credit facilities. The terms of Tejas' outstanding 9.96% Cumulative
Preferred Stock (the "9.96% Preferred Stock") and 5 1/4% Convertible Preferred
Stock (the "5 1/4% Preferred Stock") restrict the distributions Tejas may make
if there is any arrearage in the dividends thereon. Tejas' credit facilities
restrict the distributions it may receive from its subsidiaries, as more fully
described in Note 5 of "Notes to Consolidated Financial Statements" and "ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS."
18
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
Set forth below is certain selected financial information for Tejas. Such
information is based upon, and should be read in conjunction with, the
Consolidated Financial Statements of Tejas and the notes thereto included
elsewhere in this report. The amounts shown below include the operations of TNGC
only for the period subsequent to its acquisition on September 15, 1993.
Transok's operations are included in the table below only for the period
subsequent to its acquisition by Tejas on June 6, 1996 (see "SIGNIFICANT
ACQUISITION IN 1996" included in Item 1. herein).
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues ..................................... $ 2,107,967 $ 1,043,621 $ 1,031,967 $ 790,178 $ 524,471
Gross profit(1) .............................. 251,130 166,533 158,138 111,980 78,773
Earnings from operations ..................... 107,252 75,721 71,323 51,292 33,930
Interest expense ............................. (44,106) (26,130) (24,670) (18,053) (18,534)
Earnings before income taxes ................. 68,888 51,790 48,005 35,980 17,794
Net earnings ................................. 43,472 32,937 30,546 22,069 11,903
Net earnings applicable to
common stock ............................... 35,079 24,544 22,153 17,016 11,903
- ----------------------------------------------------------------------------------------------------------------------------
OTHER DATA:
Capital expenditures & other(2) .............. 56,410 22,138 63,529 18,586 45,117
Acquisitions, net of cash acquired ........... 568,500 6,746 -- 242,563 --
Depreciation and amortization ................ 45,307 32,324 30,398 23,314 18,938
Cash flow from operations(3) ................. 104,346 67,972 64,735 48,474 33,751
Cash operating income(4) ..................... 160,730 107,887 102,778 76,649 54,049
Debt to total capitalization ................. 63% 46% 58% 57% 64%
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA (AT YEAR-END):
Working capital (deficit) .................... 28,680 40,610 23,040 (21,911) (13,009)
Property, plant and equipment, net ........... 1,309,238 614,734 621,528 588,352 347,684
Total assets(5) .............................. 1,904,548 940,570 843,422 804,175 494,213
Total debt(6) ................................ 849,755 307,075 378,875 339,465 224,965
Preferred membership units of a subsidiary (6) 50,682 55,000 -- -- --
Common stockholders' equity(7) ............... 326,460 187,485 162,474 140,050 127,970
Stockholders' equity ......................... 441,460 302,485 277,474 255,050 127,970
- ----------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA:
Earnings per common share(8) ................. $ 1.87 $ 1.41 $ 1.25 $ 0.96 $ 0.68
Average common shares
outstanding(8) ............................. 18,756 17,352 17,738 17,738 17,409
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Revenues less cost of sales.
(2) Excludes acquisitions but includes investment in unconsolidated entities.
(3) Net cash flow from operating activities before changes in working capital
and after provisions for preferred stock dividends.
(4) Earnings from operations plus depreciation and amortization plus equity in
earnings or losses of unconsolidated entities.
(5) Prior years have been restated to conform to the current presentation (see
Note 2 in "Notes to Consolidated Financial Statements").
(6) Includes current maturities.
(7) Total stockholders' equity less liquidation value of preferred stock.
(8) Earnings per common share and average common shares outstanding have been
adjusted to give retroactive effect to a three-for-two stock split
implemented in March 1993, a stock dividend of one-tenth of one share of
Common Stock on each share of Common Stock outstanding paid to
stockholders of record on July 27, 1995, and a three-for-two stock split
implemented in April 1996, as if the stock splits and the stock dividend
had occurred at the beginning of each period presented.
19
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is a discussion of Tejas' financial condition, results of
operations, capital resources and liquidity. This discussion and analysis should
be read in conjunction with the Consolidated Financial Statements of Tejas and
the notes thereto included in "Item 8. Financial Statements and Supplementary
Data" of this report.
On June 6, 1996, Tejas acquired pipeline assets and related facilities and
leased seven natural gas processing plants as a result of the acquisition of
Transok, Inc., as more fully discussed herein under "Capital Resources,
Liquidity, and Outlook." The results of operations for the assets acquired or
leased (hereafter referred to as the "Transok Operations") are included herein
for the period subsequent to June 6, 1996. Earnings per common share have been
adjusted to give retroactive effect to a stock dividend of one-tenth of one
share of Common Stock on each share of Common Stock outstanding paid to
stockholders of record in July 1995 and a three-for-two stock split implemented
in April 1996, as if the stock dividend and stock split had occurred at the
beginning of each period presented.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 VERSUS 1995
Tejas' net earnings increased to $43.5 million during 1996 from $32.9
million during 1995. Net earnings applicable to common stockholders increased
$10.6 million to $35.1 million during 1996 compared to $24.5 million in 1995.
Net earnings per common share were $1.87 during 1996, an increase of 33% from
$1.41 during 1995. As more fully discussed below, Tejas' growth in net earnings
for the year ended December 31, 1996 was the result of several factors, the most
significant of which was the inclusion of the Transok Operations. Net earnings
applicable to common stock and earnings per share results include a provision
for dividends on Tejas' 9.96% Preferred Stock and Tejas' 5 1/4% Preferred Stock.
REVENUES
Revenues increased by $1.1 billion to $2.1 billion during 1996. This
increase in revenues resulted primarily from increases in natural gas sales
prices and increases in systems sales throughput due to weather-related demands
and the inclusion of the Transok Operations. Revenues attributable to the
Transok Operations for the period subsequent to June 6, 1996, accounted for
approximately 38% of the total increase.
NATURAL GAS SYSTEMS
Sales, storage, gathering and transportation of natural gas through its
owned and/or operated natural gas pipeline systems and storage facilities is
Tejas' core business. Volumes related to these systems increased 32% to 4.1 Bcf
per day during 1996 from 3.1 Bcf per day in 1995, of which approximately .8 Bcf
per day was attributable to the Transok Operations and approximately .2 Bcf was
attributable to increased sales from Tejas' pre-existing operations. The
increase in systems volumes contributed to a corresponding increase in gross
profit (revenue less cost of sales) of $50 million to $206.3 million during 1996
when compared to gross profit of $156.3 million generated in 1995. The majority
of the $50 million increase in gross profit was a result of the Transok
Operations.
20
<PAGE>
NATURAL GAS PROCESSING/TREATING/OFF-SYSTEM MARKETING
Gross profit from Tejas' natural gas processing, treating and off-system
marketing was $44.8 million during 1996, compared to $10.3 million in 1995. The
$34.5 million increase in gross profit from these activities occurred mainly due
to the inclusion of the Transok Operations.
ENERGY MARKETING PARTNERSHIP - CORAL ENERGY, L.P.
In November 1995, Coral, an energy marketing joint venture between Tejas
and Shell, began operations. During 1996, Coral's total sales volumes of 4.6 Bcf
of natural gas per day contributed approximately $8.4 million to Tejas' pre-tax
earnings, which is included in Equity Earnings of Unconsolidated Entities,
compared to 1995's two month sales volumes of .6 Bcf of natural gas per day and
pre-tax earnings of $.7 million, respectively.
OPERATING EXPENSES/DEPRECIATION/GENERAL AND ADMINISTRATIVE EXPENSES
Operating expenses, depreciation, and general and administrative expenses
increased by $53.1 million during 1996. Of this $53.1 million increase, $48.4
million related to the Transok Operations. The remainder of the increase was
attributable to increases in ad valorem taxes, repair and maintenance expense
mainly related to the WCLSF and the employee incentive plan which rewards
certain of Tejas' employees with bonuses when the company achieves certain
annual financial growth targets.
OTHER INCOME (EXPENSE)
Interest Expense increased by $18 million during 1996. The increase
relates to borrowings used to finance the Transok acquisition. Expenses related
to minority interests increased $4.5 million as a result of $3.7 million in
distributions on preferred membership units of a subsidiary issued in December
1995 and $.8 million of minority interest expense recognized for Transok's
majority owned subsidiaries.
INCOME TAXES
Income tax expense increased by $6.6 million in 1996 over 1995 due
primarily to increased pre-tax earnings and state income tax related to the
Transok Operations.
YEAR ENDED DECEMBER 31, 1995 VERSUS 1994
Tejas' net earnings increased to $32.9 million for the year ended December
31, 1995, compared to $30.5 million for the year ended December 31, 1994, an 8%
increase. Net earnings applicable to common stock for the year ended December
31, 1995, were $24.5 million, up from $22.2 million in 1994. Earnings per common
share increased to $1.41 for the 1995 annual period as compared to $1.25 for the
1994 annual period, an increase of 13%. Net earnings applicable to common stock
and per share results for 1995 and 1994 are after provisions for $8.4 million in
dividends on Tejas' 9.96% Preferred Stock issued in February 1993 and Tejas' 5
1/4% Preferred Stock issued in November 1993.
NATURAL GAS SYSTEMS
Sales, storage and transportation of natural gas through its owned and/or
operated natural gas pipeline systems and gas storage facilities is Tejas' core
business. Volumes related to those activities accounted for 97% of total systems
throughput and 95%, or $158.3 million, of gross profit during 1995 as compared
to 97% of total throughput and 95%, or $150.1 million, of gross profit in 1994.
Improved sales
21
<PAGE>
volumes, a $4.5 million gain associated with a long-term gas sales contract, and
gas purchase and sales activity supported by Tejas' WCLSF were partially offset
by lower transportation volumes. (For further discussion of WCLSF, see "Storage
Facilities," included in Item 1. herein.) Transportation volumes were impacted
by the expiration of two low margin transportation contracts and a reduction in
volumes nominated under a third low margin contract. In addition, transportation
volumes were negatively impacted by warmer than normal weather in Tejas' market
area during the first half of 1995.
Revenues for Tejas' natural gas systems increased to $1,012.5 million in
1995 as compared to $999.3 million for 1994, an increase of $13.2 million. This
increase resulted from increased system sales volumes which were partially
offset by lower average sales prices and decreased transport volumes.
NATURAL GAS PROCESSING/OFF-SYSTEM MARKETING
Natural gas processing and off-system marketing activities contributed
approximately 2.4% and 0.3%, respectively, to total 1995 throughput and 4.8% and
0.1%, respectively, to gross profit. Gross profit from these two components of
Tejas' operations increased to $8.2 million in 1995 as compared to $8 million in
1994 as a result of lower fuel and shrinkage costs for natural gas processing.
Revenues for natural gas processing and off-system marketing decreased to
$31.1 million in 1995 as compared to $32.6 million in 1994, as a result of
decreased throughput and production by suppliers.
OPERATING EXPENSES/DEPRECIATION/GENERAL AND ADMINISTRATIVE EXPENSES
Operating expenses, depreciation, and general and administrative expenses
increased by $4 million during 1995 over 1994. Reduced operating expenses and
depreciation as a result of a small, non-strategic system in Louisiana disposed
of during the second quarter of 1995, was partially offset by increased ad
valorem taxes along with the depreciation on the fixed assets of a small
gathering and marketing company acquired in February 1995 and other capital
expenditures.
OTHER INCOME (EXPENSE)
Equity in earnings (loss) of unconsolidated entities decreased by $1.2
million in 1995 over 1994 reflecting Tejas' share of losses in Evangeline Gas
Pipeline Company, L.P. ("Evangeline") and decreased earnings of Gulf Coast
Natural Gas Company ("GCN"). The decreased earnings from GCN and Tejas'
increased share of the losses incurred by Evangeline was partially offset by the
two months of earnings of Coral. Earnings in GCN were lower primarily due to
lower margins on sales of natural gas volumes. In 1995, Tejas' interests in
Evangeline bore 100% of all losses compared to 45% in 1994.
A gain of approximately $1.6 million, net of certain reserves, was
recognized by Tejas during the second quarter of 1995, on the sale of a small,
non-strategic gathering system located offshore Louisiana.
Interest expense increased by $1.5 million in 1995 as compared to 1994
primarily due to a slightly higher effective rate of interest and an increase in
the average outstanding debt balance.
INCOME TAXES
Income tax expense increased $1.4 million in 1995 over 1994 due to
increased pre-tax earnings.
22
<PAGE>
CAPITAL RESOURCES, LIQUIDITY AND OUTLOOK
CASH FLOWS FROM OPERATING ACTIVITIES
For the year ended December 31, 1996, net cash provided by operating
activities totaled $95.1 million as compared to $61.3 million for the same
period in 1995. This $33.8 million increase in net cash provided by operations
is due primarily to a $36.3 million increase in net earnings adjusted for
depreciation and amortization and other non-cash items. Excluding net changes in
the components of working capital, Tejas' operating activities generated $112.7
million in cash during 1996 as compared to $76.4 million during 1995 mainly due
to the addition of the Transok Operations.
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities totaled $514.4 million. Capital
expenditures for 1996 totaled approximately $620.4 million which included $568.5
million for the Transok acquisition, $32.3 million for an expansion project in
Oklahoma and $7.8 million to increase the operational capacity of the WCLSF.
Cash flows used in acquisitions and capital expenditures were offset by the sale
of three non-strategic assets which generated cash proceeds of approximately
$110 million.
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash provided by financing activities totaled $434.7 million which was
comprised primarily of proceeds from the July 1996 public offering of common
stock and borrowings related to the Transok acquisition. Net proceeds from the
common stock offering and the sale of three non-strategic Transok assets were
primarily used to reduce the Transok acquisition debt (see "LIQUIDITY" below).
LIQUIDITY
Tejas' net cash from operating activities increased to $95.1 million at
December 31, 1996, a change of $33.8 million from $61.3 million reported at
December 31, 1995. This improvement was due mainly to increases in net earnings,
depreciation and amortization, and deferred income taxes. Working capital stood
at $28.7 million at year-end 1996, compared to $40.6 million at year-end 1995.
This $11.9 million decrease in working capital is principally due to increased
accrued liabilities associated with the Transok acquisition.
At December 31, 1996, Tejas' long-term debt with banks totaled $639.6
million, consisting of $443.8 million borrowed under its $480 million revolving
credit facilities established for its subsidiaries TAHC and TNGC, and
approximately $196 million borrowed under the $275 million Amended Transok
Credit Facility. In addition, Tejas has $200 million of long-term debt that was
retained by Transok as part of the Transok acquisition, and $8.2 million in
notes payable, net of $2 million in current maturities, related to Industrial
Development Refunding Revenue Bonds issued by Lewis and Pleasants Counties, West
Virginia.
To finance the cash requirements for the Transok acquisition, Tejas
borrowed (i) $178 million under its existing credit facilities and (ii) $387
million, net of a $38 million voluntary prepayment, under the $425 million
Transok Credit Facility. The outstanding balance under the Transok Credit
Facility was reduced to approximately $196 million by year-end 1996 primarily
due to the application of proceeds received by Tejas subsequent to the Transok
acquisition from the sale of common stock (see Note 12 of "Notes to Consolidated
Financial Statements") and the sale of certain non-strategic assets (see Note 3
of "Notes to Consolidated Financial Statements"). Prior to year-end, the Transok
Credit Facility was amended. The principal changes to the credit facility
included extending the maturity date from
23
<PAGE>
December 31, 1997 to December 31, 2004, lowering the interest rate margins over
LIBOR, subject to a minimum margin for a limited period of time, and setting the
commitment amount at $275 million. The Amended Transok Credit Facility bears
interest, at Tejas' option, based upon either prime rate or LIBOR. Depending
upon Transok's funded debt to capitalization ratio, the margins over LIBOR that
Transok must pay vary from a minimum of 0.5% to a maximum of 1.25%. Based upon
the December 31, 1996 outstanding balance of approximately $196 million, the
Amended Transok Credit Facility had available borrowings of approximately $79
million and bore interest at Tejas' option, of prime or LIBOR plus 1.0%. Under
the terms of the Amended Transok Credit Facility, after two years the revolver
will, unless extended at the option of the lenders, convert into a six year
reducing revolver. Unless extended, commitment reductions of approximately $8.6
million per quarter will begin March 31, 1999 with the final remaining
commitment reduction to occur on December 31, 2004. Nevertheless, based upon the
current terms of the Amended Transok Credit Facility and the outstanding
principal balance thereunder at December 31, 1996, no principal payments are
required until the year 2001.
Effective January 12, 1995, Tejas amended its credit facilities to roll-up
a majority of the existing bank debt of its three principal operating
subsidiaries into a single, $455 million, eight-year, revolving credit facility
at a newly formed subsidiary, TAHC. One of the subsidiaries, TNGC, retained a
$25 million working capital facility with terms and conditions substantially
similar to the rolled-up facility. The two facilities combined provide TAHC and
its subsidiaries with $480 million in borrowing capacity. Both the TAHC and TNGC
credit facilities (the "Credit Agreements") bear interest at Tejas' option,
based on either prime rate or LIBOR. The margins over LIBOR that TAHC and TNGC
must pay vary, depending on TAHC's funded debt to capitalization ratio, from a
minimum of 0.5% to a maximum of 1.25%. Based upon borrowings at December 31,
1996, of $443.8 million, and after considering restrictions to provide for a $10
million letter of credit and borrowings under its money market credit lines
(offset by cash available pursuant to the terms of such money market credit
lines), approximately $26.2 million of additional borrowings were available
under these amended facilities. Additionally, at year-end, based upon TAHC's
funded debt to capitalization ratio test, both the TAHC and TNGC credit
facilities bore interest at Tejas' option, of prime or LIBOR plus 0.75%. Under
the terms of the Credit Agreements, after two years the revolving credit
facilities will convert into six-year reducing revolving credit agreements
unless extended at the option of the lenders. During the fourth quarter of 1996
the lenders under the Credit Agreements agreed to extend by one year both the
maturity date and the period in which commitment reductions commence. As such,
commitment reductions aggregating $15 million per quarter are scheduled to begin
March 31, 1999 with the final remaining commitment reduction to occur on
December 31, 2004. Based upon the current terms of the Credit Agreements and the
outstanding principal balances thereunder at December 31, 1996, no principal
payments are required until the year 1999.
The obligations under the Amended Transok Credit Facility are secured by
certain intercompany notes, the capital stock of all of Transok's subsidiaries
and certain partnership interests held by Transok, and are guaranteed by such
subsidiaries. The obligations under the Credit Agreements are secured by the
capital stock, partnership interests and various intercompany notes of all
material subsidiaries and partnerships of TAHC (excluding the capital stock of
Acadian, but including the capital stock and partnership interests of the
material operating subsidiaries and partnerships of Acadian) and are guaranteed
by such subsidiaries and partnerships. The notes payable related to the Lewis
and Pleasants Counties' bonds are secured by bank letters of credit which in
turn are secured by mortgages on two natural gas processing plants located in
West Virginia. The notes are also subject to certain covenants and require that
Tejas' subsidiaries, TAHC and Gulf Energy Gathering & Processing Corporation,
maintain certain financial standards. All of Tejas' credit facilities are
subject to certain covenants, including the maintenance of certain financial
ratios, with which Tejas expects to be able to comply in the ordinary course of
business.
Although TAHC, TNGC and Transok have additional borrowing capacity
available under the Credit Agreements and the Amended Transok Credit Facility,
the amount of loans, advances and dividends that
24
<PAGE>
may be made to Tejas from TAHC, TNGC and Transok under the Credit Agreements and
the Amended Transok Credit Facility is subject to certain limitations. At
year-end 1996, the permitted amount of such payments was $204.1 million. Such
limitations as herein described are not expected to have any material effect on
the ability of Tejas to meet its cash obligations. Tejas' liquidity is
ultimately dependent on cash generated by operations, and Tejas believes its
earnings from operations will generate sufficient cash to fund expansion
projects, make required debt payments and meet anticipated dividend requirements
of the 9.96% Preferred Stock and 5 1/4% Preferred Stock in the foreseeable
future.
Tejas has uncommitted money market credit lines which allow Tejas to
borrow up to $50 million for periods of up to two months. Any such borrowings
are unsecured and may be extended for additional periods if agreed to by the
lenders. At December 31, 1996, Tejas had no borrowings outstanding under such
lines. Tejas has agreed to maintain funds including, but not limited to,
availability under the Credit Agreements and the Amended Transok Credit Facility
sufficient to repay borrowings under the money market credit lines.
On December 29, 1995, a subsidiary of Tejas, Tejas-Magnolia Energy, L.L.C.
("Tejas-Magnolia"), issued preferred equity interests to a third party in return
for a capital investment of $55 million. Tejas- Magnolia is required to make
preferred distributions to the third party which constitute a return on capital
(at an effective fixed after tax cost to Tejas of 4.2%) and return of capital
over an eight-year term. Annual distributions (including returns on and of
capital) of approximately $8.7 million are payable from 1996 through 2001 and
approximately $9.5 million in each of 2002 and 2003, and approximately $2.3
million in 2004. In connection with the issuance of the preferred equity
interests in Tejas-Magnolia, another subsidiary of Tejas has contributed a
portion of the proceeds from sales under certain long-term natural gas sales
contracts to Tejas-Magnolia in exchange for common equity interests in
Tejas-Magnolia. This ongoing contribution supports the preferred distribution
obligations of Tejas-Magnolia during the eight-year term.
As part of the Transok acquisition in June 1996 and the acquisition of
pipeline and related facilities from Exxon in September 1993, Tejas entered into
separate five-year operating leases with third parties for seven natural gas
processing plants ("Plant Lease") and a pipeline system ("System Lease"),
respectively. Lease payments under the two leases are adjusted quarterly based
upon the respective lessor's financing costs. However, Tejas has entered into
interest rate derivative agreements in a notional amount of $269.5 million to
fully hedge the effects of such adjustments on the required minimum lease
payments. The Plant Lease expires June 6, 2001 unless extended by mutual consent
of the lessor and lessee for up to two additional two-year periods. The System
Lease currently expires on September 14, 1998. Upon expiration of the leases,
Tejas, at its option, may either purchase the leased properties or pay a
termination fee of $106 million under the Plant Lease and $122.8 million under
the System Lease.
Tejas' WCLSF requires the maintenance of cushion gas in order to sustain
anticipated operational requirements. Such cushion gas requirements have been
satisfied by a combination of natural gas purchased by Tejas and third party
natural gas stored in the facility. At December 31, 1996, Tejas had purchased
approximately 10.4 Bcf of cushion gas. In late 1994, Tejas entered into an
agreement with a third party whereby the third party agreed to purchase up to 35
Bcf of natural gas at a cost not to exceed $65 million and to store such gas in
the WCLSF. Such agreement was scheduled to expire in September 2000, however, as
described below, the agreement was recently amended and extended. In order to
secure Tejas' ability to purchase the gas from the third party, the agreement
provides for the payment by Tejas of a reservation fee to the third party which
is adjusted quarterly based upon the third party's financing costs. On certain
option dates, Tejas may elect to purchase specified volumes of the third party's
natural gas based upon market prices. Should Tejas decline to purchase the
natural gas, the third party may instruct Tejas to sell such volumes on the
third party's behalf. In such case, it will be necessary for Tejas to obtain
cushion gas through other means in order to meet the anticipated operational
requirements of the WCLSF. At December 31, 1996, the third party had 18.5 Bcf of
natural gas in storage at the WCLSF, which such party
25
<PAGE>
purchased for $33.1 million. Based upon the volumes and rates in effect, Tejas
paid a reservation fee of approximately $1.1 million to the third party during
1996. Tejas owns, as a result of the Transok acquisition, the 26 Bcf capacity
Greasy Creek Storage Facility in Oklahoma. The Greasy Creek Storage Facility
requires the maintenance of cushion gas in order to sustain operational
requirements. Such gas is currently purchased from various suppliers.
Effective January 16, 1997, the third party agreement described above was
amended and extended. The principal modifications to the agreement included the
extension of the contract expiration date to December 31, 2002 and, at Tejas'
option, an increase in the maximum volume of natural gas that may be stored in
Tejas' facilities, including the Greasy Creek Storage Facility, to 70 Bcf.
RISK MANAGEMENT ACTIVITIES
In order to hedge the interest rate risks associated with Tejas' financing
activities (including operating lease obligations), Tejas frequently enters into
interest rate derivative agreements with financial institutions. While the
interest rate derivatives eliminate the risks associated with increases in the
floating interest rates of Tejas' obligations, the derivatives also eliminate
the opportunities associated with reductions in such floating interest rates.
Payments received or made by Tejas under such interest rate derivatives are
recorded as reductions to or increases in interest expense or rent expense, as
applicable, over the life of the interest rate derivative instrument. As of
December 31, 1996, Tejas had a total notional amount of $700 million of interest
rate derivatives for hedging purposes with a maximum weighted average fixed rate
of 6.2% excluding Tejas' average borrowing cost over LIBOR. The weighted average
life of the interest rate derivative hedging transactions is approximately 4.9
years.
Tejas uses derivative financial instruments (primarily futures, swaps and
other contracts) as an extension of its commercial natural gas purchases and
sales and to hedge price exposure, including location and pricing basis, of its
storage and exchange gas inventories, commitments, and certain anticipated
transactions. While the derivative financial instruments are intended to reduce
the risks associated with unfavorable changes in such prices, the derivative
financial instruments also reduce the opportunities associated with favorable
changes in market prices. Any increases or decreases in the market value of such
derivative transactions are deferred and accounted for as part of the
transactions or activities being hedged. Tejas' interest rate and other
derivative agreements are with established exchanges, energy companies, and
major financial institutions, and Tejas believes that its counterparties will be
able to satisfy their contractual obligations. Coral engages in similar
derivatives transactions for its own account. Transok has historically entered
into anticipatory hedges for gas storage and gas processing. The methodology
used could result in Transok's having open positions in anticipation of future
requirements. See Notes 5 and 7 of "Notes to Consolidated Financial Statements"
for additional information with respect to Tejas' derivative transactions.
GROWTH STRATEGY
In the normal course of business, Tejas regularly reviews opportunities
for the possible acquisition of additional natural gas pipelines and companies
that own natural gas pipelines. When potential acquisition opportunities are
deemed to be consistent with Tejas' growth strategy, bids or offers in amounts
and with terms acceptable to Tejas may be submitted. It is uncertain whether any
such bids or offers which may be submitted by Tejas would be acceptable to the
sellers of such acquisition targets. In the event of a future significant
acquisition, Tejas will likely require additional financing in connection
therewith.
OUTLOOK
Tejas' 1996 results of operations were favorable when compared to 1995.
Tejas believes there are more opportunities available for future growth and
continued expansion of operations. The Transok
26
<PAGE>
acquisition provided Tejas with the opportunity to increase the sale of natural
gas to certain new markets in Oklahoma and to increase the flow of natural gas,
within the state, West to East. Proposed rules and regulations in Oklahoma may
open significant additional industrial end-user and city gate markets to
competition. These proposals, if passed or adopted, would present Transok with
opportunities to compete for supply arrangements with customers not previously
available to Transok. At the same time, these proposals and competitive bidding
procedures that are being implemented by electric utilities expose Transok to
the risk that other pipeline and marketing companies will seek to compete for
Transok's existing supply and transportation arrangements with utilities, such
as Public Service Company of Oklahoma ("PSO"). Although Transok presently
transports substantially all of the natural gas requirements for PSO's gas-fired
power stations in Oklahoma, competitors will begin transportation of natural gas
for PSO in 1998. While no prediction can be made as to the continuation of the
favorable impact of Coral on Tejas' prospects, Tejas believes that over the next
several years Coral should be in a position to take advantage of the unutilized
capacity in Tejas' major long-distance transmission lines. In addition, the
large number of interconnects between Tejas' pipelines and other intrastate and
interstate pipelines have the potential to become important supply points for
Coral. The capital invested by Tejas at the WCLSF since September 1993 has
increased the availability of natural gas and the operational flexibility of the
WCLSF. This flexibility permits Tejas to sell approximately 25 Bcf of additional
natural gas volumes annually out of this storage facility and to provide
additional daily storage injection and withdrawal capabilities to accommodate
the seasonal needs of customers. Further development of the WCLSF is possible
and Tejas will continue to monitor and review the economic benefit of such
development. There can be no assurance that market conditions, including the
average cost of natural gas held in storage, will always be conducive to
maintaining the current level of profitability. Tejas has historically shown the
ability to adapt to changing operational requirements and capitalize on new
market opportunities. Although the foregoing factors present Tejas with
opportunities to grow and expand, there can be no assurance that such factors
will result in future growth and expansion of Tejas' operations, revenues or
earnings.
In the last quarter of 1996, Tejas completed sales of three non-strategic
assets: a transmission and gathering system located in North Louisiana, a
processing plant and its related gathering system in North Central Oklahoma and
an interest in a partnership which owned and operated oil and gas wells in West
Oklahoma. The majority of the proceeds from these transactions were used to
reduce the commitment level and repay indebtedness under the Transok Credit
Facility. Tejas has refinanced the borrowings under the Transok Credit Facility
(which was to mature on December 31, 1997) with interest rates and payment terms
favorable to Tejas (when compared to the terms of the original Transok Credit
Facility). Because of the many opportunities Tejas believes are available for
future growth and continued expansion of operations, Tejas anticipates using
substantially all of its available cash in 1997 and 1998 for capital
expenditures and acquisitions. To enhance throughput on Transok's pipeline
system, Tejas began construction of a 24-inch pipeline project, which includes
eight additional compressors. Capital expenditures for 1997, including the
Transok expansion project, are anticipated to be approximately $180 million, of
which Tejas has committed contractual obligations of approximately $50 million.
Actual capital expenditures may vary from budgeted amounts due to many factors.
The statements included in this Report on Form 10-K regarding future
financial performance and results and the other statements that are not
historical facts are forward-looking statements. The words "expect," "project,"
"estimate," "predict," "anticipate," "believes" and similar expressions are also
intended to identify forward-looking statements. Such statements and Tejas'
results are subject to numerous risks, uncertainties and assumptions, including
but not limited to, changes in general economic conditions in the United States,
changes in laws and regulations to which Tejas is subject, the cost and effects
of legal and administrative claims and proceedings against Tejas or its
subsidiaries or which may be brought against Tejas or its subsidiaries,
conditions in the capital markets utilized by Tejas to access capital to finance
operations, Tejas' ability to develop expanded markets and product offerings as
well as maintain existing markets, energy prices, competition from other
pipelines and alternate fuels, the general level of natural gas
27
<PAGE>
and petroleum product demand and weather conditions, among other things, and
other risks and uncertainties described in this Report on Form 10-K and in
Tejas' other filings with the Securities and Exchange Commission. Further,
natural gas prices, which directly impact transportation and gathering and
processing throughput and operating profits, may fluctuate in unpredictable
ways. Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those indicated.
Tejas management knows of no trends or uncertainties that will impair
Tejas' ability to comply with its debt covenants or pay the dividends on the
9.96% Preferred Stock and 5 1/4% Preferred Stock.
28
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
TEJAS GAS CORPORATION
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Page
----
Independent Auditors' Report............................................. 30
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets, December 31, 1996 and 1995............... 31
Consolidated Statements of Earnings for the Years Ended
December 31, 1996, 1995 and 1994.................................... 32
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1996, 1995 and 1994........................ 33
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1996, 1995 and 1994........................ 34
Notes to Consolidated Financial Statements............................ 35
FINANCIAL STATEMENT SCHEDULE
I - Condensed Financial Information of Registrant..................... 67
All other schedules are omitted because they are not required or the required
information is shown in the consolidated financial statements or notes thereto.
29
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
Tejas Gas Corporation:
We have audited the accompanying consolidated balance sheets of Tejas Gas
Corporation and its subsidiaries ("Tejas") as of December 31, 1996 and 1995, and
the related consolidated statements of earnings, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1996. Our
audits also included the financial statement schedule listed in the Index at
Item 8. These financial statements and the financial statement schedule are the
responsibility of Tejas' management. Our responsibility is to express an opinion
on the financial statements and the financial statement schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Tejas as of December 31, 1996
and 1995, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles. Also, in our opinion, the financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE LLP
Houston, Texas
February 12, 1997
30
<PAGE>
TEJAS GAS CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 1996 1995
- --------------------------------------------------------------------------------
(IN THOUSANDS)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................... $ 45,247 $ 29,935
Accounts receivable ................................. 384,652 181,704
Exchange gas receivable ............................. 10,792 10,004
Storage gas inventory ............................... 45,389 38,733
Prepaids and other current assets ................... 29,154 9,124
Deferred income tax assets........................... 2,097 2,024
- --------------------------------------------------------------------------------
Total current assets .............................. 517,331 271,524
- --------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT - AT COST ................ 1,526,499 793,376
- --------------------------------------------------------------------------------
Less accumulated depreciation ....................... 217,261 178,642
- --------------------------------------------------------------------------------
Property, plant and equipment, net ................ 1,309,238 614,734
- --------------------------------------------------------------------------------
GOODWILL, NET .......................................... 9,811 10,278
- --------------------------------------------------------------------------------
INVESTMENTS IN UNCONSOLIDATED ENTITIES ................. 48,548 31,927
- --------------------------------------------------------------------------------
OTHER ASSETS ........................................... 19,620 12,107
- --------------------------------------------------------------------------------
TOTAL ............................................. $1,904,548 $940,570
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Gas purchases payable ............................... $ 363,748 $178,986
Exchange gas payable ................................ 9,237 9,825
Accounts payable .................................... 26,124 9,508
Accrued liabilities ................................. 82,160 25,397
Income taxes payable ................................ -- 1,881
Current maturities of long-term obligations ......... 7,382 5,317
- --------------------------------------------------------------------------------
Total current liabilities ......................... 488,651 230,914
- --------------------------------------------------------------------------------
LONG-TERM DEBT ......................................... 847,755 306,075
- --------------------------------------------------------------------------------
DEFERRED INCOME TAXES .................................. 72,072 50,413
- --------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES .......................... -- --
- --------------------------------------------------------------------------------
MINORITY INTERESTS ..................................... 54,610 50,683
- --------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Preferred Stock, $1 par value; 6,000,000 shares authorized;
200,000 shares of 9.96% Cumulative Preferred
Stock issued and outstanding in 1996 and
1995; $250 liquidation preference per share .... 200 200
260,000 shares of 5 1/4% Convertible Preferred
Stock issued and outstanding in 1996 and
1995; $250 liquidation preference per share .... 260 260
Common Stock, $.25 par value; 30,000,000 shares
authorized; 20,551,051 and 11,603,263 shares
issued and outstanding in 1996 and 1995,
respectively ...................................... 5,138 2,901
Capital surplus ..................................... 294,599 191,490
Retained earnings ................................... 141,263 107,634
- --------------------------------------------------------------------------------
Total stockholders' equity ........................ 441,460 302,485
- --------------------------------------------------------------------------------
TOTAL ............................................. $1,904,548 $940,570
================================================================================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
31
<PAGE>
TEJAS GAS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 1994
- -----------------------------------------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C>
REVENUES .............................. $ 2,107,967 $ 1,043,621 $ 1,031,967
- -----------------------------------------------------------------------------------
COSTS AND EXPENSES:
Cost of sales ..................... 1,856,837 877,088 873,829
Operating expenses ................ 60,747 38,081 36,153
Depreciation and amortization ..... 45,307 32,324 30,398
General and administrative ........ 37,824 20,407 20,264
- -----------------------------------------------------------------------------------
Total .......................... 2,000,715 967,900 960,644
- -----------------------------------------------------------------------------------
EARNINGS FROM OPERATIONS .............. 107,252 75,721 71,323
- -----------------------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Equity in earnings (loss) of
unconsolidated
entities ....................... 8,171 (158) 1,057
Interest income ................... 1,322 448 247
Interest expense .................. (44,106) (26,130) (24,670)
Minority interest ................. (4,477) (37) --
Other, net ........................ 726 1,946 48
- -----------------------------------------------------------------------------------
Total .......................... (38,364) (23,931) (23,318)
- -----------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES .......... 68,888 51,790 48,005
- -----------------------------------------------------------------------------------
INCOME TAXES:
Current ........................... 3,830 9,656 9,354
Deferred .......................... 21,586 9,197 8,105
- -----------------------------------------------------------------------------------
Total .......................... 25,416 18,853 17,459
- -----------------------------------------------------------------------------------
NET EARNINGS .......................... 43,472 32,937 30,546
- -----------------------------------------------------------------------------------
PREFERRED STOCK DIVIDEND REQUIREMENTS . 8,393 8,393 8,393
- -----------------------------------------------------------------------------------
NET EARNINGS APPLICABLE TO COMMON
STOCK ................................. $ 35,079 $ 24,544 $ 22,153
- -----------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING ................ 18,756 17,352 17,738
===================================================================================
EARNINGS PER COMMON SHARE ............. $ 1.87 $ 1.41 $ 1.25
===================================================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
32
<PAGE>
TEJAS GAS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT SHARES)
<S> <C> <C> <C> <C> <C> <C>
PREFERRED STOCK:
PAR VALUE, $1 PER SHARE:
AUTHORIZED, 6,000,000 SHARES:
9.96% Cumulative
Beginning balance .................... 200,000 $ 200 200,000 $ 200 200,000 $ 200
- ------------------------------------------------------------------------------------------------------------------------------------
ENDING BALANCE ....................... 200,000 $ 200 200,000 $ 200 200,000 $ 200
====================================================================================================================================
5 1/4% Convertible
Beginning balance .................... 260,000 $ 260 260,000 $ 260 260,000 $ 260
- ------------------------------------------------------------------------------------------------------------------------------------
ENDING BALANCE ....................... 260,000 $ 260 260,000 $ 260 260,000 $ 260
====================================================================================================================================
COMMON STOCK:
PAR VALUE, $0.25 PER SHARE:
AUTHORIZED, 30,000,000 SHARES:
Beginning balance ...................... 11,603,263 $ 2,901 10,508,729 $ 2,627 10,350,544 $ 2,588
10% Stock dividend ..................... -- -- 1,053,330 263 -- --
Three-for-two stock split .............. 5,801,769 1,450 -- -- -- --
Purchase of fractional shares .......... (269) -- (422) -- -- --
Issuance of additional stock ........... 3,075,000 770 -- -- -- --
Exercise of stock options, net ......... 69,256 17 27,970 7 158,185 39
Other .................................. 2,032 -- 13,656 4 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
ENDING BALANCE ....................... 20,551,051 $ 5,138 11,603,263 $ 2,901 10,508,729 $ 2,627
====================================================================================================================================
CAPITAL SURPLUS:
Beginning balance ...................... -- $ 191,490 -- $ 138,499 -- $ 138,267
10% Stock dividend ..................... -- -- -- 52,535 -- --
Purchase of fractional shares .......... -- (9) -- (19) -- --
Exercise of stock options, net ......... -- 1,118 -- (11) -- 253
Common shares issued ................... -- 102,000 -- -- -- --
Other .................................. -- -- -- 486 -- (21)
- ------------------------------------------------------------------------------------------------------------------------------------
ENDING BALANCE ....................... -- $ 294,599 -- $ 191,490 -- $ 138,499
====================================================================================================================================
RETAINED EARNINGS:
Beginning balance ...................... -- $ 107,634 -- $ 135,888 -- $ 113,735
10% Stock dividend ..................... -- -- -- (52,798) -- --
Three-for-two stock split .............. -- (1,450) -- -- -- --
Net earnings ........................... -- 43,472 -- 32,937 -- 30,546
Preferred dividend requirements ........ -- (8,393) -- (8,393) -- (8,393)
- ------------------------------------------------------------------------------------------------------------------------------------
ENDING BALANCE ....................... -- $ 141,263 -- $ 107,634 -- $ 135,888
====================================================================================================================================
TOTAL ...................................... -- $ 441,460 -- $ 302,485 -- $ 277,474
====================================================================================================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
33
<PAGE>
TEJAS GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 1994
- ---------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings ....................................... $ 43,472 $ 32,937 $ 30,546
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization ............... 45,307 32,324 30,398
Amortization of deferred loan costs ......... 2,466 928 1,360
Deferred income taxes ....................... 21,586 9,197 8,105
Equity in (earnings) loss of unconsolidated
entities ............................... (8,171) 158 (1,057)
Distributions from unconsolidated entities .. 8,223 1,467 2,673
Other, net .................................. (144) (646) 1,103
- ---------------------------------------------------------------------------------------------
112,739 76,365 73,128
Net increase in working capital, net of
effects from acquisitions ....................... (17,666) (15,028) (44,656)
- ---------------------------------------------------------------------------------------------
Net cash provided by operating activities .......... 95,073 61,337 28,472
- ---------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................... (51,882) (19,101) (63,225)
Other acquisitions, net of cash acquired ........... (568,500) (6,746) --
Investments in unconsolidated entities ............. (4,528) (3,037) (304)
Proceeds from sale of assets and investments ....... 110,495 4,260 --
Other, net ......................................... (17) (596) (605)
- ---------------------------------------------------------------------------------------------
Net cash used in investing activities .............. (514,432) (25,220) (64,134)
- ---------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under line-of-credit
agreements ...................................... (11,000) (19,700) 26,700
Exercise of stock options, net ..................... 1,135 106 656
Proceeds from issuance of long-term debt ........... 665,900 22,000 74,900
Retirement of long-term debt ....................... (312,220) (74,100) (62,190)
Debt amendment costs incurred ...................... -- (1,493) --
Issuance of common stock, net of expenses .......... 102,770 -- --
Preferred stock dividends .......................... (8,393) (8,393) (8,326)
Proceeds from sale of preferred membership units
of a subsidiary ................................. -- 55,000 --
Net (distribution)/contribution to minority interest
holders ......................................... (3,513) -- --
Other, net ......................................... (8) (20) (21)
- ---------------------------------------------------------------------------------------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES 434,671 (26,600) 31,719
- ---------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ..................................... 15,312 9,517 (3,943)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ....... 29,935 20,418 24,361
- ---------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............. $ 45,247 $ 29,935 $ 20,418
=============================================================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
34
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. ORGANIZATION
Tejas Gas Corporation ("Tejas") was organized in 1988 by Hamilton Oil
Corporation ("HOC") for the purpose of holding the capital stock of Tejas Gas
Corp. ("Tejas Gas"). Tejas Gas was incorporated in 1967 and had been an indirect
wholly owned subsidiary of HOC since 1979. On December 27, 1988, Tejas' stock
was distributed to the stockholders of HOC in the form of a spin-off and Tejas
became an independent, publicly traded company. Unless the context indicates
otherwise, the term "Tejas" includes Tejas Gas Corporation and its subsidiaries.
Tejas is a major intrastate natural gas pipeline company engaged in the
business of purchasing, gathering, processing, treating, storing, transporting
and marketing natural gas. Tejas' operations are situated primarily in the major
gas producing areas in Oklahoma, South Texas, East Texas and the Texas and
Louisiana Gulf Coast regions, with additional facilities located in West
Virginia. Tejas is a holding company that conducts operations through four
principal second tier subsidiaries, Tejas Gas, Acadian Gas Corporation
("Acadian"), Tejas Natural Gas Company ("TNGC") and, since June 1996, Transok,
Inc. ("Transok"). Tejas-Acadian Holding Company ("TAHC"), a wholly owned first
tier subsidiary of Tejas, was organized in December 1994 and owns the capital
stock of each of Tejas Gas, Acadian and TNGC. Tejas Transok Holding Company
("TTHC"), a wholly owned first tier subsidiary of Tejas, was organized in May
1996 and owns the capital stock of Transok (see "ACQUISITION" as described in
Note 3). Tejas Coral Holding Company ("TCHC"), formerly Tejas Alliance Holding
Company, a wholly owned first tier subsidiary of Tejas, was organized in July
1995 to hold an interest in Coral Energy, L.P. ("Coral", formerly Coral Energy
Resources, L.P.) an energy marketing joint venture with Shell Oil Company
("Shell").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - The accompanying consolidated financial statements
include the accounts of Tejas and its majority and wholly owned subsidiaries.
Investments in companies in which Tejas' ownership interest ranges from 20 to 50
percent and Tejas exercises influence over operating and financial policies are
accounted for using the equity method. Other investments are accounted for using
the cost method. All significant intercompany balances and transactions have
been eliminated in consolidation. In connection with the preparation of these
financial statements, management was required to make estimates and assumptions
that effect the reported amount of assets, liabilities, revenues, expenses and
disclosure of contingent liabilities. Actual results could differ from such
estimates.
Certain amounts in the consolidated financial statements for periods prior
to 1996 have been reclassified to conform to the current presentation.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents consist of all cash
balances and highly liquid investments which have an original maturity at
purchase of three months or less.
EXCHANGE GAS - Exchange gas volumes receivable are valued at the lower of
cost or market at the end of each period. Exchange gas volumes payable are
recorded at market value at the end of each period.
STORAGE GAS INVENTORY - Storage gas inventory is valued at the lower of
cost or market at the end of each period. Natural gas is removed from inventory
at weighted average cost.
35
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DERIVATIVES - Realized gains and losses on hedges of existing assets or
liabilities are deferred and are ultimately recognized in income as part of the
carrying amounts of the related assets or liabilities. Gains and losses related
to qualifying hedges of firm commitments or anticipated transactions also are
deferred and are recognized in income or as adjustments of carrying amounts when
the hedged transaction occurs.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment is stated at
cost. Additions, improvements and major renewals are capitalized. Maintenance,
repairs and minor renewals are expensed as incurred.
The cost of property sold or retired is credited to the asset account, and
the related depreciation is charged to the accumulated depreciation account.
Profit or loss resulting from the sale or retirement is included in earnings.
Depreciation of property, plant and equipment is provided on a
straight-line basis over the estimated useful lives of the assets as follows:
----------------------------------------------------------
Buildings .............................. 25 years
Natural gas systems, storage facilities,
processing plants and treating plants 10 - 46 years
Other equipment ........................ 4 - 15 years
----------------------------------------------------------
Effective July 1, 1996, Tejas reevaluated the estimated useful lives of
its operating assets to better reflect the economic lives for which these assets
will remain in service. The effect of the change in lives, the majority of which
occurred as a result of an increase in the lives for natural gas transmission
lines, resulted in an increase in net income available to common stockholders of
approximately $1.1 million or $.06 per share for the year ended December 31,
1996.
On January 1, 1996, Tejas implemented Statement of Financial Accounting
Standards ("SFAS") No. 121 ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. SFAS No. 121 requires that
long-lived assets and certain identifiable intangibles to be held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Certain
long-lived assets and certain identifiable intangibles to be disposed of must be
reported at the lower of carrying amount or fair value less cost to sell. The
implementation of SFAS No. 121 had no impact on Tejas' financial statements.
CAPITALIZED INTEREST - Interest on funds used to finance construction of
assets is capitalized and amortized over the productive lives of the related
assets. All other interest is charged to expense as incurred. During 1996 and
1994 Tejas capitalized interest of $1.1 million and $.4 million respectively. No
interest was capitalized in 1995.
GOODWILL - The excess of the acquisition costs over the fair value of
purchased assets, arising from the acquisition of Tejas Gas by HOC in 1978, is
recorded as goodwill and is being amortized $467,000 annually on a straight-line
basis over 40 years. At December 31, 1996 and 1995, the accumulated amortization
of goodwill was $8.9 million and $8.4 million, respectively. Tejas periodically
reviews the carrying value of goodwill in relation to the current and expected
operating results of Tejas Gas in order to assess whether there has been a
permanent impairment of goodwill.
36
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MINORITY INTERESTS - Minority interests consist of preferred membership
units of a subsidiary of $45.3 million (see Note 10) and minority interests of
$9.3 million in Tejas' majority owned subsidiaries.
REVENUES - Customers are invoiced and the related revenue is recorded as
natural gas deliveries are made.
INCOME TAXES - Tejas accounts for income taxes in accordance with SFAS No.
109. Deferred income taxes are recorded for the effects of temporary differences
between financial and taxable income.
EARNINGS PER COMMON SHARE - Earnings per common share are based upon the
weighted average number of shares of Common Stock and common stock equivalents,
if dilutive, outstanding during the year. Common stock equivalents consist of
shares issued assuming all stock options are exercised using the treasury stock
method. The difference between earnings per common share on a primary and a
fully diluted basis is not significant.
Earnings per common and common equivalent share amounts and average shares
entering into such computation for 1996 and prior periods have been restated to
reflect the three-for-two stock split of Tejas' common stock effected in the
form of a stock dividend authorized in March 1993, the stock dividend of
one-tenth of one share of Common Stock for each share of Common Stock
outstanding authorized in July 1995 and the three-for-two stock split of common
stock effected in the form of a stock dividend authorized in April 1996.
STOCK BASED COMPENSATION - In October 1995, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 123 ACCOUNTING FOR STOCK BASED
COMPENSATION. SFAS No. 123 defines a fair value method of accounting for
employee stock options and similar equity instruments. This statement is
effective for fiscal years beginning after December 15, 1995. As allowed by SFAS
No. 123, Tejas will continue to measure compensation cost for its plans using
the intrinsic value method of accounting prescribed by Accounting Principles
Board Opinion No. 25 ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES with a pro forma
disclosure of any difference between compensation cost determined by using the
intrinsic value method and the related cost measured by using the fair value
method (see Note 12).
3. ACQUISITION
TRANSOK, INC.
On June 6, 1996, Tejas, through its recently formed wholly owned
subsidiary, TTHC, acquired Transok (the "Transok acquisition") from Central and
South West Corporation ("CSW"). Immediately prior to the acquisition, CSW sold
seven natural gas processing plants (the "Transok Plants") to an unrelated third
party lessor (the "Lessor"), which in turn leased these facilities (the "Lease")
to a subsidiary of Tejas (the "Lessee").
Transok operates intrastate natural gas pipeline systems in Texas,
Oklahoma, and Louisiana and is one of the largest processors of natural gas in
Oklahoma. At the time of the acquisition, Transok's operations included: (i)
approximately 7,000 miles of gathering and transmission pipelines in Texas,
Oklahoma and Louisiana with 2.3 billion cubic feet ("Bcf") of natural gas per
day of pipeline capacity; (ii) eight natural gas processing plants, of which
seven are being leased to a subsidiary of Tejas, with total
37
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
processing capacity of 564 million cubic feet ("MMcf") per day of natural gas;
(iii) a 26 Bcf capacity natural gas reservoir storage facility with 300 MMcf per
day of withdrawal and 200 MMcf per day of injection capacity; and (iv) 1.4
trillion cubic feet of connected third-party natural gas reserves. As described
below, Tejas subsequently sold approximately 2,100 miles of gathering and
transmission lines and a processing plant acquired in the Transok acquisition.
The total purchase price received by CSW at closing was $690 million in
cash, of which $565 million was paid by Tejas and $125 million was paid by the
Lessor to acquire the Transok Plants. In addition, as part of the transaction,
Transok retained $200 million of long-term debt. To finance the cash
requirements for the Transok acquisition, Tejas borrowed (i) $178 million under
its existing credit facilities and (ii) $387 million, net of a $38 million
voluntary prepayment, under a new $425 million credit agreement (the "Transok
Credit Facility") (see Note 5).
In connection with the acquisition of Transok, CSW sold seven natural gas
processing plants to the Lessor for $125 million. Tejas, through a wholly owned
subsidiary, leased the Transok Plants from the Lessor for a five-year term with
lease payments adjusted quarterly based upon the Lessor's financing costs. Tejas
has entered into interest rate derivative agreements in a notional amount of
$125 million to hedge the effects of such adjustments on the required minimum
lease payments. In addition, under the Lease, the Lessee has the option to
extend the term of the Lease for up to two additional two year periods, subject
to approval by the Lessor, and to purchase all of the Transok Plants at any time
for $125 million. If by the end of the Lease term, the Lessee has not exercised
its option to purchase the Transok Plants, it is obligated to pay the Lessor a
termination fee of approximately $106 million. However, the Lease contains a
provision that reduces the termination fee to the extent the proceeds from the
Lessor's subsequent sale of the Transok Plants exceed $19 million. The Lease
also provides the Lessee the option to purchase, at any time during the Lease
term, one or more of the Transok Plants for an aggregate amount not exceeding
$31 million, with corresponding reductions to the $106 million termination fee
and the $19 million threshold amount.
The acquisition of Transok was accounted for as a purchase and the
purchase price was allocated to the acquired assets and liabilities based upon
the estimated fair value of such assets and liabilities as of June 6, 1996. The
Lease is for a five-year term and is accounted for as an operating lease. The
allocation of the purchase price is preliminary, as valuation and other studies
have not been finalized. It is not expected that the final allocation of the
purchase price will produce materially different results from those presented
herein. The results of operations for the assets acquired or leased as a result
of the Transok acquisition are included in the accompanying financial statements
for the period subsequent to June 6, 1996.
During the last quarter of 1996, Tejas completed the sales of three
non-strategic assets: a transmission and gathering system located in Northern
Louisiana, a processing plant and its related gathering system in North Central
Oklahoma and an interest in a partnership which owned and operated oil and
natural gas wells in Western Oklahoma. These transactions, none of which
resulted in a gain or loss, generated cash proceeds of approximately $110
million, most of which was used to reduce the commitment level and repay
indebtedness under the Transok Credit Facility.
The unaudited pro forma condensed statements of earnings which follow
represent consolidated results of operations as if the Transok acquisition had
been consummated at the beginning of each year presented. Pro forma adjustments
have been made to the historical amounts for the entities and operations
38
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
acquired for operating expenses, depreciation and amortization, general and
administrative expenses, interest expense and related tax effects. Such amounts
do not include the pro forma effects of the issuance of common stock (see Note
12), which were integral to Tejas' financial condition prior to and after the
Transok acquisition.
Years Ended December 31, 1996 1995
- --------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS - UNAUDITED)
Revenues ................................. $2,480,441 $1,759,339
Net earnings ............................. $ 48,387 $ 37,725
Earnings per common share ................ $ 1.95 $ 1.44
- --------------------------------------------------------------------------------
The pro forma results do not purport to be indicative of the results of
operations that would actually have been obtained if the acquisition had
occurred at the beginning of each year presented.
4. PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment is as follows:
December 31, 1996 1995
- --------------------------------------------------------------------------------
(IN THOUSANDS)
Buildings and land ............................... $ 10,069 $ 4,505
Natural gas systems, storage facilities,
processing plants and treating plants ........ 1,477,677 776,719
Other equipment .................................. 38,753 12,152
- --------------------------------------------------------------------------------
Total ............................................ $1,526,499 $793,376
================================================================================
5. LONG-TERM DEBT
Long-term debt consisted of the following:
December 31, 1996 1995
- --------------------------------------------------------------------------------
(IN THOUSANDS)
Revolving credit agreements .................. $639,580 $284,900
Medium term notes ............................ 200,000 --
Industrial development bonds ................. 10,175 11,175
Money market lines of credit ................. -- 11,000
- --------------------------------------------------------------------------------
849,755 307,075
Less current installments .................... 2,000 1,000
- --------------------------------------------------------------------------------
Total long-term debt ..................... $847,755 $306,075
================================================================================
39
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
TAHC AND TNGC FACILITIES
Effective January 12, 1995, Tejas amended its credit facilities to roll-up
a majority of the existing bank debt of its three principal operating
subsidiaries into a single, $455 million, eight-year, revolving credit facility
at a newly formed subsidiary, TAHC. One of the subsidiaries, TNGC, retained a
$25 million working capital facility with terms and conditions substantially
similar to the rolled-up facility. The two facilities combined (the "Credit
Agreements") provide TAHC and its subsidiaries with $480 million in borrowing
capacity. The Credit Agreements bear interest at Tejas' option, based on either
the prime rate or LIBOR. The margins over LIBOR that TAHC and TNGC must pay
vary, depending on TAHC's funded debt to capitalization ratio, from a minimum of
0.5% to a maximum of 1.25%. Based on borrowings at December 31, 1996, of $443.8
million, and after considering restrictions to provide for a $10 million letter
of credit and borrowings under its money market credit lines (offset by cash
available pursuant to the terms of such money market credit lines),
approximately $26.2 million of additional borrowings were available under these
amended facilities. Additionally, at year-end, based upon TAHC's funded debt to
capitalization ratio, the Credit Agreements bore interest, at Tejas' option, of
prime or LIBOR plus 0.75%. Under the terms of the Credit Agreements, after two
years, the revolving credit facilities will convert into six-year reducing
revolvers unless extended at the option of the lenders. During the fourth
quarter of 1996 the lenders under the Credit Agreements agreed to extend by one
year both the maturity date and the period in which commitment reductions
commence. As such, commitment reductions of $15 million per quarter are
scheduled to begin March 31, 1999 with the final remaining commitment reduction
to occur on December 31, 2004. Based upon the current terms of the Credit
Agreements and the outstanding principal balances thereunder at December 31,
1996, no principal payments are required until the year 1999.
TRANSOK FACILITY
In connection with the Transok acquisition, Tejas initially borrowed $387
million, net of a voluntary prepayment, under the Transok Credit Facility and
assumed $200 million of Transok medium term notes ("MTN's"). Additional funds of
$178 million were borrowed under the TAHC Credit Facility (see "TAHC and TNGC
Facilities" above). The outstanding balance under the Transok Credit Facility
was reduced to approximately $196 million by year-end 1996 primarily due to the
application of proceeds received by Tejas subsequent to the Transok acquisition
from the sale of common stock and the sale of certain non-strategic assets.
During the fourth quarter of 1996, the Transok Credit Facility was amended (the
"Amended Transok Credit Facility"). The principal changes included extending the
maturity date from December 31, 1997 to December 31, 2004, lowering the interest
rate margins over LIBOR, subject to a minimum margin for a limited period of
time, and setting the commitment amount at $275 million. The Amended Transok
Credit Facility bears interest, at Tejas' option, based upon either the prime
rate or LIBOR. Depending upon Transok's funded debt to capitalization ratio, the
margins over LIBOR that Transok must pay vary from a minimum of 0.5% to a
maximum of 1.25%. Based upon the December 31, 1996 outstanding balance of
approximately $196 million, the Amended Transok Credit Facility had available
borrowings of approximately $79 million and bore interest rates, at Tejas'
option, of prime or LIBOR plus 1.0%. Under the terms of the Amended Transok
Credit Facility, after two years, the revolver will, unless extended at the
option of the lenders, convert into a six year reducing revolver. Commitment
reductions of approximately $8.6 million per quarter are currently scheduled to
begin March 31, 1999 with the final remaining commitment reduction to occur on
December 31, 2004. Nevertheless, based upon the current terms of the Amended
Transok Credit Facility and the outstanding principal balance thereunder at
December 31, 1996, no principal payments are required until the year 2001.
40
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MEDIUM TERM NOTES
In connection with the Transok acquisition, Tejas assumed $200 million in
MTN's. The MTN's bear interest at fixed rates which, on a weighted average
basis, currently approximates 7.7%. The maturity dates of the MTN's vary with
the longest dated MTN's due to mature in 2023 with interest rates ranging from
6.60% to 8.96%.
The MTN's are secured by certain intercompany notes, by the capital stock
of all of Transok's subsidiaries and certain partnership interests held by
Transok, and are guaranteed by such subsidiaries.
INDUSTRIAL DEVELOPMENT BONDS
In 1990, a Tejas subsidiary issued two notes in the aggregate amount of
approximately $11.2 million related to the issuance of Industrial Development
Refunding Revenue Bonds ("IDRRBs") by Lewis and Pleasants Counties, West
Virginia, and called for redemption of previously outstanding notes and related
Industrial Development Revenue Bonds ("IDRBs") of those counties in the
aggregate amount of approximately $11.2 million. As of December 31, 1996
approximately $10.2 million of notes and IDRRBs were outstanding with a weighted
average interest rate of 8.7%, including bank fees. Such notes require annual
principal payments of $2 million in each of the years 1997 through 2000, $1.6
million in 2001 and $.6 million in 2002. The notes are secured by bank letters
of credit which in turn are secured by mortgages on two natural gas processing
plants located in West Virginia. The notes are also subject to certain covenants
and require that Tejas' subsidiaries, TAHC and Gulf Energy Gathering &
Processing Corporation, maintain certain financial standards.
MONEY MARKET CREDIT LINES
Tejas has uncommitted money market credit lines which allow Tejas to
borrow up to $50 million for periods of up to two months. Any such borrowings
are unsecured and may be extended for additional periods if agreed to by the
lenders. At December 31, 1996, Tejas had no outstanding borrowings under the
money market credit lines. Tejas has agreed to maintain funds, including, but
not limited to, availability under the Credit Agreements and the Amended Transok
Credit Facility, sufficient to repay borrowings under the money market credit
lines and accordingly, any outstanding balances are classified as long-term
debt.
41
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Cash payments for interest in 1996, 1995 and 1994, net of amounts
capitalized, were $40.5 million, $25.1 million and $22.7 million, respectively.
Scheduled maturities of long-term debt at December 31, 1996 are as follows:
Amount
Year Maturing
------------------------------------------
(IN THOUSANDS)
1997 $ 2,000
1998 2,000
1999 58,800
2000 62,000
2001 85,465
Thereafter 639,490
==========================================
Total $849,755
==========================================
INTEREST RATE DERIVATIVES
Tejas has entered into various interest rate derivative agreements as a
means of hedging interest exposure on its floating rate debt and operating lease
obligations. At December 31, 1996 Tejas had interest rate derivative agreements
in a notional amount of $700 million (see Note 7). Of this amount, $455.5
million hedges a like amount of Tejas' debt to a maximum effective interest rate
of 6.4%. Of the $455.5 million, $50 million of the agreements expire in 1997,
$5.5 million expire in 1998, $75 million expire in 1999, and the remaining $325
million expire at various times no later than 2006. See Note 14 for information
concerning interest rate derivative agreements used to hedge floating operating
lease obligations. Although Tejas does not presently anticipate terminating any
of these agreements prior to their respective expiration dates, it monitors its
options available under prevailing market conditions.
Additionally, in 1996, Tejas entered into interest rate derivative
agreements in a notional amount of $175 million. These agreements will convert a
like amount of Tejas' debt and/or operating lease obligations to an effective
interest rate of 6.7%. Of this amount, $150 million of the agreements became
effective in January 1997 and expire in January 2002. The remaining $25 million
become effective in January 1999 and expire in December 2001.
RESTRICTIVE COVENANTS
Under the terms of the Credit Agreements, and the Amended Transok Credit
Facility, TAHC and Transok are required to maintain certain financial ratios.
The Credit Agreements and the Amended Transok Credit Facility each contain,
among other things, limitations related to the transfer of funds between TAHC
and its subsidiaries and Transok and its subsidiaries, the transfer of funds
between TAHC and Tejas and Transok and Tejas, and the sale of assets in excess
of specified amounts. The obligations under the Credit Agreements are secured by
the capital stock, partnership interests and various intercompany notes of all
material TAHC subsidiaries and partnerships (excluding the capital stock of
Acadian, but including the capital stock and partnership interests of the
material operating subsidiaries and partnerships of Acadian) and are guaranteed
by such subsidiaries and partnerships. The obligations under the Amended Transok
Credit Facility and the MTN's are secured by certain intercompany notes, and by
42
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
the capital stock of all of Transok's subsidiaries and certain partnership
interests held by Transok, and are guaranteed by such subsidiaries.
The amount of loans, advances and dividends that may be made to Tejas from
TAHC, TNGC and Transok under the Credit Agreements and the Amended Transok
Credit Facility is subject to certain limitations. At December 31, 1996, the
permitted amounts of such payments were $204.1 million. In general, such
payments may be adjusted by (i) a percentage of consolidated quarterly net
earnings or losses of TAHC, TNGC and Transok, (ii) certain investments, and
(iii) any cumulative aggregate payments.
The MTN's are subject to certain covenants with which Tejas expects to be
able to comply in the ordinary course of business.
6. INCOME TAXES
Components of income tax expense are as follows:
Years Ended December 31,
---------------------------------
1996 1995 1994
------------------------------------------------------------
(IN THOUSANDS)
Current:
Federal ............ $ 2,856 $ 8,878 $ 8,971
State .............. 974 778 383
------------------------------------------------------------
Total current ... 3,830 9,656 9,354
------------------------------------------------------------
Deferred:
Federal ............ 20,311 8,906 7,727
State .............. 1,275 291 378
------------------------------------------------------------
Total deferred .. 21,586 9,197 8,105
------------------------------------------------------------
Total income tax expense $ 25,416 $ 18,853 $ 17,459
============================================================
The following table reconciles income tax expense, computed by applying
the 35% statutory federal income tax rate to earnings before income taxes, to
income taxes as reflected in the Statement of Earnings:
Years Ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------
($ IN THOUSANDS)
Federal tax computed at the statutory rate
on earnings before income taxes ......... $ 24,111 $18,127 $16,802
State income taxes, net of federal tax
benefit ................................. 1,462 695 495
Other ....................................... (157) 31 162
- --------------------------------------------------------------------------------
Total provision for income taxes ........ $ 25,416 $18,853 $17,459
- --------------------------------------------------------------------------------
Effective rate .............................. 36.9% 36.4% 36.4%
================================================================================
43
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Deferred income taxes typically reflect (a) the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes, and
(b) alternative minimum tax, net operating loss and tax credit carryforwards.
Significant components of Tejas' net deferred income tax liability are as
follows:
December 31, 1996 1995
- --------------------------------------------------------------------------------
(IN THOUSANDS)
Deferred income tax liabilities:
Tax over book depreciation ........................ $100,740 $67,481
Other ............................................. 4,995 --
- --------------------------------------------------------------------------------
105,735 67,481
- --------------------------------------------------------------------------------
Deferred income tax assets:
Alternative minimum tax credit carryforward ....... 21,047 16,336
Other ............................................. 14,713 2,756
- --------------------------------------------------------------------------------
35,760 19,092
- --------------------------------------------------------------------------------
Net deferred income tax liability ..................... $ 69,975 $48,389
================================================================================
At December 31, 1996 and 1995, $2.1 million and $2 million, respectively,
of deferred income tax assets were classified as current assets on the
Consolidated Balance Sheets. Included in "Other" above for 1996 is $9.8 million
of deferred tax assets related to accrued liabilities not deductible in the
current year. No valuation allowances were required for deferred income tax
assets at either December 31, 1996 or 1995.
Tejas made income tax payments in 1996, 1995 and 1994 of $10.4 million,
$7.4 million and $5.1 million, respectively. As of December 31, 1996, Tejas had
income tax receivable of $6.2 million included in "Prepaids and other current
assets" included in current assets on the consolidated balance sheet.
44
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. FINANCIAL INSTRUMENTS
The estimated fair value amounts of Tejas' financial instruments have been
determined by Tejas using available market data and valuation methodologies.
Fair value represents the amount at which the instruments could be exchanged in
a current transaction between willing parties. Judgement is necessarily required
in interpreting market data and the use of different market assumptions or
estimation methodologies may affect the estimated fair value amounts.
<TABLE>
<CAPTION>
December 31, 1996 1995
- --------------------------------------------------------------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
- --------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance sheet financial instruments:
Long-term debt
(excluding current installments):
Revolving credit agreements .. $639,580 $ 639,580 $284,900 $ 284,900
Medium term notes ............ 200,000 198,673 -- --
Money market lines of credit . -- -- 11,000 11,000
Industrial development bonds . 8,175 8,693 10,175 11,144
Other financial instruments:
Interest rate derivative ..... -- (6,343) -- (2,906)
agreements
Commodity swap agreements .... -- 1,205 -- 8,086
Commodity futures ............ -- (2,776) -- (4,361)
- --------------------------------------------------------------------------------------
</TABLE>
LONG-TERM DEBT
Tejas' revolving credit agreements and money market credit lines bear
floating interest rates at current market levels and therefore carrying values
in the financial statements approximate fair value. The estimated values of the
industrial development bonds and the MTN's are based upon interest rates at
December 31, 1996 for new issues with maturities which approximate the original
life of the existing bonds.
INTEREST RATE DERIVATIVE AGREEMENTS
At December 31, 1996 and 1995, Tejas had entered into interest rate
derivative agreements, with a notional amount of $700 million and $325 million,
respectively, as a means of hedging floating interest rate exposure related to
its revolving credit facilities and operating lease obligations ($269.5 million
in 1996 and $144.5 in 1995). The fair value of interest rate derivative
agreements is based upon approximated termination values obtained from third
parties. The negative fair value at December 31, 1996 is the estimated amount
Tejas would pay if it canceled the contracts or transferred them to other
parties.
COMMODITY FUTURES AND SWAPS
Tejas uses derivative financial instruments (primarily futures, swaps and
other contracts) as an extension of its commercial natural gas purchases and
sales and to hedge price exposure, including location
45
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
and pricing basis, of its storage and exchange gas inventories, commitments, and
certain anticipated transactions. At December 31, 1996 Tejas had a realized but
unrecognized loss of $5.2 million and an unrealized loss of $2.8 million on
futures contracts. At year-end, open swap contracts where Tejas pays one price
basis in exchange for another covered a notional volume of 169.5 Bcf and extend
into December 1998. The fair value of these swap contracts at December 31, 1996
was $1.2 million payable to Tejas based upon estimated termination values. The
realized but unrecognized futures loss of $5.2 million, unrealized futures loss
of $2.8 million and unrealized swaps gain of $1.2 million have been incurred in
conjunction with Tejas' storage arbitrage program or anticipated sales or
purchases of natural gas and either have been offset or will be offset by
transactions involving the physical delivery of natural gas.
CREDIT RISK
While notional contract amounts are used to express the magnitude of
interest rate derivative or commodity swap agreements, the amounts potentially
subject to credit risk, in the event of nonperformance by third parties, are
substantially smaller. Tejas does not anticipate any material impact to its
results of operations as a result of nonperformance by third parties as these
agreements are with established exchanges, energy companies, and major financial
institutions. Under certain circumstances, commodity swap agreements may require
the parties to post letters of credit issued by financial institutions
acceptable to the counterparty to satisfy margin requirements.
8. UNCONSOLIDATED ENTITIES
Tejas owns an interest in several unconsolidated entities the summary of
which is as follows:
December 31, 1996 1995
- --------------------------------------------------------------------------------
(IN THOUSANDS)
Unconsolidated entities:
Coral Entities ................................. $15,608 $ 3,655
Evangeline Gas Pipeline Company, L.P. .......... 6,611 7,950
Evangeline Gas Corp. ........................... 1,259 1,268
Gulf Coast Natural Gas Company ................. 18,537 19,054
Downtown Plaza II .............................. 6,466 --
Other .......................................... 67 --
- --------------------------------------------------------------------------------
Total ....................................... $48,548 $31,927
================================================================================
CORAL ENTITIES
Tejas, through subsidiaries of TCHC, holds one-half interest in Coral, an
energy marketing venture between Tejas and Shell which commenced operations in
November 1995. Coral is a Delaware limited partnership formed in September 1995
to market natural gas and power for Tejas and Shell. Prior to January 1997,
Coral was owned one-third by subsidiaries of Tejas and two-thirds by
subsidiaries of Shell. Effective January 1997, Tejas purchased from Shell an
additional 162/3% interest in Coral thereby increasing its ownership to 50%.
Shell Canada Limited of Calgary, Alberta may acquire an equity interest in Coral
46
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
in a transaction expected to close in early 1997. This should enhance Coral's
ability to expand its operations into Canada.
Through Coral, Tejas sells natural gas to electric utilities, local
distribution companies, industrial end-users, marketing affiliates of other
pipeline companies and gas marketing companies. Tejas' electric utility and
industrial customers normally consume the natural gas in their own operations
while local distribution companies, pipeline affiliated customers, and gas
marketing customers generally resell the natural gas. Tejas' natural gas sales
are made pursuant to both long-term contracts which range in term from one to 20
1/2 years and short-term agreements which generally range from one month to one
year in duration. An interest in Tejas' long-term sales contracts, has been
contributed to Coral.
Coral conducts natural gas marketing activities for Tejas and Shell. In
addition, Coral has received regulatory approval to market electricity in
wholesale markets and commenced such activities in the third quarter of 1996.
Coral initially began marketing 3.7 Bcf per day of Tejas and Shell natural gas
volumes. As of December 31, 1996, sales of natural gas were in excess of 6.1 Bcf
per day. Tejas provides Coral access to Tejas' natural gas pipelines which have
interconnects with other pipelines serving the U.S. and access to gas supplies
from Tejas' storage facilities and gathering and transmission systems located in
Texas, Oklahoma and Louisiana. Shell dedicates approximately 2 Bcf per day of
gross natural gas production and approximately 5.5 trillion cubic feet of
natural gas reserves. Tejas has committed to Coral substantially all of its
natural gas supply, and Shell has committed to Coral substantially all of its
natural gas production in the United States (excluding Alaska and Hawaii). Coral
was initially staffed with employees from Tejas and Shell. In addition, Tejas
provides intrastate marketing expertise, and Shell provides interstate marketing
expertise, as well as treasury and administrative support services. Coral has
also entered into a contractual arrangement with Bankers Trust to assist in
providing a variety of specially tailored risk management services.
Tejas and Shell have each contributed cash and economic interests in
natural gas sales contracts to Coral for their respective interests. Each
partner has received equity credit for natural gas contract commitments to the
partnership. If actual volumes and margins from these contracts fail to meet
targeted contract levels, the responsible partner is subject to make-up
payments. If Coral is unable to take all of the natural gas tendered for
delivery by the partners, Coral is obligated to pay for such natural gas at the
price that would have otherwise been applicable, mitigated by the amount
obtained from any sales of such natural gas to third parties.
47
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Summarized balance sheet and income statement information for Coral, which
Tejas accounts for using the equity method, as of and for the year ended
December 31, 1996, and as of and for the two months ended December 31, 1995 is
presented below.
December 31, 1996 1995
- --------------------------------------------------------------------------------
(IN THOUSANDS)
Balance Sheet:
Current assets ............................. $ 705,043 $246,562
Property, plant and equipment, net ......... 7,619 1,535
Other noncurrent assets .................... 82,388 70,768
Current liabilities ........................ 647,273 236,359
Other noncurrent liabilities ............... 51,066 --
Owners' equity ............................. 96,711 82,506
Statement of Earnings:
Revenues ................................... $3,037,548 $355,020
================================================================================
Gross profit ............................... $ 69,982 $ 8,723
================================================================================
Net earnings ............................... $ 21,275 $ 2,189
================================================================================
Tejas' share of net earnings ............... $ 8,374 $ 729
================================================================================
EVANGELINE ENTITIES
In December 1991, Tejas and other parties formed Evangeline Gas Pipeline
Company, L.P., a limited partnership ("Evangeline") and Evangeline Gas Corp.
("EGC"). Tejas owns a 45% limited partnership interest in Evangeline and 45% of
the common stock of EGC. EGC is the general partner of Evangeline and owns a 10%
general partnership interest.
Although the December 1991 projections for Evangeline anticipated losses
during the first four years of operations, at no time during the anticipated
20-year life of Evangeline did the projected cumulative losses exceed the agreed
Tejas sharing levels. By agreement, Tejas did not initially bear any losses in
the Evangeline entities until cumulative losses totaled $7.7 million. After the
$7.7 million threshold was reached, Tejas' interests in the Evangeline entities
bore 45% of all losses until cumulative losses totaled $9.7 million, and bears
100% of all losses until cumulative losses total $19.2 million. Evangeline is
not permitted to make distributions to its partners until its debt is
extinguished. At December 31, 1996 and 1995, cumulative losses of the Evangeline
entities totaled $12.5 million and $11.2 million, respectively. While Tejas has
incurred losses during 1996 and 1995 from Evangeline, Evangeline's cash flow
from operating activities during that time period has been sufficient to service
debt and meet other cash requirements.
GULF COAST NATURAL GAS COMPANY
In January 1992, Tejas and another company formed a general partnership,
Gulf Coast Natural Gas Company ("GCN") which is engaged in the natural gas
pipeline business. Tejas purchased a 50% capital
48
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
interest in the partnership over a 12-month period at a total cost of $19.4
million. Tejas invested $.3 million in GCN for its share of capital expenditures
in 1996 and $.1 million in 1995.
By agreement, Tejas receives 70% of the cash operating income of GCN until
December 31, 1998 and 50% thereafter. Depreciation expense is shared evenly for
substantially all of the assets.
DOWNTOWN PLAZA II
Transok Properties, Inc. holds a 50% undivided interest in the Downtown
Plaza II partnership. This partnership owns a twenty-eight story office building
in Tulsa, Oklahoma. Transok occupies approximately one-half of the building.
Downtown Plaza II generates cash flow from two major lessees including Transok.
Transok recognized $.3 million in equity earnings during 1996.
SUMMARIZED FINANCIAL INFORMATION
Combined summarized financial information for all Tejas' unconsolidated
entities as of and for the years ended December 31, 1996 and 1995 is presented
below. Amounts due from shareholders of EGC of $1.7 million for demand notes are
netted against equity.
December 31, 1996 1995
- --------------------------------------------------------------------------------
(IN THOUSANDS)
Balance Sheet:
Current assets ............................. $ 734,034 $ 264,991
Property, plant and equipment, net ......... 58,673 53,738
Other noncurrent assets .................... 162,282 139,232
Current liabilities ........................ 675,741 254,472
Noncurrent liabilities ..................... 130,528 73,191
Owners' equity ............................. 148,720 130,298
Statement of Earnings:
Revenues ................................... $3,233,029 $ 477,375
================================================================================
Gross profit ............................... $ 88,007 $ 24,560
================================================================================
Net earnings ............................... $ 20,456 $ 940
================================================================================
Tejas' share of net earnings (loss) ........ $ 8,171 $ (158)
================================================================================
All noncurrent liabilities of the unconsolidated entities are non-recourse
to Tejas.
49
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. RELATED PARTIES
The following table summarizes gas sales revenues from related parties for
the years 1996 and 1995 and the current receivables and current payables at the
end of each year:
1996 1995
- --------------------------------------------------------------------------------
(IN MILLIONS)
Gas Sales Revenue:
Coral .................................. $809.1 $105.9
GCN .................................... 19.7 16.7
Evangeline ............................. 109.5 74.6
- --------------------------------------------------------------------------------
Current Receivables:
Coral .................................. $142.3 $ 52.6
GCN .................................... 13.0 6.3
Evangeline ............................. 2.6 2.4
- --------------------------------------------------------------------------------
Current Payables:
Coral .................................. $ 29.1 $ 8.8
GCN .................................... 3.9 0.7
================================================================================
10. PREFERRED MEMBERSHIP UNITS OF A SUBSIDIARY COMPANY
On December 29, 1995, a subsidiary of Tejas, Tejas-Magnolia Energy, L.L.C.
("Tejas-Magnolia"), issued preferred equity interests to a third party in return
for a capital investment of $55 million. Tejas- Magnolia is required to make
preferred distributions to the third party which constitute a return on capital
(at an effective fixed after tax cost to Tejas of 4.2%) and return of capital
over an eight-year term. Annual distributions including returns on and of
capital of approximately $8.7 million are payable from 1997 through 2001 and
approximately $9.5 million in each of 2002 and 2003 and approximately $2.3
million in 2004. In connection with the issuance of the preferred equity
interests in Tejas-Magnolia, another subsidiary of Tejas has contributed a
portion of the proceeds from sales under certain long-term natural gas sales
contracts to Tejas-Magnolia in exchange for common equity interests in
Tejas-Magnolia. This ongoing contribution supports the preferred distribution
obligations of Tejas-Magnolia during the eight-year term. Required return of
capital for 1997 of $5.4 million is classified as current maturities of
long-term obligations.
11. PREFERRED STOCK
At December 31, 1996 and 1995, Tejas had authorized 6,000,000 shares of $1
par value preferred stock. The preferred stock may be issued in one or more
series and the Board of Directors will determine the specific terms and
conditions of each series in the event such shares are issued.
In February 1993, Tejas completed the sale of 2,000,000 depositary shares,
each such depositary share representing one-tenth of a share of Tejas' 9.96%
Cumulative Preferred Stock (the "9.96% Preferred
50
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Stock"). Net proceeds from the sale of the 9.96% Preferred Stock totaled $48.2
million with $48 million initially used to repay indebtedness under a
subsidiary's $120 million reducing revolving credit facility which existed at
such time. Dividends on the 9.96% Preferred Stock are cumulative from the date
of original issuance and are payable quarterly, commencing May 1, 1993, in an
amount equal to $2.49 per annum per depositary share. The 9.96% Preferred Stock
is redeemable at Tejas' option at any time after February 1, 1998 at a
redemption price equal to $250 per share.
In November 1993, Tejas completed the sale of 1,300,000 depositary shares,
each such depositary share representing one-fifth of a share of Tejas' 5 1/4%
Convertible Preferred Stock (the "5 1/4% Preferred Stock"). Net proceeds from
the sale of the 5 1/4% Preferred Stock totaled $62.8 million and were used to
repay substantially all of a $65 million term loan incurred in conjunction with
the properties purchased from Exxon Corporation. Dividends on the 5 1/4%
Preferred Stock are cumulative from the date of original issuance and are
payable quarterly, commencing February 1, 1994, in an amount equal to $2.625 per
annum per depositary share. Each share of 5 1/4% Preferred Stock is convertible,
in whole or in part, at any time, at the option of the holders thereof, into
shares of Common Stock at a conversion price of $42.4243 per share of Common
Stock (equivalent to a conversion rate of 1.1786 shares of Common Stock for each
depositary share). The 5 1/4% Preferred Stock is redeemable, at Tejas' option
(i) at any time after November 10, 2003, at a redemption price of $250 per
share, or (ii) at any time between November 10, 1996 and November 10, 2003 at
redemption prices which range from $259.19 to $251.31 per share.
Both the 9.96% Preferred Stock and the 5 1/4% Preferred Stock rank, as to
dividends and liquidation, prior to Tejas' Common Stock. If the equivalent of
six quarterly dividends payable on either the 9.96% Preferred Stock or the 5
1/4% Preferred Stock is in arrears, then the number of directors of Tejas will
be increased by two and the holders of the classes of preferred stock with
dividends in arrears will be entitled to elect the two additional directors
until all dividends in arrears have been paid or declared and set apart for
payment. No arrearages currently exist.
12. COMMON STOCK
On November 11, 1994, Tejas adopted a stockholders rights plan and
declared a dividend of one right (a "Right") for each share of Tejas' Common
Stock, par value $.25 per share (the "Common Stock"), outstanding as of the
close of business on November 22, 1994. The Rights, which under certain
circumstances entitle their holders to purchase one one-hundredth of a share of
Series C Junior Participating Preferred Stock, par value $1.00 per share, for an
exercise price of $200, will expire on November 11, 2004.
The Rights are not exercisable until the earlier to occur of (i) 10 days
following the first date of public announcement that a person or group of
affiliated persons (an "Acquiring Person") has acquired beneficial ownership of
15% or more of the outstanding shares of Common Stock or such earlier date as a
majority of the Board of Directors shall become aware of the existence of an
Acquiring Person (the "Stock Acquisition Date") or (ii) 10 business days (or
such later date as may be determined by action of the Board of Directors prior
to such time as any person or group of affiliated persons becomes an Acquiring
Person) following the commencement of, or announcement of an intention to make a
tender offer or exchange offer, the consummation of which would result in the
beneficial ownership by a person or group of 15% or more of the outstanding
shares of Common Stock.
51
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In the event that any person becomes an Acquiring Person, each holder of a
Right, other than Rights beneficially owned by the Acquiring Person (which will
thereupon become void), will thereafter have the right to receive upon exercise
of a Right at the then current exercise price of the Right, that number of
shares of Common Stock having a market value of two times the exercise price of
the Right. In the event that, after a person or group has become an Acquiring
Person, Tejas is acquired in a merger or other business combination transaction
or 50% or more of its consolidated assets or earning power are sold, each holder
of a Right other than Rights beneficially owned by an Acquiring Person (which
will have become void) will thereafter have the right to receive, upon the
exercise of the Right at the then current exercise price of the Right, that
number of shares of Common Stock of the person with whom Tejas has engaged in
the foregoing transaction which number of shares at the time of such transaction
will have a market value of two times the exercise price of the Right.
At any time until ten days following the Stock Acquisition Date (subject
to extension by the Board of Directors), Tejas may redeem the Rights in whole,
but not in part, at a price of $.01 per Right.
On April 11, 1996, the Tejas Board of Directors authorized a three-for-two
split of the Common Stock of Tejas effected in the form of a stock dividend
payable to stockholders of record as of April 26, 1996. All references to shares
issued and outstanding, average shares outstanding and earnings per share
included in the financial statements and accompanying notes and schedules have
been restated to give effect to the stock split. As a result of the stock split,
5,801,500 shares (net of 269 fractional shares repurchased) of Common Stock were
added to the 11,603,263 common shares outstanding at December 31, 1995. The par
value of the additional shares, approximately $1.5 million, has been transferred
from retained earnings to Common Stock. As a result of the stock split, the
conversion price of Tejas' 5 1/4% Convertible Preferred Stock was adjusted from
$63.6364 to $42.4243 (equivalent to an adjustment in the conversion rate from
.7857 to 1.1786 shares of Common Stock for each depositary share representing a
one-fifth interest in a share of the 5 1/4% Convertible Preferred Stock). The
adjustment to the conversion price (and conversion rate) was effective as of
April 27, 1996. Additionally, options to purchase Common Stock under Tejas'
Stock Option Plans as well as option prices were adjusted as a result of the
Common Stock split.
On July 19, 1995, Tejas' Board of Directors authorized a stock dividend of
one-tenth of one share of Common Stock for each share of Common Stock
outstanding payable to stockholders of record on July 27, 1995. All references
to average shares outstanding and earnings per share included in the financial
statements and accompanying notes for periods prior to the stock dividend have
been restated to give retroactive effect to the stock dividend. As a result of
the stock dividend, 1,052,908 shares (net of 422 fractional shares repurchased)
of Common Stock were added to the 10,533,303 common shares outstanding at June
30, 1995. The fair value of the additional shares at the declaration date, $52.8
million, was transferred from retained earnings to Common Stock and capital
surplus in the amount of $.3 million and $52.5 million, respectively. As a
result of the stock dividend, the conversion price of Tejas' 5 1/4% Preferred
Stock was adjusted from $70 to $63.6364 (equivalent to an adjustment in the
conversion rate from .7143 to .7857 shares of Common Stock for each depositary
share representing a one-fifth interest in a share of the 5 1/4% Preferred
Stock). The adjustment to the conversion price (and conversion rate) was
effective as of July 28, 1995. Additionally, options to purchase Common Stock
under Tejas' Stock Option Plans as well as option prices were adjusted as a
result of the Common Stock dividend.
52
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On July 22, 1996, Tejas sold 3,075,000 shares of its Common Stock in an
underwritten public offering. Net proceeds to Tejas from the sale of the Common
Stock, approximately $102.8 million, were used to reduce indebtedness under the
$425 million Transok Credit Facility.
In 1995, Tejas adopted the Director Stock Award Plan which was approved by
the stockholders at the annual meeting of stockholders on May 9, 1996. The
Director Stock Award Plan provides for the award of up to 45,000 shares of
Common Stock to nonemployee directors. Under the Director Stock Award Plan,
nonemployee directors are awarded newly issued shares of Common Stock on July 19
of each year equal to (i) $10,000 divided by (ii) the fair market value
(determined in accordance with such plan) per share of Common Stock on such date
(with cash in lieu of fractional shares). In addition, nonemployee directors
are entitled to elect to receive shares of Common Stock in lieu of their cash
annual retainer (currently $10,000).
In 1988, Tejas adopted the Executive Officers Stock Option Plan (the
"Tejas Plan"), which provided for the granting of options for 1,651,652 shares
of Common Stock. During 1992, Tejas amended the Tejas Plan to include key
employees other than executive officers and to increase the number of shares
available for grant under the Tejas Plan by an additional 1,312,318 shares.
During 1996, options to purchase 441,551 shares of Common Stock were granted
under the Tejas Plan to executive officers and key employees at option prices
ranging from $30.83 to $39.22 per share. In 1992, Tejas implemented the Director
Stock Option Plan (the "Director Plan"), which provided for the granting of
options for 371,250 shares of Common Stock to directors of Tejas. Options to
purchase 37,125 shares of Common Stock were granted in 1996 under the Director
Plan at an option price of $36.67 per share. Since inception, no stock options
have been granted at below market prices at the date of the grant.
The following table summarizes the status of outstanding stock options:
<TABLE>
<CAPTION>
1996 1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding, January 1 ........... 950,099 738,348 1,034,226
Granted .................................. 478,676 298,683 177,793
Exercised ................................ (130,279) (81,611) (464,591)
Canceled ................................. (128,706) (5,321) (9,080)
- ---------------------------------------------------------------------------------------------
Options outstanding, December 31 ......... 1,169,790 950,099 738,348
- ---------------------------------------------------------------------------------------------
Options available for grant at December 31 433,592 783,562 1,076,924
Options exercisable at December 31 ....... 620,336 501,006 406,263
Range of option prices exercised
during the year ..................... $10.50-$32.42 $3.85-$24.85 $3.85-$23.33
Range of option prices outstanding,
December 31 ......................... $10.55-$39.22 $10.50-$33.83 $3.85-$33.64
- ---------------------------------------------------------------------------------------------
</TABLE>
STOCK OPTION PLANS
At December 31, 1996, Tejas had two stock-based deferred compensation
plans which are described below. Tejas applies Accounting Principles Board
("APB") Opinion 25 and related interpretations in
53
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
accounting for its plans. Accordingly, no compensation cost has been recognized
for its fixed stock option plans. Had compensation cost for Tejas' two
stock-based compensation plans been determined based on the fair value at the
grant dates for awards under those plans, consistent with the method of SFAS No.
123, Tejas' net income and earnings per share would have been reduced to the pro
forma amounts indicated below:
Years Ended December 31, 1996 1995
- --------------------------------------------------------------------------------
($ in thousands except per share amounts)
Net income:
As reported .......................... $ 35,079 $ 24,544
Pro forma ............................ 33,331 23,532
- --------------------------------------------------------------------------------
Earnings per common share:
As reported .......................... $ 1.87 $ 1.41
Pro forma ............................ 1.74 1.32
- --------------------------------------------------------------------------------
Under the 1992 Tejas Plan as amended ("Employee Plan"), Tejas may grant
options to its executive officers and key employees for up to approximately 3
million shares of Common Stock. Under the 1992 Director Stock Option Plan as
amended ("Director Plan"), Tejas may grant options to its outside directors for
up to 371,250 shares of Common Stock. Under both plans, the exercise price of
each option equals the fair market price of Tejas' Common Stock on the date of
grant. Options granted under the Employee Plan expire seven years after the date
of grant and may be granted at any time determined by the Stock Option
Committee. The Employee Plan options are exercisable at times fixed by the Stock
Option Committee. Options granted under the Director Plan expire seven years
after the date of grant and are granted annually on the first business day
following Tejas' Annual Meeting of Stockholders. Options granted under the
Director Plan become exercisable, on a cumulative basis, in five equal
installments, with the first installment becoming exercisable six months after
the date of the grant and the remaining four installments becoming exercisable
annually commencing on the first anniversary of the date of the grant.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions for grants in 1995 and 1996, respectively: no dividend yield for all
years, expected volatility of 26 and 25 percent, risk-free interest rates of 6.9
and 5.7 percent for the Employee Plan options and 6.3 and 6.7 percent for the
Director Plan options; and expected lives of 6.6 and 6.9 years for the Employee
Plan options and 7 and 7 years for the Director Plan options.
54
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A summary of the status of Tejas' two fixed stock option plans as of
December 31, 1996 and 1995, and changes during the years ending on those dates
is presented below:
1996 1995
--------------------- -----------------
Weighted Weighted
Average Average
Exercise Exercise
Fixed Options Shares Price Shares Price
- --------------------------------------------------------------------------------
Outstanding at beginning of year ... 950,099 $ 21.01 738,348 $ 16.57
Granted ............................ 478,676 34.62 298,683 27.58
Exercised .......................... (130,279) 18.15 (81,611) 4.80
Forfeited .......................... (128,706) 32.77 (5,321) 22.56
Outstanding at end of year ......... 1,169,790 25.60 950,099 21.01
Options exercisable at year-end .... 620,336 $ 20.30 501,006 $ 17.03
Weighted-average fair value of
options granted during the year . -- $ 14.43 -- $ 12.06
The following table summarizes information about fixed stock options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------------- ---------------------------------
Weighted-
Number Average Number
Range of Outstanding at Remaining Weighted-Average Exercisable at Weighted-Average
Exercise Prices 12/31/96 Contractual Life Exercise Price 12/31/96 Exercise Price
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$10.55-$19.24 374,170 2.7 years $ 13.04 353,653 $ 12.68
$23.33-$29.62 181,673 5.0 years $ 25.07 76,685 $ 24.98
$30.30-$39.22 613,947 5.7 years $ 33.98 189,998 $ 32.60
- ------------------------------------------------------------------------------------------------------
</TABLE>
13. COMMITMENTS AND CONTINGENCIES
THE LONG TRUST LITIGATION
Tejas is a defendant or party in various lawsuits that have risen in the
ordinary course of Tejas' business. In particular, a subsidiary of Tejas is a
defendant in THE LONG TRUSTS V. TEJAS GAS CORP. ET. AL., 123rd Judicial District
Court, Panola County, Texas, filed March 1, 1989, in which plaintiffs assert
claims and allege damages for breach of contract and failure to take-or-pay for
natural gas pursuant to three natural gas purchase contracts. Plaintiffs allege
that, in addition to failing to take-or-pay for gas, Tejas breached (a) one of
the contracts by failing to take a minimum quantity of gas and to install and
maintain pipeline facilities sufficient to permit Tejas to meet its quantity
purchase obligations, and (b) all three contracts by failing to take gas in
quantities sufficient to enable plaintiffs to produce ratably with other
producers in a
55
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
common reservoir. In plaintiffs' Sixth Amended Original Petition filed June 6,
1995, the plaintiffs are seeking take-or-pay damages for the ten year period
1984-1994 in excess of $36 million, plus pre-judgment interest, post-judgment
interest, attorneys' fees and court costs and other unspecified actual damages.
In connection with their depositions in this matter, certain expert witnesses
retained by The Long Trusts have presented damage models purporting to show
approximately $60 million in take-or-pay damages and $70 million for failure to
take The Long Trusts' gas ratably. Management disputes The Long Trusts' claims
and believes that The Long Trusts' damage models are seriously flawed. On
January 6, 1993, the court entered an interlocutory summary judgment order
granting in part and denying in part plaintiffs' motions for summary judgment.
The court found, among other things, as a matter of law that (a) Tejas breached
the minimum take obligations under one of the contracts, (b) Tejas is not
entitled to any credits or offsets for natural gas purchased by third parties,
and (c) the "availability" of natural gas for take-or-pay purposes is
established by the delivery capacity testing procedures in the contracts.
Damages, if any, have not been determined. The effect of this order on Tejas'
case is unclear and Tejas has sought clarification and rehearing, but intends
nevertheless to defend its position aggressively.
Because of the relationship between The Long Trusts contracts and certain
contracts between Tejas and Valero Transmission Company ("VTC"), and in order to
resolve existing and potential claims and disputes, Tejas, VTC and Valero
Transmission, L.P. ("VTLP") entered into an agreement, pursuant to which, among
other things, Tejas, VTC and VTLP would cooperate in the conduct of The Long
Trusts litigation, and VTC and VTLP would bear a substantial portion of the
costs of any appeal and of the amount of any nonappealable final judgment
rendered against Tejas. On April 15, 1994, the plaintiffs named VTC and VTLP
(collectively "Valero") as additional defendants to the lawsuit, alleging that
Valero intentionally and maliciously interfered with the plaintiffs' contracts
with Tejas. In its Sixth Amended Original Petition, plaintiffs are seeking
damages against Valero in an amount in excess of $36 million, and plaintiffs
added a conspiracy claim against Tejas alleging that Tejas conspired with Valero
in interfering with the contracts. Plaintiffs also have added a claim for
exemplary damages treble the amount of the actual damages, if any, found by the
court for the interference and conspiracy claims. Plaintiffs assert that Tejas
should be jointly liable with Valero for the damages plaintiffs have asserted
against Valero. Although Tejas has not obtained a formal opinion, based on
discussions with outside counsel and an internal examination of this lawsuit,
management believes that it has adequate defenses or recourse to third parties
relating to such lawsuit and does not believe this matter will have a material
adverse effect on Tejas' financial condition.
OTHER
Tejas is also a party to various other claims and other pending and
possible legal actions arising in the ordinary course of business. There is
considerable uncertainty inherent in any litigation or governmental proceeding
and the evaluation of individual matters is necessarily dependent on the
historical experience of Tejas and others in similar circumstances and the stage
of the litigation or proceeding. Tejas believes that an adequate provision has
been made for probable losses. In cases where losses are possible but not
probable, it is Tejas' belief that their ultimate resolution will not have a
materially adverse effect on Tejas' consolidated financial position or the
results of its consolidated operations.
Tejas has committed contractual obligations of approximately $50 million
for capital expenditures to be incurred in 1997.
56
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In conjunction with the acquisition of the Acadian Gas Group on December
28, 1990, Acadian is committed to pay contingent deferred payments based upon
certain future natural gas sales volumes and profit margins, if achieved. Such
payments in any one year are not expected to exceed 2% of the cash purchase
price of the Acadian Gas Group and cumulative deferred payments are limited to a
maximum of $25 million, of which $5.3 million had been paid or accrued as of
December 31, 1996. Such payments expire if unearned not later than December 31,
2003. Tejas has guaranteed the performance of the deferred payment agreement. As
such payments are accrued, the cost is included in property, plant and equipment
and amortized over the remaining estimated lives thereof.
Tejas' West Clear Lake Storage Facility ("WCLSF") requires the maintenance
of cushion gas in order to sustain anticipated operational requirements. Such
cushion gas requirements have been satisfied by a combination of natural gas
purchased by Tejas and third party natural gas stored in the facility. At
December 31, 1996, Tejas had purchased approximately 10.4 Bcf of cushion gas. In
late 1994, Tejas entered into an agreement with a third party whereby the third
party agreed to purchase up to 35 Bcf of natural gas at a cost not to exceed $65
million and to store such gas in the WCLSF. The agreement with the third party
was scheduled to expire in September 2000. Effective January 16, 1997, the third
party agreement described above was amended and extended. The principal
modifications to the agreement included the extension of the contract expiration
date to December 31, 2002 and, at Tejas' option, an increase in the maximum
volume of natural gas that may be stored in Tejas' facilities, including the
Greasy Creek Storage Facility, to 70 Bcf. In order to secure Tejas' ability to
purchase the natural gas from the third party, the agreement provides for the
payment by Tejas of a reservation fee to the third party which is adjusted
quarterly based upon the third party's financing costs. On certain option dates,
Tejas may elect to purchase specified volumes of the third party's gas based
upon market prices. Should Tejas decline to purchase the natural gas, the third
party may instruct Tejas to sell such volumes on the third party's behalf. In
such case, it will be necessary for Tejas to obtain cushion gas through other
means in order to meet the anticipated operational requirements of the WCLSF. At
December 31, 1996 and 1995, the third party had 18.5 Bcf of natural gas in
storage at the WCLSF, which such party purchased for $33.1 million. Based upon
the volumes and rates in effect Tejas paid a reservation fee of approximately
$1.1 million, $1.9 million and $1.6 million to the third party during 1996, 1995
and 1994, respectively.
Tejas bears the cost of physical loss, if any, incurred during storage.
Management estimates that physical losses will not be significant and has
insured against physical losses due to catastrophic events.
14. LEASES
Tejas leases certain property, facilities and equipment under various
operating leases. During 1993, Tejas entered into a five-year operating lease
("Leased System") with an unrelated third party and Tejas is committed to pay a
termination fee of $122.8 million in the event Tejas elects not to exercise its
purchase option for the Leased System in 1998. Lease payments under the lease
for the Leased System are adjusted quarterly based upon the Lessor's financing
costs, and Tejas has entered into interest rate derivative agreements in a
notional amount of $144.5 million to fully hedge the effects of such adjustments
on the required minimum lease payments. Such interest rate derivative agreements
expire in 1998 and effectively fix Tejas' minimum lease payments for the Leased
System, excluding the termination fee, at $8.7 million per anum.
57
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Immediately prior to the Transok acquisition, CSW sold seven natural gas
processing plants (the "Transok Plants") to a third party lessor (the "Lessor"),
which in turn leased these facilities to Tejas. The Lessor is leasing the
Transok Plants to Tejas for a five-year term with lease payments adjusted
quarterly based upon the Lessor's financing costs. Tejas has entered into
interest rate derivative agreements in a notional amount of $125 million to
hedge the effects of such adjustments on the required minimum lease payments.
Under the Lease, the Lessee has the option to extend the term of the Lease for
up to two additional two year periods, subject to approval by the Lessor, and to
purchase all of the Transok Plants at any time for $125 million. If by the end
of the Lease term, the Lessee has not exercised its option to purchase all of
the Transok Plants, it is obligated to pay the Lessor a termination fee of
approximately $106 million. However, the Lease contains a provision which
reduces the termination fee to the extent the proceeds from the Lessor's
subsequent sale of the Transok Plants exceed $19 million. The Lease also
provides the Lessee the option to purchase, at any time during the Lease term,
one or more of the Transok Plants for an aggregate amount not exceeding $31
million, with corresponding reductions to the $106 million termination fee and
the $19 million threshold amount.
During 1993, Transok entered into a long-term operating lease arrangement
to lease all the pipeline facilities of Palo Duro Pipeline Company. The
agreement, which includes provisions to purchase the leased pipeline assets,
provides for an initial term of five years with several options to extend the
lease for up to an additional seventeen years.
Future minimum lease payments under all leases, excluding the termination
fees, as of December 31, 1996 are:
(IN THOUSANDS)
------------------------------------
1997 ............... $ 25,168
1998 ............... 19,809
1999 ............... 13,197
2000 ............... 13,147
2001 ............... 12,467
Thereafter ......... 51,805
------------------------------------
Total .......... $135,593
====================================
Rental expense for all operating leases totaled $19.2 million, $11.6
million and $ 13.3 million for 1996, 1995 and 1994, respectively.
58
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. SUPPLEMENTAL CASH FLOW INFORMATION
The "Net change in working capital, net of effects from acquisitions"
amount included in the Consolidated Statements of Cash Flows is comprised of the
following:
Years Ended December, 1996 1995 1994
- --------------------------------------------------------------------------------
(IN THOUSANDS)
Decrease (increase) in:
Accounts receivable .................... $(156,348) $(67,379) $ 1,847
Exchange gas receivable ................ 2,742 (1,355) (1,133)
Storage gas inventory .................. (2,174) (10,594) (17,975)
Prepaids and other current assets ...... (2,192) (4,171) (2,661)
Increase (decrease) in:
Gas purchases payable .................. 184,762 61,401 (21,115)
Exchange gas payable ................... (588) 975 (4,270)
Accounts payable ....................... (47,797) 3,350 2,344
Accrued liabilities .................... 5,810 878 (6,550)
Income taxes payable ................... (1,881) 1,867 4,857
- --------------------------------------------------------------------------------
Total ................................ $ (17,666) $(15,028) $(44,656)
================================================================================
In 1996, 1995 and 1994, stock options exercised were paid for in part by
the tendering of shares previously held by the party exercising the stock
options. The value of tendered shares received and an equivalent value for
shares issued are regarded as non-cash transactions for cash flow purposes.
Accordingly, Tejas' Consolidated Statements of Cash Flows include only actual
cash received as a result of the exercise of stock options.
16. SEGMENT INFORMATION AND MAJOR CUSTOMERS
Tejas predominantly operates in one industry segment, natural gas pipeline
operations.
Sales to Coral accounted for approximately 38% and 10% of Tejas' total
revenues during 1996 and 1995, respectively. No single customer accounted for
10% or more of total revenues in 1994.
Tejas' natural gas pipeline operations have a concentration of customers
in the electric and natural gas utility industries, principally in Oklahoma,
Texas and Louisiana. This concentration of customers in a regional geographic
area may impact Tejas' overall exposure to credit risk, either positively or
negatively, in that the customers may be similarly affected by changes in
economic or other conditions. Historically, Tejas has not incurred any
significant credit losses related to receivables from its customers. Receivables
are generally not collateralized.
59
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. EMPLOYEE BENEFITS
Effective January 1, 1989, Tejas adopted a noncontributory, defined
benefit pension plan. This plan covers all employees.
Under the plan, pension benefits are based on years of service and the
employee's average monthly compensation. Tejas funds pension expense as accrued,
subject to the minimum requirements of the Employee Retirement Income Security
Act of 1974, the Omnibus Budget Reconciliation Act of 1987 and the tax
deductibility of such contributions.
The components of pension expense are as follows:
Years Ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------
(IN THOUSANDS)
Service costs - costs during the period ........... $ 1,380 $ 735 $ 587
Interest cost on projected benefit obligation ..... 526 319 261
Actual return on plan assets ...................... (656) (260) (219)
Net amortization and deferral ..................... 442 (23) (9)
- --------------------------------------------------------------------------------
Net periodic pension costs .................... $ 1,692 $ 771 $ 620
- --------------------------------------------------------------------------------
The following table sets forth the pension plan's funded status and the
amount of the net pension liability at December 31, 1996 and 1995. Plan assets
are comprised of investments in an equity fund maintained by the plan trustee
and a guaranteed deposit account with an insurance company.
December 31, 1996 1995
- --------------------------------------------------------------------------------
(IN THOUSANDS)
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $3,820 and
$3,297, respectively ............................ $ 4,592 $ 3,876
================================================================================
Projected benefit obligation ........................ $(10,065) $(5,731)
Plan assets at fair value ........................... 5,128 3,838
- --------------------------------------------------------------------------------
Funded status ....................................... (4,937) (1,893)
Unrecognized net (gain) loss ........................ (879) 156
Unrecognized prior service cost ..................... 3,080 (86)
- --------------------------------------------------------------------------------
Accrued pension liability ....................... $ (2,736) $(1,823)
================================================================================
60
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Assumptions used in determining pension expense and the status of Tejas'
plan for 1996 and 1995 were as follows:
1996 1995
- --------------------------------------------------------------------------------
Discount rate .............................................. 7.50% 7.25%
Rates of increase in compensation levels ................... 5.00% 5.00%
Rate of return on plan assets .............................. 8.00% 8.00%
- --------------------------------------------------------------------------------
THRIFT PLAN
Tejas adopted a contributory, trusteed thrift plan covering all of its
employees, effective January 1, 1989. Tejas matches 100% of the employee
contributions to the plan, up to a maximum of three percent (3%) of the annual
salary paid to each participant. Tejas' share of contributions recognized in
1996, 1995 and 1994 was $.8 million, $.5 million and $.5 million, respectively.
61
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Quarters Ended March 31 June 30 Sept. 30 Dec. 31
- ---------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1996:(1) ..................................
Revenues .............................. $432,401 $419,284 $541,912 $714,370
Earnings from operations .............. 19,687 18,241 31,060 38,264
Net earnings .......................... 10,938 8,015 10,252 14,267
Preferred stock dividend requirements . 2,098 2,098 2,098 2,099
Net earnings applicable to common stock 8,840 5,917 8,154 12,168
Earnings per common share (2) ......... 0.51 0.34 0.41 0.59
1995: .....................................
Revenues .............................. $215,633 $238,122 $246,510 $343,356
Earnings from operations .............. 19,250 15,975 18,734 21,762
Net earnings .......................... 8,179 7,110 7,646 10,002
Preferred stock dividend requirements . 2,098 2,098 2,098 2,099
Net earnings applicable to common stock 6,081 5,012 5,548 7,903
Earnings per common share(2)(3) ....... 0.35 0.29 0.32 0.45
- ---------------------------------------------------------------------------------------
</TABLE>
(1) Results of operations include Transok's operations subsequent to its
acquisition on June 6, 1996.
(2) Earnings per common share have been adjusted to give retroactive effect to
a three-for-two Common Stock split effected in the form of a stock
dividend to stockholders of record as of April 26, 1996 as if the stock
dividend had occurred at the beginning of each period presented.
(3) Earnings per common share have been adjusted to give retroactive effect to
a stock dividend of one-tenth of one share of Common Stock for each share
of Common Stock outstanding on July 27, 1995 as if the stock dividend had
occurred at the beginning of each period presented.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
62
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to instruction G(3) to Form 10-K, Items 10, 11, 12 and 13 are
omitted because Tejas will file a definitive proxy statement pursuant to
Regulation 14A under the Securities Act of 1934 not later than 120 days after
the close of the fiscal year; the information required by such items is set
forth under the captions "Security Ownership of Certain Beneficial Owners and
Management," "Meetings of the Board of Directors and Committees," "Election of
Directors," "Executive Officers," "Executive Compensation," "Compensation
Committee Interlocks and Insider Participation," "Certain Relationships and
Related Transactions" and "Compliance with Section 16(a) of the Exchange Act" in
Tejas' definitive proxy statement for its annual meeting of stockholders to be
held May 8, 1997 and such information (excluding the information required by
paragraphs (i), (k) and (l) of Item 402 of Regulation S-K) is hereby
incorporated by reference from such definitive proxy statement.
63
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements -
All financial statements of Tejas are listed under Item 8 on page 29
of this Form 10-K.
2. Financial Statement Schedules -
All financial statement schedules of Tejas are listed under Item 8
on page 29 of this Form 10-K.
3. Exhibits -
See Exhibit Index on page 72 of this Form 10-K.
Executive Compensation Plans or Arrangements - the following listed
executive compensation plans or arrangements are included in the
Exhibit Index on page 72 of this Form 10-K.
10.1* Form of Tejas Gas Executive Incentive Agreement (filed as
Exhibit 10.12 to Tejas' Registration Statement on Form S-1, No.
33-24697 ("the 1988 Registration Statement")).
10.2 Tejas Gas Corporation Employee Stock Option Plan, as amended and
restated effective January 1, 1997.
10.3 Tejas Gas Corporation Director Stock Option Plan, as amended and
restated effective January 1, 1997.
10.4* Form of Tejas Gas Corporation Stock Option Agreement for
Employee Stock Option Plan (filed as Exhibit 10.4 to Tejas' Form
10-K for the year ended 1995).
10.5* Director Stock Award Plan, as approved on October 5, 1995 by the
Board of Directors of Tejas (filed as Exhibit 4.6 to Tejas'
Registration Statement on Form S-8, No. 33- 64895).
10.6* First Amendment to Director Stock Award Plan, as approved on
December 9, 1995 by the Board of Directors of Tejas (filed as
Exhibit 4.7 to Tejas' Registration Statement on Form S-8, No.
33-64895).
10.7* Tejas Gas Corporation Thrift Plan, as amended and restated
effective January 1, 1997 (filed as Exhibit 4.10 to Tejas' Form
S-8, No. 333-18349).
10.8* Tejas Gas Corporation Thrift Benefit Restoration Plan, effective
as of August 9, 1994 (filed as Exhibit 10.1 to Tejas' Form 10-Q
for the quarter ended September 30, 1994).
10.9* First Amendment to the Tejas Gas Corporation Thrift Benefit
Restoration Plan dated April 12, 1995 (filed as Exhibit 10.2 to
Tejas' Form 10-Q for the quarter ended March 31, 1995).
64
<PAGE>
10.10* Second Amendment to the Tejas Gas Corporation Thrift Benefit
Restoration Plan dated October 6, 1995 (filed as Exhibit 10.17
to Tejas' Form 10-K for the year ended December 31, 1995).
10.11* Tejas Gas Corporation Thrift Benefit Restoration Trust between
Tejas and The First National Bank of Boston, as trustee, dated
September 16, 1994 (filed as Exhibit 10.2 to Tejas' Form 10-Q
for the quarter ended September 30, 1994).
10.12* Tejas Gas Corporation Pension Benefit Restoration Plan,
effective as of August 9, 1994 (filed as Exhibit 10.3 to Tejas'
Form 10-Q for the quarter ended September 30, 1994).
10.13* First Amendment to the Tejas Gas Corporation Pension Benefit
Restoration Plan dated April 12, 1995 (filed as Exhibit 10.3 to
Tejas' Form 10-Q for the quarter ended March 31, 1995).
10.14* Tejas Gas Corporation Pension Benefit Restoration Trust between
Tejas and The First National Bank of Boston, as trustee, dated
September 16, 1994 (filed as Exhibit 10.4 to Tejas' Form 10-Q
for the quarter ended September 30, 1994).
10.15 Tejas Gas Corporation Annual Incentive Plan effective as of
January 1, 1997.
10.16* Exchange Agreement dated July 24, 1995, among Tejas,
Tejas-Acadian Holding Company, Acadian Gas Corporation and Rene
R. Joyce (filed as Exhibit 10.4 to Tejas' Form 10-Q for the
quarter ended September 30, 1995).
10.17* Termination and Grant Agreement dated October 5, 1995, among
Tejas, Acadian Gas Corporation and Rene R. Joyce (filed as
Exhibit 10.5 to Tejas' Form 10-Q for the quarter ended September
30, 1995).
10.18* Split Dollar Agreement for Jay A. Precourt dated December 21,
1994 and related Collateral Agreement (filed as Exhibit 10.4 to
Tejas' Form 10-Q for the quarter ended March 31, 1995).
(b) 4. Reports on Form 8-K
No reports on Form 8-K were filed in the fourth quarter of 1996.
- ----------------------------
* Incorporated by reference as indicated.
65
<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.
TEJAS GAS CORPORATION
(Registrant)
By: /s/ JAY A. PRECOURT
Jay A. Precourt
Chief Executive Officer
Date: March 27, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 27, 1997 by the following persons on
behalf of the Registrant and in the capacities indicated.
SIGNATURES TITLES
---------- ------
/s/ FREDERIC C. HAMILTON Chairman of the Board and Director
(Frederic C. Hamilton)
/s/ JAY A. PRECOURT Vice Chairman of the Board, Chief Executive
(Jay A. Precourt) Officer, President and Director
/s/ JAMES W. WHALEN Sr. Executive Vice President, Chief
(James W. Whalen) Financial Officer and Treasurer (principal
financial officer and principal accounting
officer)
/s/ CHARLES C. GATES Director
(Charles C. Gates)
/s/ ARTHUR L. KELLY Director
(Arthur L. Kelly)
/s/ A. J. MILLER Director
(A. J. Miller)
/s/ ROBERT G. STONE, JR. Director
(Robert G. Stone, Jr.)
/s/ RONALD F. WALKER Director
(Ronald F. Walker)
66
<PAGE>
SCHEDULE I
TEJAS GAS CORPORATION
CONDENSED BALANCE SHEETS
December 31, 1996 1995
- --------------------------------------------------------------------------------
(IN THOUSANDS)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................... $ 147 $ 282
Income taxes receivable ..................... 11,052 8,536
Prepaids and other current assets ........... 90 --
- --------------------------------------------------------------------------------
Total current assets ................... 11,289 8,818
- --------------------------------------------------------------------------------
INVESTMENTS IN CONSOLIDATED ENTITIES ............. 632,174 296,173
- --------------------------------------------------------------------------------
NOTES RECEIVABLE FROM SUBSIDIARIES ............... 172,547 204,485
- --------------------------------------------------------------------------------
DEFERRED INCOME TAX ASSET ........................ 1,189 1,360
- --------------------------------------------------------------------------------
OTHER ASSETS ..................................... 306 --
- --------------------------------------------------------------------------------
TOTAL .................................. $817,505 $510,836
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable to subsidiaries ............ $ 9,796 $ 12,050
Accrued liabilities ......................... -- 1,435
- --------------------------------------------------------------------------------
Total current liabilities .............. 9,796 13,485
- --------------------------------------------------------------------------------
NOTES PAYABLE TO SUBSIDIARIES .................... 366,249 183,866
- --------------------------------------------------------------------------------
DEFERRED INCOME TAXES ............................ -- --
- --------------------------------------------------------------------------------
LONG-TERM DEBT ................................... -- 11,000
- --------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Preferred Stock ............................. 460 460
Common Stock ................................ 5,138 2,901
Capital surplus ............................. 294,599 191,490
Retained earnings ........................... 141,263 107,634
- --------------------------------------------------------------------------------
Total stockholders' equity ............. 441,460 302,485
- --------------------------------------------------------------------------------
TOTAL .................................. $817,505 $510,836
================================================================================
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS.
67
<PAGE>
SCHEDULE I
TEJAS GAS CORPORATION
CONDENSED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
EQUITY IN EARNINGS OF CONSOLIDATED
SUBSIDIARIES ....................... $ 46,665 $ 30,134 $ 27,817
GENERAL AND ADMINISTRATIVE EXPENSE ...... 193 153 107
- --------------------------------------------------------------------------------
EARNINGS FROM OPERATIONS ................ 46,472 29,981 27,710
- --------------------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest income .................... -- 30 1
Intercompany interest income ....... 16,574 17,275 14,287
Interest expense ................... (818) (928) (788)
Intercompany interest expense ...... (20,478) (12,159) (9,001)
Other income (expense) ............. -- (3) --
Income tax benefit (expense) ....... 1,722 (1,259) (1,663)
- --------------------------------------------------------------------------------
Total ......................... (3,000) 2,956 2,836
- --------------------------------------------------------------------------------
NET EARNINGS ............................ $ 43,472 $ 32,937 $ 30,546
================================================================================
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS.
68
<PAGE>
SCHEDULE I
TEJAS GAS CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
Year Ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings .............................. $ 43,472 $ 32,937 $ 30,546
Adjustments to reconcile net earnings to
net cash provided by (used in)
operating activities:
Equity in earnings of consolidated
subsidiaries ....................... (46,665) (30,134) (27,817)
Deferred income tax .................... 171 286 (967)
- --------------------------------------------------------------------------------
(3,022) 3,089 1,762
Changes in current assets and liabilities:
(Increase) decrease in:
Prepaids and other current assets ... (90) -- --
Income taxes receivable ............. (2,516) (3,170) 2,272
Increase (decrease) in:
Accounts payable to subsidiaries .... (2,254) 1,106 9,147
Accrued liabilities ................. (1,435) (878) (4,847)
- --------------------------------------------------------------------------------
Net cash provided by operating activities . (9,317) 147 8,334
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in consolidated subsidiaries ... (289,336) -- --
Other (net) ............................... (306) -- --
- --------------------------------------------------------------------------------
Net cash used in investing activities ..... (289,642) -- --
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under
line-of-credit agreements .............. (11,000) (19,700) 26,700
Exercise of stock options, net ............ 1,135 106 656
Issuance of common stock, net of expenses . 102,770 -- --
Preferred stock dividends ................. (8,393) (8,393) (8,326)
Borrowings/(repayments) from affiliates ... 214,321 27,940 (27,206)
Other ..................................... (9) (20) (33)
- --------------------------------------------------------------------------------
Net cash provided by (used in) financing
activities ................................ 298,824 (67) (8,209)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ............................... (135) 80 125
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD ................................. 282 202 77
- --------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ... $ 147 $ 282 $ 202
- --------------------------------------------------------------------------------
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS.
69
<PAGE>
TEJAS GAS CORPORATION
SCHEDULE I - NOTES TO CONDENSED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
1. GENERAL
The accompanying condensed financial statements of Tejas Gas Corporation
("Tejas") should be read in conjunction with the consolidated financial
statements and notes thereto included in Tejas' Annual Report on Form 10-K. For
information regarding the components of and an analysis of the activity in
stockholders' equity, refer to the Consolidated Statements of Stockholders'
Equity therein.
2. LONG-TERM NOTES PAYABLE TO SUBSIDIARIES
On January 12, 1995, a promissory note payable to Tejas Gas Corp., a
wholly owned subsidiary, in the original principal amount of $77.4 million was
amended and assigned to a newly formed, wholly owned subsidiary, Tejas - Acadian
Holding Company ("TAHC"). In conjunction with the assignment of the promissory
note to TAHC, Tejas entered into a promissory note payable to TAHC in an
original principal amount of $89 million. At December 31, 1996, the balance
under this promissory note including accrued interest thereon was $103.5
million.
On January 12, 1995 two promissory notes payable to Tejas Gas Corp. in the
amounts of $35 million and $15 million and a $15 million promissory note payable
to Acadian Gas Corporation classified as a current note payable were combined
into a single $212 million revolving promissory note in an original principal
amount of $212 million. This note was then assigned to TAHC. Prior to year-end,
the principal amount of this note was increased by $50 million. At December 31,
1996, the balance under this promissory note including accrued interest thereon
was $238.8 million.
On June 6, 1996 Tejas entered into a promissory note payable to TAHC in an
original principal amount of $22.95 million. At December 31, 1996, the balance
under this promissory note including accrued interest was $23.9 million. Also on
June 6, 1996, Tejas entered into a promissory note payable to Transok, Inc. in
an original principal amount of $10 million. Prior to year-end, the principal
amount of this note was increased to $100 million. At December 31, 1996, the
balance under this promissory note including accrued interest was approximately
$43 thousand.
3. MONEY MARKET CREDIT LINES
Tejas has uncommitted money market credit lines which allow Tejas to borrow
up to $50 million for periods of up to two months. Any such borrowings are
unsecured and may be extended for additional periods if agreed to by the
lenders. At December 31, 1996, Tejas had no outstanding borrowings under the
money market credit lines. Tejas has agreed to maintain funds, including, but
not limited to, availability under the Credit Agreements and the Amended Transok
Credit Facility, sufficient to repay borrowings under the money market credit
lines and accordingly, any outstanding balances are classified as long-term
debt.
4. GUARANTEES
Tejas has guaranteed the performance of Acadian Gas Corporation under a
deferred payment agreement related to the acquisition of the Acadian Gas Group.
Tejas has also guaranteed the performance of Tejas Natural Gas Company ("TNGC")
under certain provisions of a five-year operating lease of a pipeline system and
has guaranteed the performance of TNGC and its subsidiaries' obligations under
certain purchase and transportation agreements.
70
<PAGE>
EXHIBITS TO
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
COMMISSION FILE NUMBER 0-17389
TEJAS GAS CORPORATION
(See Index to Exhibits on Page 72)
71
<PAGE>
INDEX TO EXHIBITS
Exhibit
NUMBER DESCRIPTION
2.1* Stock and Asset Purchase Agreement dated as of September 13, 1993
among Exxon Corporation, Tejas, Exxon Gas System, Inc., Humble Gas
Transmission Company, Monterey Pipeline Company, Humble Gas
System, Inc., Tejas Natural Gas Company, Tejas Gas Pipeline
Company, Tejas Gas Marketing Company, Tejas Gas Storage Company,
Tejas Pipeline Holding Company, 1993 TJ Incorporated, Tejas South
Pipeline Partnership, 1993 TX Pipeline General Partnership and
Tejas North Pipeline Partnership (filed as Exhibit 2(a) to Tejas'
Form 8-K dated September 15, 1993, as amended by Forms 8-K/A filed
on October 25, 1993 and October 29, 1993) (certain portions of
Exhibit 2.1 have been omitted pursuant to a confidential treatment
request filed with the Securities and Exchange Commission).
2.2* Participation Agreement dated as of September 15, 1993 among Tejas
North Pipeline Partnership, State Street Bank and Trust Company of
Connecticut, National Association as Trustee, 1993 TX Pipeline I
Inc., 1993 TX Pipeline II Inc., 1993 TX Pipeline General
Partnership, the Financial Institutions named in Schedule I
thereto, as Purchasers, and Citibank, N.A., as Administrative
Agent (filed as Exhibit 2(b) to Tejas' Form 8-K dated September
15, 1993, as amended by Forms 8-K/A filed on October 25, 1993 and
October 29, 1993).
2.3* Lease dated as of September 15, 1993 between 1993 TX Pipeline
General Partnership and Tejas North Pipeline Partnership (filed as
Exhibit 2(c) to Tejas' Form 8-K dated September 15, 1993, as
amended by Forms 8-K/A dated October 25, 1993 and October 29,
1993).
2.4* General Partnership Option Agreement dated as of September 15,
1993 among Tejas Natural Gas Company, 1993 TX Pipeline I Inc.,
1993 TX Pipeline II Inc. and State Street Bank and Trust Company
of Connecticut, National Association, as Trustee (filed as Exhibit
2(d) to Tejas' Form 8-K dated September 15, 1993, as amended by
Forms 8- K/A filed on October 25, 1993 and October 29, 1993).
2.5* Secured Credit Agreement dated as of September 8, 1993 among Tejas
Natural Gas Company, certain Financial Institutions as the Lenders
and Bank of Montreal, Canadian Imperial Bank of Commerce and
Citibank, N.A. as Co-Agents for the Lenders, and Canadian Imperial
Bank of Commerce as Administrative Agent for the Lenders (filed as
Exhibit 2(e) to Tejas' Form 8-K dated September 15, 1993, as
amended by Forms 8-K/A filed on October 25, 1993 and October 29,
1993) (see Exhibits 10.23, 10.24 and 10.25 to this Form 10-K which
supersede this Credit Agreement).
2.6* Agreement of Merger dated as of May 9, 1996 between Central and
Southwest Corporation and Tejas, as amended by First Amendment to
Agreement of Merger dated June 6, 1996 (filed as Exhibit 2(a) to
Tejas' Form 8-K dated June 18, 1996, as amended by Form 8-K/A
dated July 17, 1996).
72
<PAGE>
2.7* Lease Agreement dated as of June 6, 1996 between Canadian Imperial
Bank of Commerce, Inc. as Lessor, and Transok Acquisition
Corporation III, as Lessee (filed as Exhibit 2(b) to Tejas' Form
8-K/A dated July 17, 1996).
2.8* Participation Agreement dated as of June 6, 1996 between Transok
Acquisition Corporation III, as Lessee, Canadian Imperial Bank of
Commerce Inc., as Lessor, Canadian Imperial Bank of Commerce, New
York Agency, as Administrative Agent, and Bank of Montreal, as
Documentation Agent (filed as Exhibit 2(c) to Tejas' Form 8-K/A
dated July 17, 1996).
2.9* Secured Credit Agreement dated as of June 6, 1996 between Transok
Acquisition Company, Bank of Montreal and CIBC Inc. (filed as
Exhibit 2(d) to Tejas' Form 8-K/A dated July 17, 1996).
2.10 Amended and Restated Secured Credit Agreement dated as of December
12, 1996, among Transok, Inc., as the Borrower, and certain
Financial Institutions, as the Lenders, Bank of Montreal, as
Administrative Agent, and Canadian Imperial Bank of Commerce, as
Documentation Agent (included in Exhibit 4.18 to this Form 10-K).
2.11 First Omnibus Amendment to Participation Agreement, Lease and Loan
Agreement dated as of December 12, 1996 among Transok Gas
Processing Company, as Lessee, Transok, Inc., as the Transok
Guarantor, CIBC Inc., as the Lessor, and certain Financial
Institutions, as the Lenders, and Canadian Imperial Bank of
Commerce, as Administrative Agent, and Bank of Montreal, as
Documentation Agent.
3.1* Certificate of Incorporation of Tejas (filed as Exhibit 3.1 to
Tejas' Registration Statement on Form S-1, No. 33-24697 (the "1988
Registration Statement")).
3.2* By-Laws of Tejas (filed as Exhibit 3.2 to the 1988 Registration
Statement).
3.3* Certificate of Amendment to Certificate of Incorporation of Tejas
dated May 12, 1993 (filed as Exhibit 4.3 to Tejas' Form 10-Q for
the quarter ended June 30, 1993).
3.4* Certificate of Designation of 9.96% Preferred Stock dated January
26, 1993 (filed as Exhibit 2(c) to Amendment No. 1 to Tejas'
Registration Statement on Form 8-A (filed on March 25, 1993)
relating to Tejas' 9.96% Depositary Shares and 9.96% Preferred
Stock).
3.5* Certificate of Designation of 5 1/4% Convertible Preferred Stock
dated November 2, 1993 (filed as Exhibit 4.1 to Tejas' Form 10-Q
for the quarter ended September 30, 1993).
3.6* Rights Agreement, dated as of November 11, 1994, between Tejas and
Harris Trust and Savings Bank which includes the Certificate of
Designation for the Series C Junior Participating Preferred Stock
as EXHIBIT A, the form of Right Certificate as EXHIBIT B, and the
Summary of Rights to Purchase Preferred Shares as EXHIBIT C (filed
as Exhibit 1 to Tejas' Form 8-K dated November 11, 1994).
4.1* Certificate of Incorporation of Tejas (filed as Exhibit 3.1 to the
1988 Registration Statement).
4.2* Certificate of Amendment to Certificate of Incorporation of Tejas
dated May 12, 1993 (filed as Exhibit 4.3 to Tejas' Form 10-Q for
the quarter ended June 30, 1993).
73
<PAGE>
4.3* By-Laws of Tejas (filed as Exhibit 3.2 to the 1988 Registration
Statement).
4.4* Certificate of Designation of 9.96% Preferred Stock dated January
26, 1993 (filed as Exhibit 2(c) to Amendment No. 1 to Tejas'
Registration Statement on Form 8-A (filed on March 25, 1993)
relating to Tejas' 9.96% Depositary Shares and 9.96% Preferred
Stock).
4.5* Certificate of Designation of 5 1/4% Convertible Preferred Stock
dated November 2, 1993 (filed as Exhibit 4.1 to Tejas' Form 10-Q
for the quarter ended September 30, 1993).
4.6* Rights Agreement, dated as of November 11, 1994, between Tejas and
Harris Trust and Savings Bank which includes the Certificate of
Designation for the Series C Junior Participating Preferred Stock
as EXHIBIT A, the form of Right Certificate as EXHIBIT B, and the
Summary of Rights to Purchase Preferred Shares as EXHIBIT C (filed
as Exhibit 1 to Tejas' Form 8-K dated November 11, 1994).
4.7* Specimen Stock Certificate for Common Stock (filed as Exhibit 4.4
to Tejas' Form 10-Q for the quarter ended June 30, 1993).
4.8* Specimen Depositary Receipt Representing 9.96% Depositary Shares
(filed as Exhibit 4(d) to Tejas' Registration Statement on Form
S-2, No. 33-53862 (the "1993 Registration Statement")).
4.9* Specimen Depositary Receipt Representing 5 1/4% Depositary Shares
(filed as Exhibit 4.8 to Tejas' Form 10-K for the fiscal year
ended December 31, 1993).
4.10* Specimen Stock Certificate for 9.96% Preferred Stock (filed as
Exhibit 4(e) to the 1993 Registration Statement).
4.11* Specimen Stock Certificate for 5 1/4% Convertible Preferred Stock
(filed as Exhibit 4.4 to Tejas' Form 10-Q for the quarter ended
September 30, 1993).
4.12* Deposit Agreement dated as of January 26, 1993 among Tejas, Harris
Trust and Savings Bank and all holders from time to time of
depositary receipts issued thereunder (filed as Exhibit 2(d) to
Amendment No. 1 to Tejas' Registration Statement on Form 8-A
(filed on March 25, 1993) relating to Tejas' 9.96% Depositary
Shares and 9.96% Preferred Stock).
4.13* Deposit Agreement dated as of November 2, 1993 among Tejas, Harris
Trust and Savings Bank and all holders from time to time of
depositary receipts issued thereunder (filed as Exhibit 4.2 to
Tejas' Form 10-Q for the quarter ended September 30, 1993).
4.14* Amended and Restated Secured Credit Agreement dated January 12,
1995 among Tejas Natural Gas Company, certain Financial
Institutions as the Lenders and Bank of Montreal, Canadian
Imperial Bank of Commerce and Citibank, N.A. as Co-Agents for the
Lenders, and Canadian Imperial Bank of Commerce as Administrative
Agent for the Lenders (filed as Exhibit 10.29 to Tejas' Form 10-K
for the fiscal year ended December 31, 1994).
4.15* Amended and Restated Secured Credit Agreement dated January 12,
1995 among Tejas- Acadian Holding Company, certain Financial
Institutions as the Lenders and Bank of Montreal, Canadian
Imperial Bank of Commerce and Citibank, N.A. as Co-Agents for the
Lenders, and Canadian Imperial Bank of Commerce as Administrative
Agent for the
74
<PAGE>
Lenders (filed as Exhibit 10.30 to Tejas' Form 10-K for the fiscal
year ended December 31, 1994).
4.16* Form of Indenture between Tejas Gas Corporation and Texas Commerce
Bank, N.A., as Trustee (filed as Exhibit 4 to Tejas' Form S-3
Registration Statement, No. 333- 06207).
4.17* Issuing and Paying Agency Agreement for Medium Term Notes dated as
of March 30, 1992 between Transok, Inc. and Central and South West
Services, Inc. including (I) Privately-Placed Medium-Term Notes
Administrative Procedures for Fixed Rate and Floating Rate Notes
as Exhibit A, (ii) Form of Fixed Rate Medium-Term Note as Exhibit
B, and (iii) Form of Floating Rate Medium-Term Notes as Exhibit C
(filed as Exhibit 4.10 to Tejas' Form 10-Q for the quarter ended
June 30, 1996).
4.18 Amended and Restated Secured Credit Agreement dated as of December
12, 1996, among Transok, Inc., as the Borrower, and certain
Financial Institutions, as the Lenders, Bank of Montreal, as
Administrative Agent, and Canadian Imperial Bank of Commerce, as
Documentation Agent.
Pursuant to Item 601(b)(4)(iii) of Regulation S-K,
instruments with respect to long-term debt have been
omitted where the amount of authorized indebtedness
under such instruments does not exceed 10 percent of the
total consolidated assets of Tejas. Tejas hereby agrees
to furnish a copy of any such instrument to the
Securities and Exchange Commission upon its request.
10.1* Form of Tejas Gas Executive Incentive Agreement (filed as Exhibit
10.12 to the 1988 Registration Statement).
10.2 Tejas Gas Corporation Employee Stock Option Plan, as amended and
restated effective January 1, 1997.
10.3 Tejas Gas Corporation Director Stock Option Plan, as amended and
restated effective January 1, 1997.
10.4* Form of Tejas Gas Corporation Stock Option Agreement for Employee
Stock Option Plan (filed as Exhibit 10.4 to Tejas' Form 10-K for
the year ended 1995).
10.5* Director Stock Award Plan, as approved on October 5, 1995 by the
Board of Directors of Tejas (filed as Exhibit 4.6 to Tejas'
Registration Statement on Form S-8, No. 33- 64895).
10.6* First Amendment to Director Stock Award Plan, as approved on
December 9, 1995 by the Board of Directors of Tejas (filed as
Exhibit 4.7 to Tejas' Registration Statement on Form S-8, No.
33-64895).
10.7* Tejas Gas Corporation Thrift Plan, as amended and restated
effective January 1, 1997 (filed as Exhibit 4.10 to Tejas' Form
S-8, No. 333-18349).
10.8* Tejas Gas Corporation Thrift Benefit Restoration Plan, effective
as of August 9, 1994 (filed as Exhibit 10.1 to Tejas' Form 10-Q
for the quarter ended September 30, 1994).
75
<PAGE>
10.9* First Amendment to the Tejas Gas Corporation Thrift Benefit
Restoration Plan dated April 12, 1995 (filed as Exhibit 10.2 to
Tejas' Form 10-Q for the quarter ended March 31, 1995).
10.10* Second Amendment to the Tejas Gas Corporation Thrift Benefit
Restoration Plan dated October 6, 1995 (filed as Exhibit 10.17 to
Tejas' Form 10-K for the year ended December 31, 1995).
10.11* Tejas Gas Corporation Thrift Benefit Restoration Trust between
Tejas and The First National Bank of Boston, as trustee, dated
September 16, 1994 (filed as Exhibit 10.2 to Tejas' Form 10-Q for
the quarter ended September 30, 1994).
10.12* Tejas Gas Corporation Pension Benefit Restoration Plan, effective
as of August 9, 1994 (filed as Exhibit 10.3 to Tejas' Form 10-Q
for the quarter ended September 30, 1994).
10.13* First Amendment to the Tejas Gas Corporation Pension Benefit
Restoration Plan dated April 12, 1995 (filed as Exhibit 10.3 to
Tejas' Form 10-Q for the quarter ended March 31, 1995).
10.14* Tejas Gas Corporation Pension Benefit Restoration Trust between
Tejas and The First National Bank of Boston, as trustee, dated
September 16, 1994 (filed as Exhibit 10.4 to Tejas' Form 10-Q for
the quarter ended September 30, 1994).
10.15 Tejas Gas Corporation Annual Incentive Plan effective as of
January 1, 1997.
10.16* Exchange Agreement dated July 24, 1995, among Tejas, Tejas-Acadian
Holding Company, Acadian Gas Corporation and Rene R. Joyce (filed
as Exhibit 10.4 to Tejas' Form 10-Q for the quarter ended
September 30, 1995).
10.17* Termination and Grant Agreement dated October 5, 1995, among
Tejas, Acadian Gas Corporation and Rene R. Joyce (filed as Exhibit
10.5 to Tejas' Form 10-Q for the quarter ended September 30,
1995).
10.18* Split Dollar Agreement for Jay A. Precourt dated December 21, 1994
and related Collateral Agreement (filed as Exhibit 10.4 to Tejas'
Form 10-Q for the quarter ended March 31, 1995).
10.19* Master Natural Gas Purchase Agreement between Tejas Gas Storage
Company and Houston Gas Venture, L.L.C. effective as of September
16, 1994 (filed as Exhibit 10.6 to Tejas' Form 10-Q for the
quarter ended September 30, 1994).
10.20* Marketing Agreement between Tejas Gas Storage Company and Houston
Gas Venture, L.L.C. effective as of September 16, 1994 (filed as
Exhibit 10.7 to Tejas' Form 10-Q for the quarter ended September
30, 1994).
10.21* Intrastate Gas Storage Agreement between Tejas Gas Storage Company
and Houston Gas Venture, L.L.C. effective as of September 16, 1994
(filed as Exhibit 10.8 to Tejas' Form 10-Q for the quarter ended
September 30, 1994).
76
<PAGE>
10.22* Consultancy Agreement dated January 1, 1995 between F.C.H.
Operating Company and Tejas (filed as Exhibit 10.27 to Tejas' Form
10-K for the fiscal year ended December 31, 1994).
10.23* Amended and Restated Secured Credit Agreement dated January 12,
1995 among Tejas Natural Gas Company, certain Financial
Institutions as the Lenders and Bank of Montreal, Canadian
Imperial Bank of Commerce and Citibank, N.A. as Co-Agents for the
Lenders and Canadian Imperial Bank of Commerce as Administrative
Agent for the Lenders. (filed as Exhibit 10.29 to Tejas' Form 10-K
for the fiscal year ended December 31, 1994).
10.24 First Amendment to Amended and Restated Secured Credit Agreement
dated as of December 20, 1996, among Tejas Natural Gas Company, as
the Borrower, and certain Lending Institutions, as the Lenders,
and Canadian Imperial Bank of Commerce, as Administrative Agent
for the Lenders.
10.25* Amended and Restated Secured Credit Agreement dated January 12,
1995 among Tejas- Acadian Holding Company, certain Financial
Institutions as the Lenders and Bank of Montreal, Canadian
Imperial Bank of Commerce and Citibank, N.A. as Co-Agents for the
Lenders, and Canadian Imperial Bank of Commerce as Administrative
Agent for the Lenders (filed as Exhibit 10.30 to Tejas' Form 10-K
for the fiscal year ended December 31, 1994).
10.26 First Amendment to Amended and Restated Secured Credit Agreement
dated as of December 20, 1996, among Tejas-Acadian Holding
Company, as the Borrower, and certain Lending Institutions, as the
Lenders, and Bank of Montreal, Canadian Imperial Bank of Commerce
and Citibank, N.A., as Co-Agents for the Lenders, and Canadian
Imperial Bank of Commerce, as Administrative Agent for the
Lenders.
10.27* Loan Agreement and Trust Indenture with respect to Industrial
Development Revenue Bonds for Doddridge County, West Virginia
(filed as Exhibit 10.9 to the 1988 Registration Statement).
10.28* Loan Agreement and Trust Indenture with respect to Industrial
Development Refunding Revenue Bonds for Pleasants County, West
Virginia (filed as Exhibit 10.17 to Tejas' Form 10-Q for the
quarter ended June 30, 1990).
10.29* Loan Agreement and Trust Indenture with respect to Industrial
Development Refunding Revenue Bonds for Lewis County, West
Virginia (filed as Exhibit 10.18 to Tejas' Form 10-Q for the
quarter ended June 30, 1990).
10.30* Cavern Lease Agreement between Shell Oil Company and Pontchartrain
Natural Gas System dated as of June 17, 1992 (filed as Exhibit
10.21 to Tejas' Form 8-K dated June 29, 1992).
10.31* Sublease Agreement between Shell Oil Company and Pontchartrain
Natural Gas system dated as of June 17, 1992 (filed as Exhibit
10.22 to Tejas' Form 8-K dated June 29, 1992).
77
<PAGE>
10.32* Operating Agreement between Shell Pipe Line Corporation, acting on
behalf of Shell Oil Company, and Pontchartrain Natural Gas System
dated as of June 17, 1992 (filed as Exhibit 10.23 to Tejas' Form
8-K dated June 29, 1992).
10.33* Construction and Operating Agreement for the Austin Pipeline
between Intrastate Gathering Corporation and Houston Pipe Line
Company dated September 19, 1986 (filed as Exhibit 10(dd) to the
1993 Registration Statement).
10.34* Construction, Operating and Tax Agreement between Intrastate
Gathering Corporation and Houston Pipe Line Company dated November
19, 1985 (filed as Exhibit 10(ee) to the 1993 Registration
Statement).
10.35* Construction, Operating and Tax Agreement Amendment between
Houston Pipe Line Company and Gulf Energy Pipeline Company
amending the Construction, Operating and Tax Agreement dated
November 19, 1985 (filed as Exhibit 10(ff) to the 1993
Registration Statement).
10.36* Letter of Intent dated September 12, 1991 regarding Pontchartrain
Natural Gas System, Acadian Gas Pipeline System and LGS Natural
Gas Company (filed as Exhibit 10(gg) to the 1993 Registration
Statement).
10.37* Agreement of Limited Partnership for Evangeline Gas Pipeline
Company, L.P. among Evangeline Gas Corp., Evangeline Gulf Coast
Gas Corporation and Evangeline Northwest Corp. dated as of
September 24, 1991 (filed as Exhibit 10(hh) to the 1993
Registration Statement).
10.38* Gulf Coast Natural Gas Company Partnership Agreement between
ENSERCH Corporation and Tejas Gas Transmission Company dated as of
October 1, 1991 but effective as of January 1, 1992 (filed as
Exhibit 10(ii) to the 1993 Registration Statement).
10.39* First Amendment to Partnership Agreement between ENSERCH
Corporation and Tejas Gas Transmission Company dated as of October
1, 1991 but effective as of January 1, 1992 (filed as Exhibit
10(jj) to the 1993 Registration Statement).
10.40* Partnership Contribution Agreement among ENSERCH Corporation,
Tejas Gas Transmission Company and Gulf Coast Natural Gas Company
dated as of October 1, 1991 but effective as of January 1, 1992
(filed as Exhibit 10(kk) to the 1993 Registration Statement).
10.41* Construction, Ownership, Operation and Maintenance Agreement
between Gulf Energy Pipeline Company and Houston Pipe Line Company
dated as of August 20, 1992 (("Big Cowboy System") filed as
Exhibit 10(ll) to the 1993 Registration Statement).
10.42* Deferred Payment Agreement dated December 28, 1990 among Acadian
Gas Corporation, Tejas, Texas Oil and Gas Corporation and
Occidental Petroleum Corporation (filed as Exhibit 10(mm) to the
1993 Registration Statement).
10.43* Tax Allocation dated December 27, 1988 between Tejas and Tejas Gas
Corp. (filed as Exhibit 10(nn) to the 1993 Registration
Statement).
78
<PAGE>
10.44* Tax Allocation dated December 28, 1990 between Tejas and Acadian
Gas Corporation (filed as Exhibit 10(oo) to the 1993 Registration
Statement).
10.45* Gas Sale and Purchase Contract Between Tejas, as Seller, and Coral
Energy Resources, L.P., as Buyer, dated November 1, 1995 (filed as
Exhibit 10.1 to Tejas' Form 8-K dated November 2, 1995, as amended
by a Form 8-K/A dated January 31, 1996) (certain portions of
Exhibit 10.50 were omitted pursuant to a confidential treatment
request filed with the Securities and Exchange Commission).
10.46* Gas Sale and Purchase Contract between Acadian Gas Corporation, as
Seller, and Coral Energy Resources, L.P., as Buyer, dated November
1, 1995 (filed as Exhibit 10.2 to Tejas' Form 8-K dated November
2, 1995, as amended by a Form 8-K/A dated January 31, 1996)
(certain portions of Exhibit 10.51 were omitted pursuant to a
confidential treatment request filed with the Securities and
Exchange Commission).
10.47* Limited Partnership Agreement of Coral Energy Resources, L.P.,
dated September 1, 1995 (filed as Exhibit 10.3 to Tejas' Form 8-K
dated November 2, 1995, as amended by Form 8-K/A dated January 31,
1996) (certain portions of Exhibit 10.52 were omitted pursuant to
a confidential treatment request filed with the Securities and
Exchange Commission).
10.48* First Amendment Agreement to the Limited Partnership Agreement of
Coral Energy Resources, L.P. dated April 3, 1996 (filed as Exhibit
10.1 to Tejas' Form 10-Q for the quarter ended June 30, 1996).
10.49* Second Amendment Agreement to the Limited Partnership Agreement of
Coral Energy Resources, L.P. dated April 10, 1996 (filed as
Exhibit 10.2 to Tejas' Form 10-Q for the quarter ended June 30,
1996).
10.50* Third Amendment Agreement to the Limited Partnership Agreement of
Coral Energy Resources, L.P. dated June 3, 1996 (filed as Exhibit
10.3 to Tejas' Form 10-Q for the quarter ended June 30, 1996).
10.51* Amended and Restated Limited Liability Company Agreement of
Tejas-Magnolia Energy, L.L.C. dated as of December 18, 1995 (filed
as Exhibit 10.53 to Tejas' Form 10- K for the year ended December
31, 1995).
10.52* Class B Units Membership Subscription Agreement dated as of
December 18, 1995 between Tejas-Magnolia Energy, L.L.C. and
Magnolia Energy Venture Trust (filed as Exhibit 10.54 to Tejas'
Form 10-K for the year ended December 31, 1995).
10.53* Amended and Restated Firm Intrastate Service Agreement dated as of
March 12, 1996 between Transok, Inc., as transporter, and Public
Service Company of Oklahoma, as shipper, as amended by Amendment
dated as of June 6, 1996 (filed as Exhibit 10.5 to Tejas' Form
10-Q for the quarter ended June 30, 1996).
10.54* Indemnification Agreement dated as of June 6, 1996 between Public
Service Company of Oklahoma and Transok, Inc. (filed as Exhibit
10.6 to Tejas' Form 10-Q for the quarter ended June 30, 1996).
11.1 Computations of Earnings Per Common Share.
79
<PAGE>
21.1 Subsidiaries of Tejas.
23.1 Consent of Deloitte & Touche LLP, independent auditors.
- ---------------
* Incorporated by reference as indicated.
80
EXHIBIT 2.11
FIRST OMNIBUS AMENDMENT TO
PARTICIPATION AGREEMENT, LEASE, AND
LOAN AGREEMENT
AMONG
TRANSOK GAS PROCESSING COMPANY,
AS THE LESSEE,
TRANSOK, INC.,
AS THE TRANSOK GUARANTOR,
CIBC INC.,
AS THE LESSOR
AND
CERTAIN FINANCIAL INSTITUTIONS,
AS THE LENDERS,
AND
CANADIAN IMPERIAL BANK OF COMMERCE,
AS ADMINISTRATIVE AGENT,
AND
BANK OF MONTREAL,
AS DOCUMENTATION AGENT
DATED AS OF DECEMBER 12, 1996
INDEX
Capitalized terms contained herein have the same meaning ascribed to
them in the Participation Agreement.
1. First Omnibus Amendment to Participation Agreement, Lease, and Loan
Agreement (including receipt therefor by Administrative Agent)
SCHEDULE I Lenders
SCHEDULE II Disclosure Schedule
SCHEDULE 2.2 Commitments
SCHEDULE 8.2 Notice Information
EXHIBIT 8.7 Subsidiaries and Material Subsidiaries
EXHIBIT A List of Guarantors
EXHIBIT A-1 Form of Consent and Acknowledgment of
Guaranties executed by Guarantors listed on
EXHIBIT A
EXHIBIT A-2 Form of Consent and Acknowledgment of Guaranty
executed by Tejas Transok Holding Company
EXHIBIT A-3 Form of Amendment to Transok Guaranty
EXHIBIT B-1 Form of Opinion of Texas counsel to Lessee and
the Guarantors
EXHIBIT B-2 Form of Opinion of Oklahoma counsel to Lessee
and the Transok
Guarantor
EXHIBIT C Form of Financial Condition Certificate of
Transok, Inc. and its Subsidiaries
EXHIBIT D Form of Amendment to Memorandum of Lease
-1-
<PAGE>
TAB DOCUMENTS
2. Consent and Acknowledgment of Guaranties executed by:
a. Transok Properties, Inc.
b. Transok Gas Company
c. Transok Gas Processing Company
d. Tejas Oklahoma Natural Gas, Inc.
e. Tejas and Transok Energy, Inc.
f. Tejas Newco Intrastate Company
g. Tejas Oklahoma Marketing Company
h. Tejas Oklahoma Newco, Inc.
i. Tejas Oklahoma Pipeline Services, L.L.C.
3. Consent and Acknowledgment of Guaranty executed by Tejas Transok
Holding Company
4. First Amendment to Transok Guaranty executed by Transok, Inc.
5. New A-Notes and B-Notes of Lessor payable to:
a. Bank of Nova Scotia
b. Credit Lyonnais
c. National Westminster Bank Plc
d. Sumitomo Bank
e. Wells Fargo Bank (Texas) N.A.
6. Receipt by Administrative Agent of existing A-Notes and B-Notes of
Lessor marked "exchanged" from:
a. Bank of Boston
b. Credit Lyonnais
c. National Westminster Bank Plc
d. Wells Fargo Bank (Texas) N.A.
7. Certificates of a Secretary or an Assistant Secretary and the
President or a Vice President for each of the Lessee and Guarantors
which is a party to a Loan Document together with:
i. Signatures and incumbency of officers
ii. Resolutions with respect to the transactions
iii. AND a certificate as to no amendments to, or attaching
amended, [Certificate] [Articles] of Incorporation, Partnership
Agreement, Membership Agreement, and By-Laws
a. Lessee
b. Transok, Inc.
c. Tejas Transok Holding Company
d. Transok Gas Company
e. Transok Properties, Inc.
f. Tejas Oklahoma Natural Gas, Inc.
g. Tejas and Transok Energy, Inc.
-2-
<PAGE>
TAB DOCUMENTS
h. Tejas Newco Intrastate Company
i. Tejas Oklahoma Marketing Company
j. Tejas Oklahoma Newco, Inc.
k. Tejas Oklahoma Pipeline Services, L.L.C.
8. Opinions of Counsel
a. Hutcheson & Grundy, L.L.P., special Texas counsel for Lessee and
Guarantors b. Hall, Estill, Hardwick, Gable, Golden & Nelson, special
Oklahoma counsel for Lessee and Guarantors
9. Certificate of Financial Condition from the chief financial officer of
Transok, Inc. together with all related financial statements, opinions
and other material documents containing information on which such
certificate is based
10. Satisfaction of conditions precedent under, and purchase of and
payment for the Notes under the Amended and Restated Secured Credit
Agreement
11. U.C.C.-3 Financing Statement Amendments with respect to Assignment of
Lease and Rents, attaching First Omnibus Amendment
12. Amendment to Memorandum of Lease
-3-
<PAGE>
FIRST OMNIBUS AMENDMENT
to
PARTICIPATION AGREEMENT, LEASE
and
LOAN AGREEMENT
dated as of December 12, 1996
among
TRANSOK GAS PROCESSING COMPANY, as Lessee,
TRANSOK, INC., as Transok Guarantor,
CIBC INC., as Lessor,
CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY,
as Administrative Agent,
BANK OF MONTREAL, as Documentation Agent,
and
CERTAIN FINANCIAL INSTITUTIONS NAMED ON SCHEDULE I,
as Lenders,
ALL RIGHT, TITLE AND INTEREST OF LESSOR UNDER THIS FIRST OMNIBUS
AMENDMENT TO PARTICIPATION AGREEMENT, LEASE AND LOAN AGREEMENT (THIS
"AMENDMENT") AND THE PROPERTY SUBJECT HERETO HAVE BEEN ASSIGNED TO, AND ARE
SUBJECT TO A SECURITY INTEREST IN FAVOR OF, CANADIAN IMPERIAL BANK OF COMMERCE,
NEW YORK AGENCY, AS ADMINISTRATIVE AGENT ("ADMINISTRATIVE AGENT") UNDER THE
ASSIGNMENT OF LEASE AND RENTS DATED AS OF JUNE 6, 1996 (AS SUCH AGREEMENT MAY BE
AMENDED AND/OR SUPPLEMENTED TO THE EXTENT PERMITTED THEREBY) FOR THE BENEFIT OF
THE PARTICIPANTS REFERRED TO IN SUCH AGREEMENT. THIS AMENDMENT HAS BEEN EXECUTED
IN SEVERAL COUNTERPARTS. TO THE EXTENT THAT THIS AMENDMENT MAY CONSTITUTE
CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN
EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS AMENDMENT
MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART HEREOF
OTHER THAN THE "ORIGINAL EXECUTED COUNTERPART", WHICH SHALL BE IDENTIFIED AS THE
COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE ADMINISTRATIVE AGENT
ON OR FOLLOWING THE SIGNATURE PAGE THEREOF.
<PAGE>
FIRST OMNIBUS AMENDMENT TO PARTICIPATION AGREEMENT,
LEASE AND LOAN AGREEMENT
This FIRST OMNIBUS AMENDMENT TO PARTICIPATION AGREEMENT, LEASE AND
LOAN AGREEMENT is made and entered into as of December 12, 1996 (this
"Amendment"), among TRANSOK GAS PROCESSING COMPANY, a Delaware corporation, as
Lessee, TRANSOK, INC., an Oklahoma corporation, as Transok Guarantor, CIBC INC.,
a Delaware corporation, as Lessor, CANADIAN IMPERIAL BANK OF COMMERCE, a bank
organized under the laws of Canada, acting through its New York Agency, not in
its individual capacity but solely as Administrative Agent, BANK OF MONTREAL, a
bank organized under the laws of Canada, acting through certain of its U.S.
branches or agencies, as Documentation Agent, and the various financial
institutions named on Schedule I hereto or as are or may from time to time
become parties hereto, as Lenders.
R E C I T A L S:
A. Transok Acquisition Corporation III, a Delaware corporation ("TAC
III"), as Lessee, and CIBC Inc., as Lessor, have entered into a Lease Agreement
dated as of June 6, 1996 (the "LEASE").
B. To finance a portion of the acquisition of the property subject to
the Lease, TAC III, as Lessee, Transok Acquisition Company, a Delaware
corporation ("TAC"), as Transok Guarantor, CIBC Inc., as Lessor, the
Administrative Agent, the Documentation Agent and the Lenders entered into a
Participation Agreement dated as of June 6, 1996 (the "PARTICIPATION AGREEMENT")
and the Lessor, the Administrative Agent, the Documentation Agent and the
Lenders entered into a Loan Agreement dated as of June 6, 1996 (the "LOAN
AGREEMENT").
C. TAC III has merged with and into the Lessee and the Lessee is the
surviving corporation.
D. TAC has merged with and into the Transok Guarantor and the Transok
Guarantor is the surviving corporation.
E. The Lessee, the Lessor, the Transok Guarantor, the Administrative
Agent, the Documentation Agent and the Lenders now desire to amend the
Participation Agreement, the Lease and the Loan Agreement as hereinafter set
forth.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereby agree as follows (terms used but not defined
herein shall have the meaning provided in the Lease, the Loan Agreement and the
Participation Agreement, as the case may be):
<PAGE>
A. MODIFICATIONS TO THE LEASE, THE LOAN AGREEMENT AND THE
PARTICIPATION AGREEMENT.
1. APPENDIX A to the Participation, Lease and Loan Agreement is
amended as follows:
(a) The definitions of "APPLICABLE MARGIN," "BORROWER,"
"CAPITALIZATION," "CREDIT AGREEMENT," "EURODOLLAR INTEREST RATE," "LEASE,"
"LESSEE," "LOAN AGREEMENT," "MATERIAL SUBSIDIARY," "PARTICIPATION AGREEMENT,"
"RSN," "TOTAL INTEREST EXPENSE" and "TRANSOK GUARANTOR" are amended and restated
to read as follows:
"APPLICABLE MARGIN" means at such time and from time to time
as the Leverage Ratio is in one of the following ranges, the
percentages per annum set forth opposite such Leverage Ratio
under the heading for the relevant type of Loan:
PERCENTAGE
LEVERAGE RATIO DOMESTIC LOAN EURODOLLAR LOAN
Range 1: Equal to or greater than 65% 0.250% 1.250%
Range 2: Less than 65% and
equal to or greater than 60% 0% 0.875%
Range 3: Less than 60% and
equal to or greater than 55% 0% 0.750%
Range 4: Less than 55% and
equal to or greater than 50% 0% 0.625%
Range 5: Less than 50% 0% 0.500%
PROVIDED, HOWEVER that during the period from the Amendment Effective Date
through and including December 30, 1997, at such times and from time to time as
the Leverage Ratio is in Range 2, 3, 4 or 5 as indicated above, the minimum
Applicable Margin with respect to Eurodollar Loans shall be 1.000%, unless the
ratio of EBITDA to Total Interest Expense calculated on June 30, 1997 or at any
time thereafter in accordance with Section 4.1.2(g) of the Transok Guaranty is
at least 2.50:1, in which case the Applicable Margin with respect to Eurodollar
Loans shall be calculated in accordance with the Leverage Ratio table above.
"BORROWER" means Transok, Inc., an Oklahoma corporation, successor by
merger to Transok Acquisition Company, a Delaware corporation, and its
successors and assigns.
"CAPITALIZATION" means the sum, at the time outstanding and without
duplication, of (i) Funded Debt plus (ii) Stockholders' Equity plus (iii)
Operating Lessor's Debt.
"CREDIT AGREEMENT" means the Amended and Restated Secured Credit
Agreement dated as of December 12, 1996, among the Transok Guarantor, certain
financial institutions, as the
-2-
<PAGE>
Lenders, Bank of Montreal, as Administrative Agent, and Canadian Imperial Bank
of Commerce, New York Agency, as Documentation Agent.
"EURODOLLAR INTEREST RATE" means, with respect to each Eurodollar Funded
Amount for any Eurodollar Interest Period, a rate per annum (rounded upwards, if
necessary, to the nearest integral multiple of the number of decimal points
displayed on Telerate Page 3750, or any successor or similar service, or if
neither such Telerate Page 3750 nor any successor or similar service is
available and such rate is determined using Reference Lenders, one one-hundredth
of one percent (1/100%)), equal to (i) the average of the offered quotations
appearing on Telerate Page 3750 (or if such Telerate Page shall not be
available, any successor or similar service as may be selected by the Agents and
the Lessee) as of 11:00 a.m., London time (or as soon thereafter as
practicable), two (2) Eurodollar Business Days prior to the beginning of such
Eurodollar Interest Period, and (ii) if neither such Telerate Page 3750 nor any
successor or similar service is available, then the quotient of (x) the
arithmetic average of the quotation by each Reference Lender (notified to the
Administrative Agent by such Reference Lender) of the rate of interest per annum
at which deposits in Dollars in immediately available funds are offered to such
Reference Lender two (2) Eurodollar Business Days prior to the beginning of such
Eurodollar Interest Period by prime banks in the interbank Eurodollar market as
at or about 9:00 a.m., Chicago time, for delivery on the first day of such
Eurodollar Interest Period, in each case for a period equal to such Eurodollar
Interest Period and in an amount equal to the proposed Eurodollar Funded Amount
of such Reference Lender to which such Eurodollar Interest Period relates,
divided by (y) the remainder of one (1) minus the decimal equivalent of the
applicable Eurocurrency Reserve Percentage. If on any occasion any Reference
Lender is unable, or for any reason fails, so to notify the Administrative Agent
by 10:00 a.m., Chicago time, two (2) Eurodollar Business Days before the first
day of such Eurodollar Interest Period, the applicable Eurodollar Interest Rate
shall be determined on the basis of each quotation furnished by those of the
Reference Lenders which so notify the Administrative Agent at or prior to said
10:00 a.m.
"LEASE" means the Lease Agreement dated as of June 6, 1996, between the
Lessor and the Lessee, as the same may be amended, extended, renewed,
supplemented, restated or otherwise modified from time to time.
"LESSEE" means Transok Gas Processing Company, a Delaware corporation,
successor by merger to Transok Acquisition Corporation III, a Delaware
corporation, in its capacity as lessor under the Lease and its permitted
successors and assigns.
"LOAN AGREEMENT" means the Loan Agreement dated as of June 6, 1996,
among the Lessor, the Agents and the Lenders, as the same may be amended,
restated, supplemented, renewed, extended or otherwise modified from time to
time.
"MATERIAL SUBSIDIARY" means (1) as of the date hereof the entities
identified as such on EXHIBIT 8.7 to the Participation Agreement and (2) any
Subsidiary of the Transok Guarantor having Consolidated Stockholders' Equity (as
defined in the Credit Agreement) in excess of $15,000,000, provided, that any
Subsidiary which becomes a Material Subsidiary of the type
-3-
<PAGE>
described in the foregoing clause shall remain a Material Subsidiary for
purposes of this Agreement even if it shall cease to have Consolidated
Stockholders' Equity in excess of $15,000,000 and provided further that the
following Subsidiaries shall not be a Material Subsidiary for purposes of the
Operative Documents: Tranpache Partnership, a Texas general partnership;
Downtown Plaza II, an Oklahoma general partnership; Southwest Gathering (East
Caddo), a joint venture governed by the Texas Uniform Partnership Act; Southwest
Joint Venture (West Caddo); Mistletoe Gathering System, a joint venture governed
by the Oklahoma Uniform Partnership Act; and Roger Mills Gas Gathering System, a
joint venture governed by the laws of Texas; and (3) any Subsidiary of the
Transok Guarantor that is designated by the Transok Guarantor in writing to the
Administrative Agent as a Material Subsidiary.
"PARTICIPATION AGREEMENT" means the Participation Agreement dated as of
June 6, 1996, among the Lessee, the Lessor, the Transok Guarantor, the Agents
and the Lenders, as the same may be amended, restated, supplemented, renewed,
extended or otherwise modified from time to time.
"RSN" means one or more revolving subordinated promissory notes from the
Transok Guarantor payable to the Holding Company or the Parent Company in the
form of Exhibit 9.3.3 to the Credit Agreement and shall include the Subordinated
Promissory Note (RSN) dated as of June 6, 1996 from the Transok Guarantor
payable to the Parent Company.
"TOTAL INTEREST EXPENSE" means with respect to any period for which a
determination thereof is to be made, the sum, without duplication, of (i) the
aggregate amount of all interest accrued (whether or not paid), on all
Indebtedness of the Transok Guarantor and its Subsidiaries on a consolidated
basis other than unpaid accrued interest on Subordinated Debt owed or owing by
the Transok Guarantor or any of its Subsidiaries to any Person, including
without limitation, the RSNs, plus (ii) the aggregate amount of all accrued
Fixed Rent (whether or not paid), plus (iii) the portion of any rental
obligation allocable to interest expense in accordance with GAAP.
"TRANSOK GUARANTOR" means Transok, Inc., an Oklahoma corporation, its
successors and assigns.
(b) The definition of "FUNDED DEBT" is amended by deleting the
phrase "the Transok Guarantor or any of its Subsidiaries" appearing in CLAUSE
(C) of such definition and substituting therefor the phrase "such Person."
(c) The definition of "GUARANTOR" is amended by deleting the
phrase "the Parent Company" appearing in the first line of such definition.
(d) The definition of "GUARANTY" or "GUARANTIES" is amended by
deleting the phrase "the Parent Company Guaranty" appearing in the first line of
such definition.
(e) The definition of "MATERIAL ADVERSE EFFECT" is amended by
deleting the phrase "the financial condition, operations, performance,
properties or prospects" and
-4-
<PAGE>
substituting therefor the phrase "the consolidated business condition (financial
or otherwise), operations, performance or properties."
(f) The definition of "OPERATING LESSOR'S DEBT" is amended by
deleting the phrase "at all times when the Lease is not a Capitalized Lease
Obligation" appearing in the second and third line of such definition.
(g) The definition of "PERMITTED INVESTMENT" is amended by
inserting the following at the end of such definition immediately before the
final period:
"(f) any certificate of deposit or bankers acceptance or time
deposits including Eurodollar time deposits, in each case
maturing not more than one year after such time, issued by
one or more local Oklahoma banks; provided, however, that
the aggregate at any time of all such investments
permitted by this clause (f) shall not exceed at any time
outstanding $10,000,000 in the aggregate"
(h) The definition of "SECURITY DOCUMENTS" is amended by deleting
the phrase "the Parent Company Guaranty" appearing in the second and third line
of such Section.
(i) The following definitions are added to Appendix A in
appropriate alphabetical order:
"ADJUSTED STOCKHOLDER'S EQUITY" means, as of the time any
determination thereof is to be made, the positive sum, if any, of
(i) Stockholder's Equity plus (ii) all Indebtedness of the
Transok Guarantor outstanding under the RSNs minus (iii) all
outstanding Indebtedness of the Transok Guarantor to the Parent
Company to the extent the Parent Company's source of funds for
such Indebtedness is unsecured credit lines which by their terms
require borrowing availability to be maintained under the Credit
Agreement to the extent of any outstanding Indebtedness under
such unsecured credit lines.
"AMENDMENT EFFECTIVE DATE" means the first Business Day to
occur on which all conditions to the effectiveness of the First
Omnibus Amendment to Participation Agreement, Lease and Loan
Agreement dated as of December 12, 1996, among the Lessee, the
Transok Guarantor, the Lessor, the Administrative Agent, the
Documentation Agent and the Lenders, set forth in Section C
thereof have been satisfied or waived by all Participants, which
will in no event be later than December 31, 1996.
"HOLDING COMPANY" means Tejas Transok Holding Company, a
Delaware corporation.
-5-
<PAGE>
"HYDROCARBONS" means collectively, natural gas, oil,
condensate and other liquid and gaseous hydrocarbons, including
natural gas or liquid products extracted from gas.
"LEVERAGE RATIO" means the ratio, expressed as a
percentage, of (a) the sum, without duplication of Funded Debt
(other than Indebtedness of the Transok Guarantor outstanding
under the RSNs) plus Operating Lessor's Debt to (b) the sum,
without duplication, of Adjusted Stockholder's Equity plus Funded
Debt plus Operating Lessor's Debt. The Transok Guarantor shall
give written notice promptly to the Administrative Agent of any
changes in the Leverage Ratio which result in a change to the
Applicable Margin, and the Administrative Agent shall advise each
Participant thereof promptly thereafter. For purposes of
determining the appropriate Leverage Ratio, figures of one-half
of one-tenth of one percent (.05%) or more shall be rounded
upwards to the nearest integral multiple of one-tenth of one
percent (.1%) and figures of less than one-half of one-tenth of
one percent (.05%) shall be rounded down to the nearest integral
multiple of one-tenth of one percent (.1%).
(j) The definition of "GUARANTY EVENT OF DEFAULT" is deleted in
its entirety.
(k) The definition of "PARENT COMPANY GUARANTY" is deleted in its
entirety.
2. Schedules I, II, 2.2 and 8.2 and Exhibit 8.7 to the Participation
Agreement are hereby amended and restated in their entirety to read as set forth
in Schedules I, II, 2.2 and 8.2 and Exhibit 8.7, respectively, hereto. All
references in any Operative Document to Schedule I, II, 2.2 or 8.2 or Exhibit
8.7 to the Participation Agreement shall be deemed to refer to Schedule I, II,
2.2 or 8.2 or Exhibit 8.7, respectively, hereto.
3. All references to the word "Borrower" in the Lease, the Loan
Agreement or the Participation Agreement are deleted and the phrase "Transok
Guarantor" is substituted therefor.
4. The Lease is amended as follows:
a. Section 10.3 of the Lease is amended by deleting the date "March
31" appearing in the seventh line of such Section and substituting therefor the
date "November 1."
b. Clause (f) of Article XVI of the Lease is amended by deleting the
phrase "or any Guaranty Event of Default."
-6-
<PAGE>
c. Clause (o) of Article XVI of the Lease is amended (a) by inserting
the phrase "and Liens of the type permitted by Sections 8.6(i), (iii) and (xv)
of the Credit Agreement" immediately after the phrase "Transok Guarantor"
appearing in the fourth line of such clause and (b) by inserting the phrase "or
as a result of any transactions permitted by Section 4.1.3 of the Transok
Guaranty" immediately after the phrase "Transok Guaranty" appearing in the last
line of such clause.
d. Clause (s) of Article XVI of the Lease is amended and restated in
its entirety to as follows:
"(s) [Intentionally Omitted]; or"
5. Section 7.5(i) of the Participation Agreement is amended by inserting
the phrase "or if any Participant does not agree to an amendment, modification,
waiver or consent," immediately following the phrase "SECTION 8.13" appearing in
the sixth line of such Section.
B. REPRESENTATIONS AND WARRANTIES. To induce the Lessor, the Lenders and
the Agents to enter into this Amendment, each of the Lessee and the Transok
Guarantor hereby reaffirms, as of the date hereof, its representations and
warranties contained in the Lease, the Participation Agreement and the Transok
Guaranty, as applicable (except to the extent such representations and
warranties relate solely to an earlier date and except that for purposes of this
SECTION B all references to the phrase "financial condition, operations, assets,
business, properties or prospects" in any such representation or warranty shall
be deemed to refer to the phrase "consolidated business condition (financial or
otherwise), operations, performance or properties" and the phrases "or
prospects" and "and prospects" shall be deemed to be deleted) and additionally,
represents and warrants as follows:
1. AUTHORIZATION; NO CONFLICT. The execution and delivery of this
Amendment and the other Operative Documents, and the performance by the
Lessee and each Guarantor of their respective Obligations under this
Amendment, the other Operative Documents and the Participation Agreement
and the Lease as amended by this Amendment, are within the Lessee's and
the Guarantors' corporate, limited liability company, or partnership
powers as the case may be, have been duly authorized by all necessary
corporate, limited liability company or partnership action, as the case
may be, have received all necessary governmental consents,
authorizations, orders and approvals (if any shall be required), and do
not and will not contravene or conflict with any provision (a) of Law,
(b) of the charter, bylaws, certificate of formation, limited liability
company agreement or partnership agreement of the Lessee or any other
Obligor, or (c) of any material agreement binding upon the Lessee or any
other Obligor or any of them.
2. VALIDITY AND BINDING NATURE. This Amendment is, and the other
Operative Documents when duly executed and delivered will be, legal,
valid and binding obligations of the Lessee and each other Obligor party
thereto enforceable against each of the Lessee and such other Obligors
in accordance with their respective terms subject as to
-7-
<PAGE>
enforcement only to bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of creditors' rights
generally and general principles of equity.
3. EXCEPTED PERMITS. The Lessee has obtained all Excepted
Permits.
4. FINANCIAL STATEMENTS. (a) The audited consolidated financial
statements of Transok Guarantor, dated as of December 31, 1995, and the
related consolidated statements of earnings and cash flow of the Transok
Guarantor and its Subsidiaries, copies of which have been furnished to
each Participant, have been prepared in conformity with GAAP, and
present fairly the consolidated financial condition of the corporations
and other entities covered thereby as at the dates thereof and the
results of operations for the periods then ended.
(b) The unaudited financial statements of the Transok Guarantor
dated as of September 30, 1996, prepared on a consolidated and
consolidating basis signed by a duly authorized financial officer of the
Transok Guarantor and consisting of at least a balance sheet as at the
close of such quarter, statements of cash flows and statements of
earnings for such quarter, copies of which have been furnished to each
Participant, have been prepared in conformity with GAAP, and present
fairly the consolidated and consolidating financial condition of the
corporations and other entities covered thereby as at the dates thereof
and the results of operations for the periods then ended and since
September 30, 1996, there has been no material adverse change in the
consolidated business condition (financial or otherwise), operations,
performance or properties of, the Transok Guarantor and its Subsidiaries
(taken as a whole).
C. CONDITIONS TO THE EFFECTIVENESS. The effectiveness of this Amendment
is conditioned upon the following:
1. EXISTING NOTES. Receipt by the Administrative Agent (for
delivery to the Lessor) of those existing Notes of the Lessor in favor
of those Lenders whose Commitments have increased, decreased or
terminated as shown on SCHEDULE II, marked "exchanged";
2. NEW NOTES. Receipt by the Administrative Agent (for delivery
to each Lender whose Commitment has increased or decreased) of new
A-Notes and B-Notes, duly executed and delivered by the Lessor,
substantially in the form of Exhibit A and Exhibit B, respectively, to
the Loan Agreement, dated the Amendment Effective Date and with other
appropriate insertions as to payee and principal amount, payable to the
order of each Lender, respectively, in a maximum principal amount equal
to such Lender's Commitment as amended hereby;
3. THIS AMENDMENT. Receipt by the Administrative Agent of the
"original executed counterpart" of this Amendment fully executed by all
parties hereto;
-8-
<PAGE>
4. CERTIFICATE OF OFFICERS OF THE LESSEE AND THE GUARANTORS.
Receipt by the Agents of a certificate, in form and substance
satisfactory to the Agents, of a Secretary or an Assistant Secretary and
the President or a Vice President of the Lessee and each Guarantor,
together with certified copies of the articles of incorporation and
bylaws, certificate of formation and limited liability company
agreement, or the partnership agreement, as the case may be, and
signatures and incumbency of officers of the Lessee and the Guarantors
and resolutions with respect to the transactions contemplated herein;
provided that in lieu of delivering articles of incorporation, bylaws,
certificates of formation, limited liability company agreements or
partnership agreements for the Lessee and each Guarantor for which such
documents were provided to the Administrative Agent pursuant to the
Participation Agreement and which documents so provided have not
changed, such certificate may state that such documents were so
delivered and have not changed;
5. GUARANTIES. Receipt by the Agents of a consent,
acknowledgment, and agreement as to each of the Guaranties duly executed
by each Guarantor described in EXHIBIT A in substantially the form of
EXHIBIT A-1 and as to the Holding Company Guaranty duly executed by
Tejas Transok Holding Company in substantially the form of EXHIBIT A-2,
and an amendment to the Transok Guaranty duly executed by the Transok
Guarantor in substantially the form of EXHIBIT A-3;
6. OPINIONS OF COUNSEL. Receipt by the Agents of the following
opinions, each dated the Amendment Effective Date, substantially in the
form set forth in the Exhibit noted below, and containing such other
matters as the parties to whom they are addressed shall reasonably
request, shall have been delivered and addressed to each of the Lessor,
the Agents and the Lenders:
(a) the opinion of Hutcheson & Grundy, L.L.P., special
Texas counsel of the Lessee and the Guarantors (EXHIBIT
B-1); and
(b) the opinion of Hall, Estill, Hardwick, Gable,
Golden & Nelson, special Oklahoma counsel for the Lessee and
the Transok Guarantor (EXHIBIT B-2).
7. CERTIFICATE OF FINANCIAL CONDITION. The Administrative Agent
shall have received a Certificate of Financial Condition from the chief
financial officer of the Transok Guarantor in substantially the form of
EXHIBIT C, (addressed to or otherwise in favor of the Agents, the Lessor
and each Lender);
8. MEMORANDUM OF LEASE. Receipt by the Administrative Agent
of an amendment to the Memorandum of Lease in substantially the form of
EXHIBIT D duly executed by the Lessor and the Lessee and in recordable
form;
-9-
<PAGE>
9. LITIGATION. No action or proceeding shall have been instituted
or threatened nor shall any governmental action, suit, proceeding or
investigation be instituted or threatened before any Governmental
Authority, nor shall any order, judgment or decree have been issued or
proposed to be issued by any Governmental Authority, to set aside,
restrain, enjoin or prevent the performance of this Amendment or any
transaction contemplated hereby or by any other Operative Document or
any Operative Loan Document or which is reasonably likely to materially
adversely affect the Leased Property or the Easements or any transaction
contemplated by the Operative Documents and the Operative Loan Documents
or which could reasonably be expected to result in a Material Adverse
Effect;
10. NO EVENTS. (i) No Event of Default, Potential Event of
Default, Event of Loss or Event of Taking shall have occurred and be
continuing, and (ii) no action shall be pending or threatened by a
Governmental Authority to initiate a Condemnation or an Event of Taking;
11. PURCHASE OF NOTES UNDER CREDIT AGREEMENT. The conditions to
the initial Borrowing under the Credit Agreement shall have been
concurrently satisfied and the purchase of and payment for the Notes (as
defined in the Credit Agreement) so as to reallocate the commitments of
the Lender Parties under the Credit Agreement shall have been
concurrently consummated in accordance with the terms of the Credit
Agreement; and
12. ADDITIONAL DOCUMENTS. The Administrative Agent shall have
received such other approvals, certificates or documents as any Agent
may reasonably request to evidence satisfaction of the conditions set
forth in this SECTION C.
All documents executed or submitted pursuant hereto by or on behalf of
any Lessee or the Guarantor shall be satisfactory in form and substance to
Agents and their counsel.
D. REAFFIRMATION OF THE LEASE, THE PARTICIPATION AGREEMENT AND THE LOAN
AGREEMENT. This Amendment shall be considered an amendment to the Lease, the
Loan Agreement and the Participation Agreement and except as herein expressly
amended, each of the Lease, the Loan Agreement and the Participation Agreement
is hereby reaffirmed, ratified and approved in every respect. All references to
the Lease, the Loan Agreement or the Participation Agreement in any other
document, instrument, agreement or writing shall hereafter be deemed to refer to
the Lease, the Loan Agreement or the Participation Agreement, as applicable, as
amended hereby.
E. RELEASE OF PARENT COMPANY GUARANTY. Upon the Amendment Effective Date
the Parent Company shall be released from the obligations as guarantor under its
Guaranty dated as of June 6, 1996.
F. REALLOCATION OF COMMITMENTS AND FUNDED AMOUNTS. On the Amendment
Effective Date, the aggregate principal balance of the all Funded Amounts
outstanding under the
-10-
<PAGE>
Participation Agreement is $125,000,000 (the "Prior Indebtedness") as shown on
SCHEDULE 2.2 hereto, and Lessee represents for itself and each Participant
represents and warrants for itself, that its outstanding Funded Amounts, if any,
under the Participation Agreement as of the Amendment Effective Date are as set
forth in the second column of SCHEDULE 2.2 hereto. Participants hereby sell,
assign, transfer and convey, and Participants (including, without limitation,
those Participants not previously a party to the Participation Agreement) hereby
purchase and accept so much of the Prior Indebtedness and all of the rights,
titles, benefits, interests, privileges, claims, liens, security interests, and
obligations existing and to exist (collectively the "INTERESTS") such that each
Participants' Commitment Percentage of the outstanding Funded Amounts and
Commitments under the Participation Agreement as amended and restated by this
Agreement shall be as set forth in SCHEDULE 2.2 hereto as of the Amendment
Effective Date. The foregoing assignment, transfer and conveyance are without
recourse to the Participants and without any warranties whatsoever as to title,
enforceability, collectibility, documentation or freedom from liens or
encumbrances, in whole or in part, other than the warranty by each Participant
that it has not sold, transferred, conveyed or encumbered such Interests. If as
a result thereof, a Participant's Commitment Percentage of the outstanding
Funded Amounts under the Participation Agreement as amended by this Amendment is
less than its outstanding Funded Amounts under the Participation Agreement on
the Amendment Effective Date, the difference set forth in the last column of
SCHEDULE 2.2 hereto shall be remitted to such Participant by the Administrative
Agent upon receipt of funds from the other Participants shown in the last column
of SCHEDULE 2.2 on the Amendment Effective Date. Each Participant so acquiring a
part of such outstanding loans and letter of credit reimbursement obligations
assumes its Commitment Percentage of the outstanding Funded Amounts,
Commitments, rights, titles, interests, privileges, claims, liens, security
interests, benefits and obligations under the Operative Documents. Participants
are proportionately released from the obligations assumed by Participants so
acquiring such obligations and, to that extent, the Participants so released
shall have no further obligation under the Participation Agreement, as amended
and restated hereby. The Borrower hereby represents and warrants that it has no
defenses, offsets or counterclaims to the Prior Indebtedness or its obligations
or rights under the Participation Agreement or the Operative Documents,
including, without limitation, the Interests being assigned pursuant to this
SECTION F. Each Participant confirms that it has received a copy of the Bank/CSW
Agreement and represents, warrants and agrees that it has acquired its Interests
subject in all respects to the terms and provisions of the Bank/CSW Agreement.
Any Funded Amounts outstanding under the Participation Agreement on the
Amendment Effective Date bearing interest at a Eurodollar Interest Rate shall be
deemed continued as a Funded Amount under this Amendment at such Eurodollar
Interest Rate and for the Interest Period with respect thereto under the
Participation Agreement.
G. MISCELLANEOUS PROVISIONS.
1. COUNTERPARTS. This Amendment may be executed in any
number of counterparts, each of which shall be deemed an original of this
Amendment and all of which will constitute but one and the same agreement.
-11-
<PAGE>
2. SECTION CAPTIONS. Section captions in this Amendment are
inserted for convenience of reference only and shall not be considered a part of
this Amendment or the Lease or the Participation Agreement, or used in their
interpretation.
3. GOVERNING LAW. THIS AMENDMENT SHALL IN ALL RESPECTS BE
GOVERNED BY, AND BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH
STATE, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
4. NOTICE. THIS WRITTEN AMENDMENT, THE LEASE, THE PARTICIPATION
AGREEMENT, THE LOAN AGREEMENT AND THE OTHER OPERATIVE DOCUMENTS REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
TRANSOK GAS PROCESSING COMPANY, as Lessee
By:
Name:
Title:
TRANSOK, INC., as Transok Guarantor
By:
Name:
Title:
CIBC INC., as Lessor and Lender
By:
Name:
Title:
CANADIAN IMPERIAL BANK OF COMMERCE, NEW
YORK AGENCY, as Administrative Agent
By:
Name:
Title:
-13-
<PAGE>
BANK OF MONTREAL, as Documentation Agent and
as Lender
By:
Name:
Title:
THE BANK OF NEW YORK
By:
Name:
Title:
BANKERS TRUST COMPANY
By:
Name:
Title:
BANQUE PARIBAS
By:
Name:
Title:
By:
Name:
Title:
-14-
<PAGE>
CHRISTIANA BANK OG KREDITKASSE
By:
Name:
Title:
By:
Name:
Title:
CITIBANK N.A.
By:
Name:
Title:
CREDIT LYONNAIS
By:
Name:
Title:
CREDIT SUISSE
By:
Name:
Title:
By:
Name:
Title:
-15-
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
By:
Name:
Title:
THE FUJI BANK, LIMITED
By:
Name:
Title:
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By:
Name:
Title:
LONG TERM CREDIT BANK OF JAPAN, LIMITED
By:
Name:
Title:
-16-
<PAGE>
MELLON BANK, N.A.
By:
Name:
Title:
NATIONAL WESTMINSTER BANK PLC.,
NEW YORK BRANCH
By:
Name:
Title:
NATIONAL WESTMINSTER BANK PLC.,
NASSAU BRANCH
By:
Name:
Title:
NATIONSBANK OF TEXAS
By:
Name:
Title:
-17-
<PAGE>
SOCIETE GENERALE, SOUTHWEST AGENCY
By:
Name:
Title:
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By:
Name:
Title:
TORONTO DOMINION (TEXAS), INC.
By:
Name:
Title:
UNION BANK OF CALIFORNIA, N.A.
By:
Name:
Title:
-18-
<PAGE>
UNION BANK OF SWITZERLAND,
HOUSTON AGENCY
By:
Name:
Title:
By:
Name:
Title:
WELLS FARGO BANK (TEXAS) N.A.
By:
Name:
Title:
CAISSE NATIONALE DE CREDIT AGRICOLE
By:
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By:
Name:
Title:
-19-
<PAGE>
BANK OF TOKYO-MITSUBISHI, LTD.
By:
Name:
Title:
BANK OF NOVA SCOTIA, ATLANTA AGENCY
By:
Name:
Title:
THE SUMITOMO BANK, LIMITED
By:
Name:
Title:
By:
Name:
Title:
-20-
<PAGE>
For purposes of selling, assigning, transferring and conveying its Interests,
the undersigned has caused this Agreement to be executed by its officer
thereunto duly authorized as of the date and year first above written.
BANK OF BOSTON
By:
Name:
Title:
-21-
<PAGE>
SECTION 4.1(g)(ii)
EXCEPTED PERMITS
PERMITS ISSUED BY THE OKLAHOMA DEPARTMENT
OF ENVIRONMENTAL QUALITY TO TRANSOK, INC.*/
Air Permit No. 95-499-0
Air Permit No. 94-228-0
Air Permit No. 92-023-0
Air Permit No. 91-033-0
Air Permit No. 81-067-0
Air Permit No. 85-016-0 (PSD)
Air Permit No. 85-004-0
Air Permit No. 83-033-0
Air Permit No. R-93-18
Air Permit No. 93-071-0
Air Permit No. 91-071-0
Air Permit No. 93-051-0
Air Permit No. 93-015-0
Air Permit No. 95-302-0
Air Permit No. 94-084-0
Air Permit No. 90-137-0
Air Permit No. 88-046-0
Air Permit No. 84-004-0
and as more fully described in the attached three pages.
- --------
*/ Except to the extent superceded in whole or part by a subsequent
Applicable Permit.
<PAGE>
SECTION 4.1(h)
ENVIRONMENTAL MATTERS
1. Toxic Substances Control Act - Consent Decree, EPA Docket No.
TSCA-95-H-31, involving payment of $21,000 penalty for failure to file
1990 Inventory Update Reports for natural gas liquids produced by three
Transok gas processing plants.
2. GENE ARNOLD DEROUEN, ET AL. VS. SHOCKER ENERGY INC., ET AL., 14th
Judicial District Court, Calcasieu Parish, Louisiana; Case No. 93-767.
3. All environmental matters disclosed in that certain draft Environmental
Assessment Report of the Transok Active and Inactive Gas Processing
Plants dated May 22, 1996, prepared by Pilko & Associates, Inc.
4. Also see Section 4.1(g)(ii) of the Disclosure Schedule.
EXHIBIT 4.18
AMENDED AND RESTATED
SECURED CREDIT AGREEMENT
among
TRANSOK, INC.,
as the Borrower,
and
CERTAIN FINANCIAL INSTITUTIONS,
as the Lenders,
and
BANK OF MONTREAL,
as Administrative Agent,
and
CANADIAN IMPERIAL BANK OF COMMERCE,
as Documentation Agent
Dated as of December 12, 1996
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS............................................. 1
SECTION 1.1 Certain Defined Terms................................... 1
ARTICLE II COMMITMENTS OF THE LENDERS;
BORROWING PROCEDURES AND
CONDITIONS.............................................. 24
SECTION 2.1 Commitments............................................. 24
SECTION 2.1.1 Loan Commitment......................................... 24
SECTION 2.1.2 Letter of Credit Commitment............................. 24
SECTION 2.1.3 Lenders Not Permitted or Required to Make
Borrowings Available.................................... 25
SECTION 2.2 Domestic Loans and Eurodollar Loans..................... 25
SECTION 2.3 Borrowing Procedures.................................... 25
SECTION 2.3.1 Domestic Loans.......................................... 25
SECTION 2.3.2 Eurodollar Loans........................................ 26
SECTION 2.3.3 Letters of Credit....................................... 26
SECTION 2.4 Letter of Credit Procedures............................. 27
SECTION 2.4.1 Letter of Credit Operations............................. 27
SECTION 2.4.2 Borrower's Agreement to Repay Letter of Credit
Drawings................................................ 27
SECTION 2.4.3 Lenders' Agreement to Repay Letter of Credit
Drawings................................................ 29
SECTION 2.4.4 Procedures for Depositing Cash Collateral............... 30
SECTION 2.5 [Intentionally Omitted]................................. 30
SECTION 2.6 Increased Capital Costs................................. 30
SECTION 2.7 Extension of Scheduled Commitment Termination
Date, Initial Commitment Amortization Date and
Revolving Commitments................................... 31
ARTICLE III PROVISIONS RELATING TO THE NOTES
AND REPAYMENT........................................... 38
SECTION 3.1 The Notes............................................... 38
SECTION 3.2 Repayments.............................................. 38
SECTION 3.3 Due Date Extension...................................... 38
ARTICLE IV INTEREST, FEES AND SPECIAL
EURODOLLAR LOAN RELATED
PROVISIONS.............................................. 38
SECTION 4.1 Interest on the Borrowings.............................. 38
SECTION 4.1.1 Interest Prior to Maturity.............................. 38
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
SECTION 4.1.2 Interest After Maturity................................. 39
SECTION 4.2 Notice of Eurodollar Interest Rate; Determination
Conclusive.............................................. 40
SECTION 4.3 Eurodollar Interest Periods............................. 40
SECTION 4.4 Commitment Fee; Other Fees.............................. 40
SECTION 4.5 Letter of Credit Fees................................... 41
SECTION 4.6 Payment of Interest; Calculation of Interest and
Fees.................................................... 41
SECTION 4.7 Eurodollar Deposits Unavailable or Eurodollar
Interest Rate Unascertainable........................... 42
SECTION 4.8 Changes in Law Rendering Eurodollar Lending
Unlawful................................................ 42
SECTION 4.9 Special Fees in Respect of Reserve Requirements......... 43
SECTION 4.10 Taxes................................................... 43
SECTION 4.11 Reasonable Efforts...................................... 44
SECTION 4.12 Increased Costs......................................... 44
SECTION 4.13 Discretion of the Lenders as to Manner of
Funding................................................. 45
SECTION 4.14 Eurodollar Loan-Related Indemnification Provisions...... 46
SECTION 4.15 Replacement of Lender on Account of Increased
Costs, Eurodollar Lending Unlawful, Reserve
Requirements, Taxes, Certain Dissents, etc.............. 46
SECTION 4.16 Maximum Interest........................................ 47
ARTICLE V REDUCTION OR TERMINATION OF THE
COMMITMENTS; PREPAYMENTS................................ 49
SECTION 5.1 Voluntary Reduction or Termination of the
Commitments............................................. 49
SECTION 5.2 Voluntary Prepayments................................... 49
SECTION 5.3 Mandatory Scheduled Reductions of the
Commitment Amount....................................... 49
SECTION 5.4 [Intentionally Omitted]................................. 50
SECTION 5.5 Mandatory Prepayments and Reduction of
Commitment Amount on Account of Asset
Transfers............................................... 50
SECTION 5.6 [Intentionally Omitted]................................. 50
SECTION 5.7 Mandatory Prepayments on Account of Loans and
Letters of Credit Exceeding Commitment
Amounts................................................. 50
ii
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE VI CONVERSION OF LOANS BETWEEN
EURODOLLAR LOANS AND DOMESTIC
LOANS................................................... 51
ARTICLE VII MAKING AND PRORATION OF PAYMENTS;
OFFSET.................................................. 51
SECTION 7.1 Making of Payments...................................... 51
SECTION 7.2 Proration of Payments................................... 52
SECTION 7.3 Offset.................................................. 52
ARTICLE VIII REPRESENTATIONS AND WARRANTIES.......................... 52
SECTION 8.1 Organization, etc....................................... 52
SECTION 8.2 Authorization; No Conflict.............................. 53
SECTION 8.3 Validity and Binding Nature............................. 53
SECTION 8.4 Representation with Respect to Financial Statements..... 53
SECTION 8.5 Pending or Threatened Litigation and Contingent
Liabilities............................................. 54
SECTION 8.6 Existing Liens.......................................... 54
SECTION 8.7 Existing Subsidiaries................................... 55
SECTION 8.8 Existing Employee Benefit Plans......................... 55
SECTION 8.9 Investment Company Act Representation................... 55
SECTION 8.10 Public Utility Holding Company Act Representation....... 55
SECTION 8.11 Representation with Respect to Regulations G, T,
U and X................................................. 55
SECTION 8.12 Representation with Respect to True and Complete
Disclosure.............................................. 56
SECTION 8.13 Status of Title to Assets............................... 56
SECTION 8.14 Taxes................................................... 56
SECTION 8.15 Unconditional Purchase Obligations...................... 56
SECTION 8.16 Environmental Warranties................................ 56
SECTION 8.17 Regulatory Compliance................................... 59
ARTICLE IX BORROWER'S COVENANTS.................................... 59
SECTION 9.1 Reports, Certificates and Other Information............. 59
SECTION 9.1.1 Audit Report............................................ 60
SECTION 9.1.2 Interim Financial Reports............................... 60
SECTION 9.1.3 Compliance Certificates................................. 60
iii
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
SECTION 9.1.4 Reports to SEC, Shareholders and Other
Regulatory Agencies..................................... 61
SECTION 9.1.5 Notices Relating to Default, Litigation and
Certain ERISA Matters................................... 61
SECTION 9.1.6 Changes in Material Subsidiaries........................ 62
SECTION 9.1.7 Projected Cash Flow Statements.......................... 62
SECTION 9.1.8 Other Information....................................... 62
SECTION 9.2 Affirmative Covenants................................... 62
SECTION 9.2.1 Books, Records and Inspections.......................... 62
SECTION 9.2.2 Insurance............................................... 62
SECTION 9.2.3 Taxes, Assessments, Etc................................. 62
SECTION 9.2.4 Maintenance of Employee Benefit Plans................... 63
SECTION 9.2.5 Use of Loan Proceeds and Letters of Credit.............. 63
SECTION 9.2.6 Title to Properties..................................... 63
SECTION 9.2.7 New or Activated Subsidiaries; Material Subsidiaries.... 63
SECTION 9.2.8 Environmental Covenant.................................. 63
SECTION 9.2.9 Compliance with Laws, etc............................... 64
SECTION 9.2.10 [Intentionally Omitted]................................. 64
SECTION 9.2.11 Indemnity............................................... 64
SECTION 9.3 Negative Covenants...................................... 64
SECTION 9.3.1 Restrictions on Redemption and Purchase of Securities
and Payment of Dividends................................ 64
SECTION 9.3.2 Stock Purchases......................................... 66
SECTION 9.3.3 Permitted Indebtedness.................................. 66
SECTION 9.3.4 Liens................................................... 68
SECTION 9.3.5 Guaranties, Loans, Advances or Investments.............. 69
SECTION 9.3.6 Restrictions on Fundamental Changes..................... 72
SECTION 9.3.7 Fiscal Year............................................. 73
SECTION 9.3.8 Transfer of Assets...................................... 73
SECTION 9.3.9 Unconditional Purchase Obligations...................... 75
SECTION 9.3.10 Other Agreements........................................ 75
SECTION 9.3.11 Business Activities..................................... 75
SECTION 9.3.12 Capital Expenditures, etc............................... 75
SECTION 9.3.13 Negative Pledges, Restrictive Agreements, etc........... 76
SECTION 9.3.14 [Intentionally Omitted]................................. 76
SECTION 9.3.15 Transactions with Affiliates............................ 76
SECTION 9.3.16 Restrictions on Decrease in Capital Stock............... 76
SECTION 9.3.17 [Intentionally Omitted]................................. 76
SECTION 9.3.18 Modifications of Certain Agreements..................... 76
iv
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
SECTION 9.3.19 Receivables Financing................................... 76
SECTION 9.4 Financial Covenants..................................... 77
SECTION 9.4.1 Minimum Stockholders' Equity............................ 77
SECTION 9.4.2 EBITDA to Total Interest Expense........................ 77
SECTION 9.4.3 Funded Debt to Capitalization........................... 77
ARTICLE X COLLATERAL SECURITY..................................... 77
SECTION 10.1 Pledge Agreement........................................ 77
SECTION 10.2 Partnership/Limited Liability Company Security
Agreement............................................... 78
SECTION 10.3 Guaranties.............................................. 78
SECTION 10.4 Notes Security Agreement................................ 78
SECTION 10.5 Guaranty of the Holding Company......................... 78
ARTICLE XI CONDITIONS TO BORROWING................................. 79
SECTION 11.1 Conditions Precedent to Initial Borrowing............... 79
SECTION 11.1.1 Executed Original Notes................................. 79
SECTION 11.1.2 Certificate of Officers of the Borrower and
Certain Subsidiaries.................................... 79
SECTION 11.1.3 Consents, etc........................................... 79
SECTION 11.1.4 Opinion of Counsel for the Borrower..................... 80
SECTION 11.1.5 [Intentionally Omitted]................................. 80
SECTION 11.1.6 The Pledge Agreement.................................... 80
SECTION 11.1.7 [Intentionally Omitted]................................. 80
SECTION 11.1.8 Guaranties.............................................. 80
SECTION 11.1.11 Notes Security Agreement................................ 80
SECTION 11.1.12 Partnership/Limited Liability Company Security
Agreement............................................... 80
SECTION 11.1.13 Holding Company......................................... 81
SECTION 11.1.14 [Intentionally Omitted]................................. 81
SECTION 11.1.15 [Intentionally Omitted]. .............................. 81
SECTION 11.1.16 Financial Statements.................................... 81
SECTION 11.1.17 Other Documents......................................... 81
SECTION 11.2 Other Conditions Precedent to Making Initial
Borrowing............................................... 81
SECTION 11.2.1 Fees.................................................... 81
SECTION 11.2.2 Purchase of A-Notes and B-Notes......................... 81
SECTION 11.2.3 [Intentionally Omitted]................................. 81
SECTION 11.2.4 [Intentionally Omitted]................................. 81
SECTION 11.2.5 [Intentionally Omitted]................................. 81
v
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
SECTION 11.3 All Borrowings.......................................... 81
SECTION 11.3.1 No Default; Warranties True and Correct................. 81
ARTICLE XII EVENTS OF DEFAULT AND THEIR EFFECT...................... 82
SECTION 12.1 Events of Default....................................... 82
SECTION 12.1.1 Non-Payment of the Loans, Letter of Credit
Obligations, Fees or Other Amounts...................... 82
SECTION 12.1.2 Non-Payment of Other Indebtedness for
Borrowed Money.......................................... 82
SECTION 12.1.3 Lease................................................... 82
SECTION 12.1.4 Bankruptcy, Insolvency, etc............................. 83
SECTION 12.1.5 Non-Performance of Certain Covenants and
Obligations............................................. 83
SECTION 12.1.6 Non-Performance of Other Covenants and
Obligations............................................. 83
SECTION 12.1.7 Breach of Warranties and Misleading Statements.......... 83
SECTION 12.1.8 Change in Ownership..................................... 84
SECTION 12.1.9 Judgments............................................... 84
SECTION 12.1.10 Employee Benefit Plans.................................. 85
SECTION 12.1.11 Lien or Guaranty Failure................................ 85
SECTION 12.1.12 Default Under Any Security Document..................... 85
SECTION 12.1.13 [Intentionally Omitted]................................. 85
SECTION 12.1.14 [Intentionally Omitted]................................. 85
SECTION 12.1.15 [Intentionally Omitted]................................. 85
SECTION 12.1.16 Non-Payment of Other Indebtedness for
Borrowed Money by the Parent Company.................... 85
SECTION 12.2 Effect of Event of Default.............................. 85
SECTION 12.3 Cash Collateralization of Letters of Credit Upon
Event of Default........................................ 86
ARTICLE XIII THE ADMINISTRATIVE AGENT,
DOCUMENTATION AGENT AND ISSUING
BANK.................................................... 86
SECTION 13.1 Authorization........................................... 86
SECTION 13.2 Power................................................... 87
SECTION 13.3 Indemnification of the Administrative Agent, the
Documentation Agent or the Issuing Bank................. 87
SECTION 13.4 Action on Instructions of the Required Lenders.......... 88
SECTION 13.5 Exculpation............................................. 88
SECTION 13.6 Employment of Counsel, etc.............................. 89
vi
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
SECTION 13.7 Reliance on Documents................................... 89
SECTION 13.8 Credit Investigation.................................... 89
SECTION 13.9 Resignation............................................. 89
SECTION 13.10 Annual Administrative Agency Fees....................... 90
SECTION 13.11 The Administrative Agent, Issuing Bank and
Documentation Agent as Lenders.......................... 90
ARTICLE XIV MISCELLANEOUS PROVISIONS................................ 90
SECTION 14.1 No Waiver............................................... 90
SECTION 14.2 Amendments, Modifications, Waivers and Consents......... 90
SECTION 14.3 Confirmations........................................... 91
SECTION 14.4 Notices, Demands, Instructions and Other
Communications.......................................... 91
SECTION 14.5 Accounting Terms and Computations....................... 92
SECTION 14.6 Sales and Transfers, etc., of Borrowings and
Notes; Participations in Borrowings and Notes........... 92
SECTION 14.7 Payment of Costs, Expenses and Taxes.................... 97
SECTION 14.8 INDEMNIFICATION PROVISIONS.............................. 97
SECTION 14.9 Subsidiary References................................... 98
SECTION 14.10 Section Captions and Table of Contents.................. 98
SECTION 14.11 Governing Law........................................... 98
SECTION 14.12 Execution in Counterparts............................... 99
SECTION 14.13 Successors and Assigns.................................. 99
SECTION 14.14 Waiver of Jury Trial.................................... 99
SECTION 14.15 Forum Selection and Consent to Jurisdiction............. 99
SECTION 14.16 Severability............................................100
SECTION 14.17 Confidentiality.........................................100
SECTION 14.18 Release of Parent Company Guaranty......................101
SECTION 14.19 Notice..................................................101
vii
<PAGE>
LIST OF SCHEDULES AND EXHIBITS TO SECURED CREDIT AGREEMENT
SCHEDULE I Address, Telex, TWX, Telephone and Telecopier Numbers
SCHEDULE II Percentages, Original Designated Maximum Commitments, Etc.
EXHIBIT 2.3 Form of Borrowing Request
EXHIBIT 2.3.3A Form of Issuance Request
EXHIBIT 2.7 Form of Annual Certificate of Extension
EXHIBIT 3.1 Form of Note
EXHIBIT 8.5 Pending Litigation
EXHIBIT 8.6 Existing Liens
EXHIBIT 8.7 Existing Subsidiaries and Material Subsidiaries
EXHIBIT 8.14 Taxes
EXHIBIT 8.16 Environmental Matters
EXHIBIT 8.17 Regulatory Compliance
EXHIBIT 9.1.3A Form of Annual Compliance Certificate
EXHIBIT 9.1.3B Form of Quarterly Compliance Certificate
EXHIBIT 9.3.3 Form of RSN
EXHIBIT 9.3.3(xv) Subordination Provisions
EXHIBIT 9.3.5(xxiv) Existing Equity Investments
EXHIBIT 9.3.9 Unconditional Purchase Obligations
EXHIBIT 10.1A Form of Pledge Agreement from Borrower
EXHIBIT 10.1B Form of Pledge Agreement from Subsidiary
EXHIBIT 10.2 Form of Partnership/Limited Liability Company Security
Agreement
EXHIBIT 10.3 Form of Guaranty
EXHIBIT 10.4A Form of Notes Security Agreement
EXHIBIT 10.4B Form of Intercompany Subordinated Demand Note
EXHIBIT 11.1.4 Form of Opinion of Counsel for the Borrower
EXHIBIT 11.1.6 Form of Acknowledgement and Reaffirmation of Pledge
Agreement
EXHIBIT 11.1.8 Guarantors
EXHIBIT 11.1.8A Form of Consent, Acknowledgement and Agreement of
Guarantors
EXHIBIT 11.1.8B Form of Consent, Acknowledgement and Agreement of Tejas
Transok Holding Company
EXHIBIT 11.1.9 Form of Certificate of Financial Condition
EXHIBIT 11.1.10 Form of Subordination Agreement
EXHIBIT 11.1.10A Form of Acknowledgement and Reaffirmation of Subordination
Agreement
EXHIBIT 11.1.11 Form of First Amendment to Notes Security Agreement
EXHIBIT 11.1.12 Form of Acknowledgement and Reaffirmation of
Partnership/Limited Liability Company Pledge Agreement
EXHIBIT 11.1.13 Form of Acknowledgement and Reaffirmation of Holding
Company
Security Agreement.
EXHIBIT 14.6 Form of Assignment and Acceptance Agreement
<PAGE>
AMENDED AND RESTATED SECURED CREDIT AGREEMENT
THIS AMENDED AND RESTATED SECURED CREDIT AGREEMENT, dated as of
December 12, 1996 (as may be amended, modified, supplemented, renewed, extended
or restated from time to time, this "AGREEMENT"), among TRANSOK, INC., an
Oklahoma corporation (the "BORROWER"), the various financial institutions as are
or may become parties hereto (collectively the "LENDERS"), BANK OF MONTREAL,
acting through certain of its U.S. branches or agencies ("BMO"), as
administrative agent (in such capacity, together with any successor(s) thereto
in such capacity, the "ADMINISTRATIVE AGENT") and CANADIAN IMPERIAL BANK OF
COMMERCE, acting through certain of its U.S. branches or agencies ("CIBC"), as
documentation agent (in such capacity, together with any successor(s) thereto in
such capacity (the "DOCUMENTATION AGENT").
W I T N E S S E T H:
WHEREAS, Transok Acquisition Company, a Delaware corporation ("TAC"), the
Lenders, the Administrative Agent and the Documentation Agent have heretofore
entered into a Secured Credit Agreement, dated as of June 6, 1996 (herein called
the "ORIGINAL CREDIT AGREEMENT"); and
WHEREAS, TAC has merged with and into the Borrower and the Borrower is the
surviving corporation;
WHEREAS, the Borrower, the Lenders, the Administrative Agent and the
Documentation Agent now desire to amend and restate the Original Credit
Agreement in its entirety as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 CERTAIN DEFINED TERMS. Unless otherwise defined herein or in
such other agreements, as used in this Agreement, the Notes (as hereinafter
defined), or any other agreement, document, statement, instrument or transaction
contemplated thereby or relating thereto, and all amendments, extensions,
modifications, renewals, supplements or waivers thereof or thereto, the
following terms shall have the following meanings, which meanings shall be
equally applicable to both the singular and plural form of such terms:
A-NOTES - shall mean all of the Series A Notes issued and, unless
otherwise specified or the context otherwise requires, outstanding under the
Loan Agreement (as defined in the Participation Agreement).
<PAGE>
ACCEPTING LENDERS - shall have the meaning assigned to such term in
SECTION 2.7(B).
ACADIAN - shall mean Acadian Gas Corporation, a Nevada corporation.
ACTIVATION - shall mean, with respect to any Subsidiary of the Borrower,
the transformation of such entity from a passive legal entity existing for a
purpose such as holding a royalty or similar interest and receiving payments
thereunder to an entity engaged in business or commercial activities of any type
or otherwise engaged in activities other than the holding of such interest and
the receipt of payments thereunder.
ADDITIONAL RENT - shall have the meaning set forth in the Lease.
ADJUSTED STOCKHOLDER'S EQUITY - shall mean, as of the time any
determination thereof is to be made, the positive sum, if any, of (i)
Stockholder's Equity PLUS (ii) all Indebtedness of the Borrower outstanding
under the RSNs MINUS (iii) all outstanding Indebtedness of the Borrower to the
Parent Company to the extent the Parent Company's source of funds for such
Indebtedness is unsecured credit lines which by their terms require borrowing
availability to be maintained under this Agreement to the extent of any
outstanding Indebtedness under such unsecured credit lines.
ADMINISTRATIVE AGENT - is defined in the PREAMBLE.
AFFILIATE - of any Person shall mean any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any employee benefit plan). A Person shall be deemed to be
"controlled by" any other Person if such other Person possesses, directly or
indirectly, power (a) to vote 10% or more of the securities (on a fully diluted
basis) having ordinary voting power for the election of directors or managing
general partners; or (b) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
AGENT - shall mean either the Administrative Agent, the Collateral Agent
or the Documentation Agent, or any combination of the foregoing, as the case may
be.
AGGREGATE DISTRIBUTIONS AND INVESTMENTS - shall mean at the time any
determination thereof is to be made, the sum of (i) all Distributions made in
accordance with SECTION 9.3.1(I), (ii) the aggregate amount of all Equity
Investments in excess of $35,000,000 in the aggregate made in accordance with
SECTION 9.3.5(XIX), (iii) loans made and not repaid pursuant to SECTION
9.3.5(XVIII) to the Parent Company in excess of $100,000,000, made on or after
June 6, 1996 and to and including the date of such determination; and (iv) loans
made and not repaid pursuant to SECTION 9.3.5(XVII)(D) to any Subsidiary of the
Borrower that is not a Material Subsidiary in excess of $35,000,000 in the
aggregate.
2
<PAGE>
AGGREGATE REVOLVING OUTSTANDINGS - shall mean, at any time, the sum of (i)
the aggregate principal amount of all Loans outstanding at such time PLUS (ii)
the aggregate amount of all Letter of Credit Liabilities outstanding at such
time.
AGREEMENT - is defined in the PREAMBLE.
ALTERNATE BASE RATE - shall mean:
(a) on any date and with respect to all Domestic Loans other than
those dates and Loans described in CLAUSE (B) of this
definition, a fluctuating rate of interest per annum equal to
the higher of:
(i) the Base Rate, and
(ii) the Federal Funds Rate most recently determined by the
Administrative Agent PLUS 1% per annum; or
(b) on any date occurring during any Overnight Funds Period, but
with respect only to Domestic Loans made or Eurodollar Loans
converted into Domestic Loans during such Overnight Funds
Period, the Overnight Funds Rate.
The Alternate Base Rate is not necessarily intended to be the lowest rate of
interest determined by the Administrative Agent in connection with extensions of
credit. Changes in the rate of interest on that portion of any Loans maintained
as Domestic Loans shall take effect simultaneously with each change in the
Alternate Base Rate. The Administrative Agent shall give notice promptly to the
Borrower and the Lenders of changes in the Alternate Base Rate.
ANNIVERSARY DATE - shall mean any December 31, with the first such date
being December 31, 1997.
ANNUAL CERTIFICATE OF EXTENSION - shall mean any certificate of extension
duly executed by an authorized officer of the Borrower, substantially in the
form of EXHIBIT 2.7.
APPLICABLE DEFAULT MARGIN - shall mean two percent (2%) per annum.
APPLICABLE MARGIN - shall mean either the Applicable Margin for Loans or
the Applicable Margin for Letters of Credit, as the case may be.
APPLICABLE MARGIN FOR LETTERS OF CREDIT - shall mean with respect to the
letter of credit fee described in SECTION 4.5(A) at such times and from time to
time as the relevant Leverage Ratio is in one of the following ranges, the
percentage per annum set forth opposite such Leverage Ratio:
3
<PAGE>
LEVERAGE RATIO PERCENTAGE
Range 1: Equal to or greater than 65% 1.250%
Range 2: Less than 65% but
equal to or greater than 60% 0.875%
Range 3: Less than 60% but
equal to or greater than 55% 0.750%
Range 4: Less than 55% but
equal to or greater than 50% 0.625%
Range 5: Less than 50% 0.500%
PROVIDED, HOWEVER that during the period from the Effective Date through and
including December 30, 1997, at such times and from time to time as the Leverage
Ratio is in Range 2, 3, 4 or 5 as indicated above, the minimum Applicable Margin
for Letters of Credit shall be 1.000%, unless the ratio of EBITDA to Total
Interest Expense calculated on June 30, 1997 or at any time thereafter in
accordance with SECTION 9.4.2 is at least 2.50:1, in which case the Applicable
Margin for Letters of Credit shall be calculated in accordance with the Leverage
Ratio table above.
APPLICABLE MARGIN FOR LOANS - shall mean with respect to Loans, at such
times and from time to time as the Leverage Ratio is in one of the following
ranges, the percentages per annum set forth opposite such Leverage Ratio under
the heading for the relevant type of Loan:
PERCENTAGE
LEVERAGE RATIO DOMESTIC LOAN EURODOLLAR LOAN
Range 1: Equal to or greater than 65% 0.250% 1.250%
Range 2: Less than 65% and
equal to or greater than 60% 0% 0.875%
Range 3: Less than 60% and
equal to or greater than 55% 0% 0.750%
Range 4: Less than 55% and
equal to or greater than 50% 0% 0.625%
Range 5: Less than 50% 0% 0.500%
PROVIDED, HOWEVER that during the period from the Effective Date through and
including December 30, 1997, at such times and from time to time as the Leverage
Ratio is in Range 2, 3, 4 or 5 as indicated above, the minimum Applicable Margin
for Loans with respect to Eurodollar Loans shall be 1.000%, unless the ratio of
EBITDA to Total Interest Expense calculated on June 30, 1997 or at any time
thereafter in accordance with SECTION 9.4.2 is at least 2.50:1, in which case
the Applicable Margin for Loans with respect to Eurodollar Loans shall be
calculated in accordance with the Leverage Ratio table above.
4
<PAGE>
ASSET - shall mean, as to the Borrower and its Subsidiaries, all property
of any kind, name or nature, real or personal, tangible or intangible, legal or
equitable, whether now owned or hereafter acquired, including, without
limitation, money, stock, contract rights, franchises, value as a going concern,
causes of action, undivided fractional ownership interests, and anything of any
value which can be made available for, or may be appropriated to, the payment of
debts.
ASSIGNMENT AND ACCEPTANCE - shall mean an Assignment and Acceptance
Agreement substantially in the form of EXHIBIT 14.6.
B-NOTES - shall mean the Series B Notes issued and, unless specified or
the context otherwise requires, outstanding under the Loan Agreement (as defined
in the Participation Agreement).
BASE RATE - shall mean, at any time, the rate per annum then most recently
announced by the Administrative Agent at Chicago, Illinois, as its base rate for
Dollar loans in the United States, which base rate may not be the lowest rate
charged by the Administrative Agent on loans to any of its customers.
BMO - is defined in the PREAMBLE.
BORROWER - is defined in the PREAMBLE.
BORROWING - shall mean any extension of credit (as opposed to any
continuation or conversion thereof) made by the Lenders by way of Letters of
Credit or Loans.
BORROWING REQUEST - shall mean a request for a Borrowing and certificate
duly executed by the Borrower substantially in the form of EXHIBIT 2.3.
BUSINESS DAY - shall mean a day which is both a Domestic Business Day and
a Eurodollar Business Day.
CAPITAL EXPENDITURES - shall mean, for any period, the sum, without
duplication, of (i) all expenditures of the Borrower and its Subsidiaries
(including all expenditures incurred by the Lessee pursuant to the Lease) for
fixed or capital assets (except for purchases of natural gas classified as
property, plant and equipment) made during such period which, in accordance with
GAAP, would be classified as capital expenditures, and (ii) all Capitalized
Lease Obligations incurred during such period.
CAPITALIZATION - shall mean the sum, at the time outstanding and without
duplication, of (i) Funded Debt plus (ii) Stockholders' Equity plus (iii)
Operating Lessor's Debt.
CAPITALIZED LEASE OBLIGATIONS - shall mean all monetary obligations of the
Borrower or any of its Subsidiaries under any leasing or similar arrangement
which, in accordance with GAAP, would be classified as capitalized leases, and,
for purposes of this Agreement and each
5
<PAGE>
other Loan Document, the amount of such obligations shall be the capitalized
amount thereof, determined in accordance with GAAP.
CERCLA - shall mean the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
CERCLIS - shall mean the Comprehensive Environmental Response Compensation
Liability Information System List.
CIBC - is defined in the PREAMBLE.
CODE - shall mean the Internal Revenue Code of 1986, as amended, and the
laws promulgated or issued from time to time thereunder.
CLOSING DATE - shall mean the date of this Agreement.
COLLATERAL AGENT - shall mean BMO, in its capacity as collateral agent
under the Security Documents, together with its successors in such capacity.
COMMITMENT - shall mean, as the context may require, a Letter of Credit
Commitment, Loan Commitment or Revolving Commitment.
COMMITMENT AMOUNT - shall mean, on any date, the Total Committed Amount as
such amount may be reduced from time to time pursuant to SECTIONS 5.1, 5.3, or
5.5; provided in no event shall the Commitment Amount exceed the Total Committed
Amount.
COMMITMENT FEE RATE - shall mean, at such times and from time to time as
the Leverage Ratio is in one of the following ranges, the percentage per annum
set forth opposite such Leverage Ratio:
LEVERAGE RATIO PERCENTAGE
Equal to or greater than 0.375%
50%
Less than 50% 0.250%
COMMITMENT TERMINATION DATE - shall mean the earliest of:
(a) the Scheduled Commitment Termination Date;
(b) the date on which all of the Commitments are terminated in
full or the Commitment Amount is reduced to zero pursuant to
SECTIONS 5.1, 5.3, or 5.5; and
6
<PAGE>
(c) the earlier of the date of either
(i) the occurrence of any Event of Default described in
SECTION 12.1.4; or
(ii) the occurrence and continuance of any other Event of
Default and either (1) the declaration of the Loans to
be due and payable pursuant to SECTION 12.2, or (2) in
the absence of such declaration, the giving of notice by
the Administrative Agent to the Borrower that the
Commitments have been terminated pursuant to SECTION
12.2.
CONSOLIDATED NET INCOME - shall mean, for any period, the consolidated net
income (or loss) of the Borrower and its Subsidiaries for such period determined
on a consolidated basis in accordance with GAAP; PROVIDED that there shall be
excluded therefrom all non-cash gains and losses which would be classified as
extraordinary under GAAP.
CONSOLIDATED STOCKHOLDERS' EQUITY - shall mean, with respect to any Person
as of the time any determination thereof is to be made, (a) with respect to any
Person that is a corporation, the sum of such Person's capital stock (which
shall exclude, except in the case of the Parent Company, treasury stock and any
capital stock subject to mandatory redemption by the issuer at the option of the
holder thereof) and additional paid-in capital, PLUS retained earnings (MINUS
accumulated deficit), (b) with respect to any Person that is a partnership, the
aggregate of the capital accounts of all partners of such partnership, and (c)
with respect to any Person that is a limited liability company, the aggregate of
all membership interests of all members of such limited liability company.
CONTINGENT LIABILITY - shall mean any agreement, undertaking or
arrangement by which any Person guarantees, endorses or otherwise becomes or is
contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or otherwise to
invest in, a debtor, or otherwise to assure a creditor against loss) the
Indebtedness, obligation or any other liability of any other Person (other than
by endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of or interests in
any other Person. The amount of any Person's obligation under any Contingent
Liability shall (subject to any limitation set forth therein) be deemed to be
the outstanding principal amount (or maximum principal amount, if larger) of the
Indebtedness, obligation or other liability guaranteed thereby or, if
applicable, such lesser principal amount as is expressly stated to be the
maximum principal amount of such Person's obligation thereunder.
DECLINING LENDER - shall have the meaning assigned to such term in SECTION
2.7(C).
DESIGNATED MAXIMUM COMMITMENT - shall mean at any time, as to any Lender,
the lesser of (i) such Lender's Original Designated Maximum Commitment and (ii)
from and after the Election Effective Date, the amount specified by such Lender
in the most recent notice provided
7
<PAGE>
by such Lender pursuant to SECTION 2.7(A) and resulting from the Borrower's
election in SECTION 2.7(C).
DISTRIBUTION - shall have the meaning assigned to such term in SECTION
9.3.1.
DOLLARS (and the symbol "$") - shall mean lawful money of the United
States.
DOMESTIC BUSINESS DAY - shall mean a day on which banks are open for
business in Houston, Texas, New York City, New York and Chicago, Illinois.
DOMESTIC LOAN - shall mean a Loan bearing an interest rate determined with
reference to the Alternate Base Rate.
EBITDA - shall mean, with respect to any period for which a determination
thereof is to be made, the sum of (i) gross profit (revenues less cost of
sales), MINUS (ii) operating expenses (excluding any Fixed Rent or amortization
of deferred costs associated with such Fixed Rent), MINUS (iii) general and
administrative expenses, PLUS (iv) cash equity earnings of any unconsolidated
Subsidiary of the Borrower or any partnership or joint venture in which the
Borrower or any of its Subsidiaries has an equity interest and actually paid to
the Borrower and its Subsidiaries, all as determined on a consolidated basis for
the Borrower and its Subsidiaries in accordance with GAAP.
EFFECTIVE DATE - shall mean the first Business Day to occur on which all
conditions to the effectiveness of this Agreement set forth in ARTICLE XI have
been satisfied or waived by all Lenders, which will be in no event later than
December 31, 1996.
ELECTION EFFECTIVE DATE - shall mean the date specified in the Election
Notice as the date on which Commitments of any of the Lenders are to terminate
or reduce as a result of the Borrower's election in SECTION 2.7(C) or such later
date as selected by the Borrower in an amended Election Notice, and which date
shall be on or before the Initial Commitment Amortization Date of the year in
which such Election Notice or amended Election Notice is given, or if no
Election Notice is provided pursuant to the terms of SECTION 2.7, the Initial
Commitment Amortization Date.
ELECTION NOTICE - shall have the meaning assigned to such term in SECTION
2.7(C).
ENVIRONMENTAL LAWS - shall mean all applicable federal, state or local
statutes, laws, ordinances, codes, rules, regulations and guidelines (including
consent decrees and administrative orders) relating to public health and safety
and protection of the environment.
EQUITY INVESTMENT - shall mean, relative to any Person, any ownership or
similar interest held by such Person in any other Person. The amount of any
Equity Investment shall be the original capital amount thereof less all returns
of equity thereon (and without adjustment by reason of the financial condition
of such other Person) and shall, if made by the transfer or
8
<PAGE>
exchange of property other than cash, be deemed to have been made in an original
capital amount equal to the Fair Market Value of such property.
ERISA - shall mean the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
EUROCURRENCY RESERVE PERCENTAGE - shall mean, with respect to each
Eurodollar Interest Period, a percentage (expressed as a decimal) equal to the
daily average during such Eurodollar Interest Period of the percentages in
effect on each day of such Eurodollar Interest Period, if any, as prescribed by
the Board of Governors of the Federal Reserve System (or any successor thereto),
for determining the maximum reserve requirements applicable to "Eurocurrency
Liabilities" pursuant to Regulation D of the Board of Governors of the Federal
Reserve System or any other then applicable regulation of the Board of Governors
which prescribes reserve requirements applicable to "Eurocurrency Liabilities"
as presently defined in Regulation D.
EURODOLLAR BUSINESS DAY - shall mean a day on which dealings are carried
on in the interbank Eurodollar market and on which banks are open for business
in Houston, Texas, New York City, New York and Chicago, Illinois.
EURODOLLAR INTEREST PAYMENT DATE - shall have the meaning assigned to such
term in SECTION 4.6.
EURODOLLAR INTEREST PERIOD - shall mean, as to each Eurodollar Loan, the
period commencing on (and including) the latest Eurodollar Period Commencement
Date with respect to such Eurodollar Loan and ending on (but excluding) the day
numerically corresponding to such date one (1) month, two (2), three (3), or six
(6) months, or, if available from all the Lenders, twelve (12) months,
thereafter, as selected by the Borrower in the relevant notice pursuant to
SECTION 2.3; PROVIDED, HOWEVER, that:
(a) absent such selection, the Borrower shall be deemed to have
selected a Eurodollar Interest Period of one month or such
other duration as shall be required in order to comply with
the provisions of this definition;
(b) there shall not be more than fifteen (15) Eurodollar Interest
Payment Dates in effect at any one time for all Loans;
(c) any Eurodollar Interest Period which would otherwise end on a
day which is not a Eurodollar Business Day shall continue to
and end on the next succeeding Eurodollar Business Day, unless
the result would be that such Eurodollar Interest Period would
be extended to the next succeeding calendar month in which
case such Eurodollar Interest Period shall end on the next
preceding Eurodollar Business Day;
9
<PAGE>
(d) if there exists no numerically corresponding day in such
month, such Eurodollar Interest Period shall end on the last
Eurodollar Business Day of such month; and
(e) no Eurodollar Interest Period shall end later than the
Scheduled Commitment Termination Date.
EURODOLLAR INTEREST RATE - shall mean, with respect to each Eurodollar
Loan for any Eurodollar Interest Period, a rate per annum (rounded upwards, if
necessary, to the nearest integral multiple of the number of decimal points
displayed on Telerate Page 3750, or any successor or similar service, or if
neither such Telerate Page 3750 nor any successor or similar service is
available and such rate is determined using Reference Lenders, one one-hundredth
of one percent (1/100%)), equal to (i) the average of the offered quotations
appearing on Telerate Page 3750 (or if such Telerate Page shall not be
available, any successor or similar service as may be selected by the Agents and
the Borrower) as of 11:00 a.m., London time (or as soon thereafter as
practicable), two (2) Eurodollar Business Days prior to the beginning of such
Eurodollar Interest Period, and (ii) if neither such Telerate Page 3750 nor any
successor or similar service is available, then the quotient of (x) the
arithmetic average of the quotation by each Reference Lender (notified to the
Administrative Agent by such Reference Lender) of the rate of interest per annum
at which deposits in Dollars in immediately available funds are offered to such
Reference Lender two (2) Eurodollar Business Days prior to the beginning of such
Eurodollar Interest Period by prime banks in the interbank Eurodollar market as
at or about 9:00 a.m., Chicago time, for delivery on the first day of such
Eurodollar Interest Period, in each case for a period equal to such Eurodollar
Interest Period and in an amount equal to the proposed Eurodollar Loan of such
Reference Lender to which such Eurodollar Interest Period relates, divided by
(y) the remainder of one (1) minus the decimal equivalent of the applicable
Eurocurrency Reserve Percentage. If on any occasion any Reference Lender is
unable, or for any reason fails, so to notify the Administrative Agent by 10:00
a.m., Chicago time, two (2) Eurodollar Business Days before the first day of
such Eurodollar Interest Period, the applicable Eurodollar Interest Rate shall
be determined on the basis of each quotation furnished by those of the Reference
Lenders which so notify the Administrative Agent at or prior to said 10:00 a.m.
EURODOLLAR LOAN - shall mean a Loan bearing an interest rate determined
with reference to the Eurodollar Interest Rate.
EURODOLLAR OFFICE - shall have the meaning set forth in SECTION 4.12.
EURODOLLAR PERIOD COMMENCEMENT DATE - shall mean, with respect to each
Eurodollar Loan, the date on which such Eurodollar Loan is made or the date on
which such Eurodollar Loan is converted from a Domestic Loan to a Eurodollar
Loan pursuant to the provisions of ARTICLE VI, and thereafter each date on which
such Eurodollar Loan is continued as a Eurodollar Loan pursuant to the
provisions of SECTION 4.3.
EVENT OF DEFAULT - shall mean any event described in SECTION 12.1.
10
<PAGE>
FAIR MARKET VALUE - shall mean (i) with respect to any Asset (other than
cash) the price at which a willing buyer would buy and a willing seller would
sell, such Asset in an arms' length transaction, and (ii) with respect to cash,
the amount of such cash.
FEDERAL FUNDS RATE - shall mean, for any period, a fluctuating interest
rate per annum equal for each day during such period to:
(a) the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published for such day
(or, if such day is not a Domestic Business Day, for the next
preceding Domestic Business Day) by the Federal Reserve Bank
of New York; or
(b) if such rate is not so published for any day which is a
Domestic Business Day, the average of the quotations for such
day on such transactions received by the Administrative Agent
from two Federal funds brokers of recognized standing selected
by it.
FIXED RENT - shall have the meaning provided in the Lease.
FUNDED DEBT - shall mean on a consolidated basis for the Borrower and its
Subsidiaries at any time a determination thereof is to be made, the sum without
duplication of: (a) indebtedness for borrowed money, all obligations evidenced
by bonds, debentures, notes or other similar instruments, and purchase money
obligations which in accordance with GAAP would be shown on the consolidated
balance sheet of the Borrower as a liability, (b) all obligations evidenced by
the Medium Term Notes, (c) all obligations, contingent or otherwise, relative to
the face amount of all letters of credit, whether or not drawn, issued for the
account of such Person, and (d) all obligations of such Person as lessee under
leases which have been, in accordance with GAAP, recorded as Capitalized Lease
Obligations.
GAAP - shall have the meaning assigned to such term in SECTION 14.5.
GUARANTOR - shall mean each Subsidiary of the Borrower listed as a
Material Subsidiary in EXHIBIT 8.7 or a Guarantor in EXHIBIT 11.1.8, and any
other Subsidiary of the Borrower that may from time to time execute and deliver
a Guaranty and become a Guarantor pursuant to SECTION 9.2.7.
GUARANTY - shall have the meaning set forth in SECTION 10.3.
HAZARDOUS MATERIAL - shall mean
(a) any "hazardous substance," as defined by CERCLA;
(b) any "hazardous waste," as defined by the Resource Conservation
and Recovery Act, as amended;
11
<PAGE>
(c) any petroleum product, crude oil or any fraction thereof; or
(d) any pollutant or contaminant or hazardous, dangerous or toxic
chemical, material or substance within the meaning of any
other Environmental Law.
HEDGING OBLIGATIONS - shall mean, with respect to any Person, (a) all
liabilities of such Person under interest rate swap agreements, interest rate
cap agreements and interest rate collar agreements, and all other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates or currency exchange rates, and (b) all liabilities of such Person under
commodity hedge, commodity swap, exchange, forward, future, collar or cap
agreements, fixed price agreements and all other agreements or arrangements
designed to protect such Person against fluctuations in commodity prices.
HEREIN, HEREOF, HERETO, HEREUNDER and similar terms contained in this
Agreement or any other Loan Document refer to this Agreement or such other Loan
Document, as the case may be, as a whole and not to any particular section,
paragraph or provision of this Agreement or such other Loan Document.
HIGHEST LAWFUL RATE - shall have the meaning assigned to such term in
SECTION 4.16.
HOLDING COMPANY - shall mean Tejas Transok Holding Company, a Delaware
Corporation.
HOLDING COMPANY GUARANTY - shall have the meaning assigned to such term in
SECTION 10.5.
HOLDING COMPANY SECURITY AGREEMENT - shall have the meaning assigned to
such term in SECTION 10.5.
HYDROCARBONS - shall mean collectively, natural gas, oil, condensate and
other liquid and gaseous hydrocarbons, including natural gas or liquid products
extracted from gas.
INCREMENTAL EARNINGS - shall mean at the time any determination thereof is
to be made, the amount, if positive, equal to the sum of (i) 50% of Consolidated
Net Income of the Borrower and its Subsidiaries for each quarter ending on or
prior to the date of such determination (as shown on the financial statements
delivered under SECTION 9.1.2 or, with respect to the last fiscal quarter of any
fiscal year, as shown on the financial statements delivered under SECTION 9.1.1)
in which such Consolidated Net Income is positive AND (ii) 100% of Consolidated
Net Income of the Borrower and its Subsidiaries for each quarter ending on or
prior to the date of such determination (as shown on the financial statements
delivered under SECTION 9.1.2 or, with respect to the last fiscal quarter of any
fiscal year, as shown on the financial statements delivered under SECTION 9.1.1)
in which such Consolidated Net Income is negative, for each quarter beginning
with the fiscal quarter commencing October 1, 1996 through the date of such
determination and, if negative, zero.
12
<PAGE>
INCREMENTAL LOSSES - shall mean at the time any determination thereof is
to be made, the amount, if negative, equal to the sum of (i) 50% of Consolidated
Net Income of the Borrower and its Subsidiaries for each quarter ending on or
prior to the date of such determination (as shown on the financial statements
delivered under SECTION 9.1.2 or, with respect to the last fiscal quarter of any
fiscal year, as shown on the financial statements delivered under SECTION 9.1.1)
in which such Consolidated Net Income is positive AND (ii) 100% of Consolidated
Net Income of the Borrower and its Subsidiaries for each quarter ending on or
prior to the date of such determination (as shown on the financial statements
delivered under SECTION 9.1.2 or, with respect to the last fiscal quarter of any
fiscal year, as shown on the financial statements delivered under SECTION 9.1.1)
in which such Consolidated Net Income is negative, for each quarter beginning
with the fiscal quarter commencing October 1, 1996 through the date of such
determination and, if positive, zero.
INDEBTEDNESS - of any Person shall mean, without duplication:
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments (but excluding sight drafts
that evidence trade account payables arising in the ordinary
course of business);
(b) all obligations, contingent or otherwise, relative to the face
amount of all letters of credit, whether or not drawn, and
banker's acceptances issued for the account of such Person;
(c) all obligations of such Person as lessee under leases which
have been or should be, in accordance with GAAP, recorded as
Capitalized Lease Obligations;
(d) all obligations of such Person as lessee of any real or
personal property (or any interest therein) which have not
been or should not be, in accordance with GAAP, recorded as
Capitalized Lease Obligations;
(e) all other items which, in accordance with GAAP, would be
included as liabilities on the liability side of the balance
sheet of such Person as of the date at which Indebtedness is
to be determined;
(f) net liabilities of such Person under all Hedging Obligations;
(g) whether or not so included as liabilities in accordance with
GAAP, all obligations of such Person to pay the deferred
purchase price of property or services (but excluding trade
accounts payable arising in the ordinary course of business),
and indebtedness (excluding prepaid interest thereon) secured
by a Lien on property owned or being purchased by such Person
(including indebtedness arising under conditional sales or
other title
13
<PAGE>
retention agreements), whether or not such indebtedness shall
have been assumed by such Person or is limited in recourse;
and
(h) all Contingent Liabilities of such Person in respect of any
Indebtedness of any other Person.
For all purposes of this Agreement, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture in which such Person is a
general partner or a joint venturer.
INDEMNIFIED PARTIES - shall have the meaning assigned to such term in
SECTION 14.8.
INITIAL BORROWING DATE - shall mean the date on which the initial Loans
are made or the initial Letters of Credit are issued hereunder.
INITIAL COMMITMENT AMORTIZATION DATE - shall mean March 31, 1999, or such
later date as may result from any extension requested by the Borrower and
consented to by the Accepting Lenders pursuant to SECTION 2.7.
INTERCOMPANY SUBORDINATED DEMAND NOTES - shall have the meaning assigned
to such term in SECTION 10.4.
ISSUANCE REQUEST - shall mean a request for issuance of a Letter of Credit
and a certificate duly executed by the Borrower substantially in the form of
EXHIBIT 2.3.3A.
ISSUING BANK - shall mean BMO, in its capacity as Letter of Credit issuing
bank, together with its successors and assigns in such capacity.
LAW - shall mean any law (including, without limitation, any zoning law or
ordinance or any Environmental Law), statute, rule, regulation, ordinance,
order, directive, code, interpretation, judgment, decree, injunction, writ,
determination, award, permit, license, authorization, direction, requirement or
decision of and agreement with or by any government or governmental department,
commission, board, court, authority, agency, official or officer, domestic or
foreign.
LEASE - shall mean the Lease, dated as of June 6, 1996 between CIBC Inc.,
as Lessor and Transok Acquisition Corporation III, as Lessee, as the same may be
amended, extended, renewed, supplemented, restated or otherwise modified from
time to time.
LENDERS - is defined in the PREAMBLE.
LENDING INSTALLATION - shall mean a foreign branch, foreign subsidiary or
foreign affiliate of a Lender designated by such Lender pursuant to the
provisions of SECTION 2.2 to make any Eurodollar Loan.
14
<PAGE>
LESSEE - shall mean Transok Gas Processing Company, successor by merger to
Transok Acquisition Corporation III, a Delaware corporation.
LESSOR - shall mean CIBC Inc.
LESSOR'S A-INVESTED AMOUNT - is defined in the Participation Agreement.
LESSOR'S B-INVESTED AMOUNT - is defined in the Participation Agreement.
LETTER OF CREDIT - shall have the meaning assigned to such term in SECTION
2.1.2.
LETTER OF CREDIT COMMITMENT - shall mean, relative to the Issuing Bank its
obligation to issue, and relative to any Lender, its obligation to participate
in, Letters of Credit hereunder pursuant to SECTION 2.1.2 and SECTION 2.3.3.
LETTER OF CREDIT COMMITMENT AMOUNT - shall mean, at any time, the lesser
of (i) $50,000,000, as such amount may be reduced pursuant to SECTION 5.1, 5.3,
or 5.5, (ii) an amount equal to the positive difference, if any, between the
Commitment Amount MINUS the aggregate principal amount of all Loans outstanding
at such time and (iii) the Commitment Amount.
LETTER OF CREDIT LIABILITIES - shall mean, at any time, with respect to
any Letter of Credit then in effect, the sum of (i) the undrawn face amount of
such Letter of Credit PLUS (ii) the aggregate unpaid amount, if any, of all
Obligations of the Borrower then due and payable to reimburse the Issuing Bank
and the Lenders in respect of drawings under such Letter of Credit.
LEVERAGE RATIO - shall mean the ratio, expressed as a percentage, of (a)
the sum, without duplication of Funded Debt (other than Indebtedness of the
Borrower outstanding under the RSNs) PLUS Operating Lessor's Debt to (b) the
sum, without duplication, of Adjusted Stockholder's Equity PLUS Funded Debt PLUS
Operating Lessor's Debt. The Borrower shall give written notice promptly to the
Administrative Agent of any changes in the Leverage Ratio which result in a
change to the Applicable Margin or the Commitment Fee Rate, and the
Administrative Agent shall advise each Lender thereof promptly thereafter. For
purposes of determining the appropriate Leverage Ratio, figures of one-half of
one-tenth of one percent (.05%) or more shall be rounded upwards to the nearest
integral multiple of one-tenth of one percent (.1%) and figures of less than
one-half of one-tenth of one percent (.05%) shall be rounded down to the nearest
integral multiple of one-tenth of one percent (.1%).
LIEN - shall mean any interest in any asset or property securing an
obligation owed to, or a claim by, a Person other than the owner of the asset or
property, whether such interest is based on the common law, statute or contract,
and whether such obligation or claim is fixed or contingent, and including,
without limitation, any security interest, mortgage, pledge, lien, claim,
charge, encumbrance, hypothecation, assignment, deposit arrangement, or interest
in property to secure payment of a debt or performance of an obligation;
provided that a negative
15
<PAGE>
pledge arrangement or a restriction on alienation is not a Lien for purposes of
this Agreement or any other Loan Document.
LOAN - shall have the meaning assigned to such term in SECTION 2.1.1 and
shall include Loans deemed made or continued pursuant to SECTION 14.6(F).
LOAN COMMITMENT - shall mean, relative to any Lender, such Lender's
obligations to make Loans pursuant to SECTION 2.1.1.
LOAN COMMITMENT AMOUNT - shall mean, at any time, an amount equal to the
positive difference, if any, between (a) the Commitment Amount then in effect
MINUS (b) the aggregate of all Letter of Credit Liabilities.
LOAN DOCUMENTS - shall mean, collectively, this Agreement, the Notes, the
Guaranties, the Security Documents and any other document, instrument or
certificate executed pursuant hereto or thereto as such may be amended,
modified, supplemented, renewed, extended, or restated from time to time.
MAJORITY LENDERS - shall mean, at any time, Lenders holding more than 66
2/3% of the then aggregate outstanding principal or face amount of the
Borrowings, or, if no such principal or face amount is then outstanding, Lenders
having more than 66 2/3% of the total Commitments.
MARGIN STOCK - shall mean "margin stock" as such term is defined in
Regulation U.
MATERIAL SUBSIDIARY - shall mean (i) as of the date hereof the entities
identified as such on EXHIBIT 8.7 and (ii) any Subsidiary of the Borrower having
Consolidated Stockholders' Equity in excess of $15,000,000; provided, that any
Subsidiary which becomes a Material Subsidiary of the type described in the
foregoing clause shall remain a Material Subsidiary for purposes of this
Agreement even if it shall cease to have Consolidated Stockholders' Equity in
excess of $15,000,000 and provided further that the following Subsidiaries shall
not be a Material Subsidiary for purposes of this Agreement: Tranpache
Partnership, a Texas general partnership; Downtown Plaza II, an Oklahoma general
partnership; Southwest Gathering (East Caddo), a joint venture governed by the
Texas Uniform Partnership Act; Southwest Joint Venture (West Caddo); Mistletoe
Gathering System, a joint venture governed by the Oklahoma Uniform Partnership
Act; and Roger Mills Gas Gathering System, a joint venture governed by the laws
of Texas; and (iii) any Subsidiary of the Borrower that is designated by the
Borrower in writing to the Administrative Agent as a Material Subsidiary.
MATERIAL TEJAS SUBSIDIARIES - shall mean Acadian, TGC, TAHC, TNGC and any
Subsidiary of the Parent Company having Consolidated Stockholders' Equity in
excess of $75,000,000.
16
<PAGE>
MEDIUM TERM NOTES - shall mean the $200,000,000 Medium Term Notes of the
Borrower issued under the Private Placement Memorandum dated March 30, 1992, and
the Amended Private Placement Memorandum dated August 17, 1992.
MERGER - means the merger of TAC and the Borrower, with the Borrower being
the surviving Person as provided in the Merger Agreement.
MERGER AGREEMENT - shall mean the Agreement of Merger dated May 9, 1996,
between Central and South West Corporation and Tejas Gas Corporation relating to
Transok, Inc., as amended, extended, modified or supplemented from time to time.
NET PROCEEDS - shall mean, with respect to any Transfer of any Asset, an
amount equal to the proceeds received by the transferor of such Asset net of
reasonable brokerage and reasonable legal and other closing costs, commissions
and any transfer or similar tax.
NOTE - shall mean a promissory note issued by the Borrower to a Lender
pursuant to the provisions of SECTION 3.1, which note will be issued in
rearrangement and modification, and extension and renewal, of the notes executed
and delivered pursuant to the Original Credit Agreement, as amended, extended,
modified, rearranged and/or supplemented from time to time, together with any
promissory note given in extension, renewal, replacement, rearrangement,
modification and/or substitution thereof or therefor.
NOTES SECURITY AGREEMENT - shall have the meaning assigned to such term in
SECTION 10.4.
OBLIGATIONS - shall mean all obligations (monetary or otherwise) of the
Borrower and each other Obligor arising under or in connection with this
Agreement, the Notes, the Letters of Credit and each other Loan Document.
OBLIGOR - shall mean the Borrower, any Guarantor, and the Holding Company.
OPERATING LESSOR'S DEBT - shall mean Indebtedness in respect of the
A-Notes, the Lessor's A-Invested Amount, the B-Notes and the Lessor's B-Invested
Amount.
OPERATIVE DOCUMENTS - shall have the meaning set forth in the
Participation Agreement.
OPTION TO PURCHASE - shall mean any option to purchase all or a portion of
any pipeline, gas plant, gas gathering system or other related assets of a type
customarily entered into by parties engaged in the gas processing, transporting
and gathering business.
ORIGINAL CREDIT AGREEMENT - shall have the meaning assigned to such term
in the FIRST RECITAL.
ORIGINAL DESIGNATED MAXIMUM COMMITMENT - shall mean, as to each Lender,
the amount set forth opposite its name on SCHEDULE II or as set forth in the
Assignment and Acceptance
17
<PAGE>
Agreement executed by such Lender and its Purchasing Lender and delivered
pursuant to SECTION 14.6.
ORIGINAL TOTAL COMMITTED AMOUNT - shall mean $275,000,000.
OVERNIGHT FUNDS PERIOD - shall mean a period of one or more consecutive
days during which the Overnight Funds Rate exceeds the rates described in
CLAUSES (A)(I) and (A)(II) of the definition "ALTERNATE BASE RATE." Upon the
making, continuing, or converting of any applicable Loan during any such period,
the Administrative Agent shall give prompt notice to the Borrower and the
Lenders of the commencement and termination of such Overnight Funds Period and
the Overnight Funds Rate for such period.
OVERNIGHT FUNDS RATE - shall mean, for any Overnight Funds Period, a
fluctuating interest rate per annum equal for each day during such period to the
rate of interest offered in the interbank market to the Administrative Agent as
the overnight Federal Funds Rate as at or about 10:00 a.m., New York City time
on such day (or if such day is not a Domestic Business Day, for the next
preceding Domestic Business Day) plus 1% per annum.
PARENT COMPANY - shall mean Tejas Gas Corporation, a Delaware corporation.
PARENT COMPANY NOTE - shall have the meaning assigned to such term in
Section 9.3.5 (xviii).
PARTICIPANT - shall have the meaning assigned to such term in SECTION
14.6.
PARTICIPATION AGREEMENT - shall mean the Participation Agreement dated as
of June 6, 1996, among the Lessee, the Lessor, the Transok Guarantor, the
Administrative Agent, the Documentation Agent and the Lenders party thereto, as
amended, modified, supplemented or restated from time to time.
PARTNERSHIP/LIMITED LIABILITY COMPANY SECURITY AGREEMENTS - shall have the
meaning assigned to such term in SECTION 10.2.
PAYEE - shall have the meaning assigned to such term in SECTION 9.3.3(XV).
PAYMENT OFFICE - shall mean the office of Harris Trust and Savings Bank
located at 115 South LaSalle Street, Chicago, Illinois 60603, or such other
office or branch of a financial institution located in Chicago, Illinois, or New
York City, New York as the Administrative Agent may from time to time designate
by notice to the Borrower and the Lenders.
PAYOR - shall have the meaning assigned to such term in SECTION 9.3.3(XV).
PBGC - shall have the meaning assigned to such term in SECTION 8.8.
18
<PAGE>
PERCENTAGE - shall mean, relative to any Lender, the percentage set forth
opposite its name on SCHEDULE II, or as set forth in an Assignment and
Acceptance executed by such Lender and its Purchasing Lender and delivered
pursuant to SECTION 14.6, or allocated to such Lender pursuant to SECTION
2.7(C), as the case may be.
PERMITTED BUSINESS - shall have the meaning assigned to such term in
SECTION 9.3.11.
PERMITTED CASH COLLATERAL INVESTMENTS - shall mean marketable obligations,
maturing within one (1) year after acquisition thereof, issued or
unconditionally guaranteed by the United States of America or an instrumentality
or agency thereof and entitled to the full faith and credit of the United States
of America, and money market and mutual funds that invest solely in such
obligations.
PERMITTED INVESTMENT - shall mean the following at any time:
(a) any evidence of Indebtedness, maturing not more than one year
after such time, issued by or guaranteed by the full faith and
credit of the United States of America; or
(b) commercial paper, maturing not more than nine months from the
date of issue, which is issued by, or notes or bonds maturing
not more than one year after such time which is issued by a
corporation (other than an Affiliate of a Borrower) organized
under the laws of any state of the United States or of the
District of Columbia with a senior unsecured debt rating of
AA- or higher by Standard & Poors Ratings Group or the
equivalent by Moody's Investor Service, Inc. and which
commercial paper is rated A-1 by Standard & Poors Ratings
Group or P-1 by Moody's Investors Service, Inc.; or
(c) any certificate of deposit or bankers acceptance, or time
deposits including Eurodollar time deposits, in each case,
maturing not more than one year after such time, which is
issued by either
(i) a commercial banking institution that is a member of the
Federal Reserve System and has a combined capital and
surplus and undivided profits of not less than
U.S.$400,000,000 and with a senior unsecured debt rating
of AA- or higher by Standard & Poors Ratings Group or
the equivalent by Moody's Investor Service, Inc.; or
(ii) a commercial banking institution not organized under the
laws of the United States or any State thereof, that has
a combined capital and surplus and undivided profits of
not less than $500,000,000 and with senior unsecured
debt rating of AA- by Standard & Poors
19
<PAGE>
Ratings Group or the equivalent by Moody's Investor
Service, Inc.; or
(d) any repurchase agreement entered into with any Lender (or
other Person) having a senior unsecured debt rating of AA- or
higher by Standard & Poors Ratings Group or the equivalent by
Moody's Investor Service, Inc. which
(i) is secured by a fully perfected security interest in any
obligation of the type described in CLAUSE (A); and
(ii) has a market value at the time such repurchase agreement
is entered into of not less than 100% of the repurchase
obligation of such Lender (or other Person) thereunder;
(e) any investment permitted by the investment policy of United
States Trust Company of New York as in effect from time to
time; or
(f) any certificate of deposit or bankers acceptance or time
deposits including Eurodollar time deposits, in each case
maturing not more than one year after such time, issued by one
or more local Oklahoma banks; provided, however, that the
aggregate at any time of all such investments permitted by
this clause (f) shall not exceed at any time outstanding
$10,000,000 in the aggregate.
PERSON - shall mean any corporation, limited liability company, trust,
partnership, joint venture, association, joint stock association or other
unincorporated entity or any government or governmental agency, body or
instrumentality; or a natural person.
PLEDGE AGREEMENT - shall have the meaning assigned to such term in SECTION
10.1.
PURCHASING LENDER - shall have the meaning assigned to such term in
SECTION 14.6.
RECEIVABLES - shall mean trade receivables of the Borrower or any of its
Subsidiaries arising in the ordinary course of business and (i) all of the
interest of the Borrower or such Subsidiary in the goods or services the sale or
rendering of which gave rise to such receivables after the passage of title
thereto to any obligor, (ii) all security interests, mortgages, pledges,
hypothecations, assignments, deposit arrangements, encumbrances, liens or
charges and property subject thereto from time to time purporting to secure
payment of such receivables and (iii) all guarantees, insurance, letters of
credit and other agreements or arrangements of whatever character from time to
time supporting or securing payment of any such receivables.
RECEIVABLES FINANCING - shall mean the Transfer by the Borrower or any
Subsidiary of the Borrower of Receivables or of an undivided ownership interest
in a Receivables pool purporting to be a sale (and considered a sale under GAAP)
that (i) does not provide, directly
20
<PAGE>
or indirectly, for recourse against the seller of such Receivables (or against
the Borrower or any Subsidiary of the Borrower) by way of guaranty or any other
support arrangement for the collectibility of such Receivables (based on
financial conditions or circumstances of the obligor thereunder) other than such
limited recourse as is related to historical bad debt loss experience or (ii)
does not satisfy the requirements of the foregoing clause (i).
REDUCED DECLINING LENDER - shall have the meaning assigned to such term in
SECTION 2.7(C)(II).
REFERENCE LENDERS - shall mean BMO and CIBC.
REGULATION G - shall mean Regulation G of the Board of Governors of the
Federal Reserve System, from time to time in effect, and all official rulings
and interpretations thereunder or thereof.
REGULATION T - shall mean Regulation T of the Board of Governors of the
Federal Reserve System, from time to time in effect, and all official rulings
and interpretations thereunder or thereof.
REGULATION U - shall mean Regulation U of the Board of Governors of the
Federal Reserve System, as from time to time in effect, and all official rulings
and interpretations thereunder or thereof.
REGULATION X - shall mean Regulation X of the Board of Governors of the
Federal Reserve System, as from time to time in effect, and all official rulings
and interpretations thereunder or thereof.
REGULATORY CHANGE - shall mean, relative to any Lender, any change
occurring after the date hereof in any (or the adoption after the date hereof of
any new):
(a) United States Federal or state law or foreign law applicable
to such Lender; or
(b) regulation, interpretation, directive, or request (whether or
not having the force of law) applicable to such Lender of any
court or governmental authority charged with the
interpretation or administration of any law referred to in
CLAUSE (A) or of any fiscal, monetary, or other authority
having jurisdiction over such Lender.
REIMBURSEMENT OBLIGATION - shall have the meaning assigned to such term in
SECTION 2.4.2.
RELEASE - shall mean a "release," as such term is defined in CERCLA.
21
<PAGE>
REQUIRED LENDERS - shall mean, at any time, Lenders holding at least 51%
of the then aggregate outstanding principal or face amount of the Borrowings,
or, if no such principal or face amount is then outstanding, Lenders having at
least 51% of the total Commitments.
RESOURCE CONSERVATION AND RECOVERY ACT - shall mean the Resource
Conservation and Recovery Act, 42 U.S.C. Section 690, ET SEQ., as in effect from
time to time.
REVOLVING COMMITMENT - shall mean, relative to any Lender, such Lender's
obligation to make Loans and to participate in Letters of Credit pursuant to
SECTIONS 2.1.1 and 2.1.2.
RSN - shall mean one or more revolving subordinated promissory notes from
the Borrower payable to the Holding Company or the Parent Company in the form of
EXHIBIT 9.3.3 and shall include the Subordinated Promissory Note (RSN) dated as
of June 6, 1996 from the Borrower payable to the Parent Company.
SCHEDULED COMMITMENT TERMINATION DATE - shall mean December 31, 2004, or
such other later date as may result from any extension requested by the Borrower
and consented to by the Accepting Lenders pursuant to SECTION 2.7.
SECURITY DOCUMENTS - shall mean, collectively, the Pledge Agreements, the
Notes Security Agreement, the Holding Company Guaranty, the Holding Company
Security Agreement, the Partnership/Limited Liability Company Security
Agreements and any and all additional security documents described in SECTION
9.2.7.
STATED MATURITY DATE - shall mean the earlier of:
(a) the Scheduled Commitment Termination Date; and
(b) either
(i) the occurrence of any Event of Default described in SECTION
12.1.4; or
(ii) the occurrence and continuance of any other Event of Default
and the declaration of the Loans to be due and payable
pursuant to SECTION 12.2.
STOCKHOLDERS' EQUITY - shall mean, as of the time any determination
thereof is to be made, (i) at a time when the Borrower is a corporation, the sum
of the Borrower's capital stock (which shall exclude treasury stock and any
capital stock subject to mandatory redemption by the issuer at the option of the
holder thereof) and additional paid-in capital, PLUS retained earnings (MINUS
accumulated deficit), and (ii) at a time when the Borrower is a limited
liability company, the sum of all membership interests of all members of the
Borrower, all as shown on the consolidated balance sheet of the Borrower and its
Subsidiaries and based on GAAP.
SUBORDINATED DEBT - shall mean all unsecured Indebtedness of the Borrower
and its Subsidiaries on a consolidated basis for borrowed money which is
subordinated, upon terms
22
<PAGE>
satisfactory to the Lenders, in right of payment to the payment in full in cash
of all Obligations, including Indebtedness evidenced by the RSNs.
SUBSIDIARY - shall mean a corporation of which any Person and its
Subsidiaries own, directly or indirectly, such number of outstanding shares of
capital stock as have more than fifty percent (50%) of the ordinary voting power
for the election of directors; each partnership of which any Person or any
Subsidiary of any Person is a general partner; and each limited liability
company in which any Person is a member or manager and with an aggregate
interest of more than fifty percent (50%).
TAC - shall have the meaning assigned to such term in the FIRST RECITAL.
TAHC - shall mean Tejas-Acadian Holding Company, a Delaware corporation.
TAXES - shall have the meaning assigned to such term in SECTION 4.10.
TGC - shall mean Tejas Gas Corp., a Nevada corporation.
TNGC - shall mean Tejas Natural Gas Company, a Nevada corporation.
TOTAL COMMITTED AMOUNT - shall mean the lesser of:
(a) the Original Total Committed Amount; and
(b) the aggregate of the Designated Maximum Commitments.
TOTAL INTEREST EXPENSE - shall mean with respect to any period for which a
determination thereof is to be made, the sum, without duplication, of (i) the
aggregate amount of all interest accrued (whether or not paid) on all
Indebtedness of the Borrower and its Subsidiaries on a consolidated basis other
than unpaid accrued interest on Subordinated Debt owed or owing by the Borrower
or any of its Subsidiaries to any Person, including, without limitation, the
RSNs, PLUS (ii) the aggregate amount of all accrued Fixed Rent (whether or not
paid), PLUS (iii) the portion of any rental obligation allocable to interest
expense in accordance with GAAP.
TRANSFER - shall mean (i) a sale, transfer, conveyance, assignment or
other disposition of an Asset (or related Assets) having a Fair Market Value in
excess of $100,000, or (ii) destruction as a result of a casualty of an Asset
(or related Assets) having a Fair Market Value in excess of $500,000 in the
aggregate for any such casualty.
TRANSFER EFFECTIVE DATE - shall have the meaning assigned to such term in
the Assignment and Acceptance.
TRANSFEREE - shall have the meaning assigned to such term in SECTION 14.6.
23
<PAGE>
TYPE - shall mean, relative to any Loan, the portion thereof, if any,
being maintained as a Domestic Loan or a Eurodollar Loan.
UNITED STATES or U.S. - shall mean the United States of America, its fifty
States and the District of Columbia.
UNMATURED EVENT OF DEFAULT - shall mean any event which with the passage
of time or notice to the Borrower, or both, would constitute an Event of
Default.
UNUSED ASSET TRANSFER ALLOWANCE - shall mean, as of the time any
determination thereof is to be made, the positive difference, if any, of (a) the
product of (i) $40,000,000 times (ii) the number of fiscal years of the Borrower
ended during the period from the Effective Date to such determination date MINUS
(b) the aggregate Fair Market Value of all Assets Transferred during the period
from the Effective Date to such determination date as permitted by SECTION
9.3.8(III).
ARTICLE II
COMMITMENTS OF THE LENDERS;
BORROWING PROCEDURES AND CONDITIONS
SECTION 2.1 COMMITMENTS. Subject to the terms and conditions of this
Agreement, each Lender severally and for itself alone agrees to make extensions
of credit pursuant to the Commitments as described in this ARTICLE II.
SECTION 2.1.1 LOAN COMMITMENT. From time to time on any Business Day
occurring prior to the Commitment Termination Date each Lender will make loans
(relative to such Lender, its "LOANS") to the Borrower equal to such Lender's
Percentage of the aggregate amount of Loans requested by the Borrower to be made
on such day. No Lender shall be permitted or required to make any Loan if, after
giving effect thereto, the aggregate outstanding principal amount of all Loans
(i) of all Lenders would exceed the Loan Commitment Amount or (ii) of such
Lender would exceed such Lender's Percentage of the Loan Commitment Amount or
such Lender's Designated Maximum Commitment. On the terms and subject to the
conditions hereof, the Borrower may from time to time borrow, prepay, repay and
reborrow Loans.
SECTION 2.1.2 LETTER OF CREDIT COMMITMENT. From time to time on any
Business Day occurring at least six (6) Business Days prior to the Commitment
Termination Date then in effect, the Issuing Bank will issue, and each Lender
will participate in, standby letters of credit (herein individually referred to
as a "LETTER OF CREDIT" and collectively referred to as "LETTERS OF CREDIT") for
the account of the Borrower, and in the name of the Borrower or any Subsidiary
of the Borrower, in a principal amount equal to such Lender's Percentage of the
face amount of all Letters of Credit requested by the Borrower to be issued on
such day. Neither the Issuing Bank nor any Lender shall be permitted or required
to issue or participate in any Letter of Credit if, after giving effect thereto,
(i) the aggregate of all Letter of Credit Liabilities outstanding on such date
under and in connection with all Letters of Credit of all Lenders would
24
<PAGE>
exceed the Letter of Credit Commitment Amount or (ii) the Percentage of such
Lender in all Letter of Credit Liabilities outstanding on such date would exceed
such Lender's Percentage of the Letter of Credit Commitment Amount. Anything
herein contained to the contrary notwithstanding, BMO's obligations and
commitments to issue Letters of Credit hereunder shall cease immediately and
automatically and without further action of any kind if BMO ceases to be the
Administrative Agent hereunder. On the terms and subject to the conditions
hereof, the Borrower may from time to time request, reimburse and request new
Letters of Credit.
SECTION 2.1.3 LENDERS NOT PERMITTED OR REQUIRED TO MAKE BORROWINGS
AVAILABLE. No Lender shall be permitted or required to make any Loan or
participate in (and the Issuing Bank shall have no obligation to issue) any
Letter of Credit, if, after giving effect thereto and to all other Borrowings
and conversions and continuations to be made on such date, (a) the Aggregate
Revolving Outstandings of all Lenders would exceed the Commitment Amount or (b)
the sum of the aggregate outstanding principal amount of all Loans of such
Lender PLUS the aggregate of such Lender's Percentage of all Letter of Credit
Liabilities would exceed the lesser of (i) such Lender's Percentage of the
Commitment Amount and (ii) such Lender's Designated Maximum Commitment.
SECTION 2.2 DOMESTIC LOANS AND EURODOLLAR LOANS. Subject to the terms and
conditions set forth in ARTICLE VI, each Loan shall be either a Eurodollar Loan
or a Domestic Loan as the Borrower may request, it being understood that Loans
made to the Borrower on any date may be either Eurodollar Loans or Domestic
Loans or a combination thereof. As to any Eurodollar Loan, each Lender may, if
it so elects, fulfill its commitment to make such Eurodollar Loan by causing a
Lending Installation to make such Eurodollar Loan; PROVIDED, HOWEVER, that in
such event the obligation of the Borrower to repay such Eurodollar Loan
nevertheless shall be to such Lender and shall be deemed to be held by such
Lender for the account of such Lending Installation.
SECTION 2.3 BORROWING PROCEDURES. The Borrower shall give the
Administrative Agent prior written or telegraphic notice (in substantially the
form of EXHIBIT 2.3 hereto) of each proposed Borrowing or continuation, and as
to whether such Borrowing or continuation is to be of Domestic Loans, Eurodollar
Loans or Letters of Credit, as follows:
SECTION 2.3.1 DOMESTIC LOANS. The Administrative Agent shall receive
written or telegraphic notice from the Borrower on or before 11:00 a.m. Chicago
time at least one (1) Domestic Business Day prior to the date requested for each
proposed Borrowing of a Domestic Loan of the date of such Borrowing and amount
of such Borrowing (which shall be in a minimum amount of $1,000,000 or in the
unused amount of the Loan Commitment), and the Administrative Agent shall advise
each Lender thereof promptly thereafter. Not later than 10:00 a.m., Chicago
time, on the date specified in such notice for such Borrowing, each Lender shall
provide to the Administrative Agent at the Payment Office, same day or
immediately available funds covering such Lender's Percentage of the requested
Domestic Loan. Upon fulfillment of the applicable conditions set forth in
ARTICLE XI with respect to such Domestic Loan, the Administrative Agent shall
make available to the Borrower the proceeds of each
25
<PAGE>
Domestic Loan (to the extent received from the Lenders) by wire transfer of such
proceeds to such account(s) as the Borrower shall have specified in the
Borrowing Request.
SECTION 2.3.2 EURODOLLAR LOANS. The Administrative Agent shall receive
written or telegraphic notice from the Borrower on or before 11:00 a.m. Chicago
time, (i) at least three (3) Eurodollar Business Days prior to the date
requested for each proposed Borrowing or continuation of a Eurodollar Loan
having an initial one (1), two (2), three (3) or six (6) month Eurodollar
Interest Period and (ii) at least four (4) Eurodollar Business Days prior to the
date requested for each proposed Borrowing or continuation of a Eurodollar Loan
having an initial twelve (12) month Eurodollar Interest Period, of the date of
such Borrowing or continuation, as the case may be, the amount of such Borrowing
or continuation, as the case may be (which shall be in a minimum amount of
$5,000,000 or in the unused amount of the applicable Commitment), and the
duration of the initial Eurodollar Interest Period with respect thereto, and the
Administrative Agent shall advise each Lender thereof promptly thereafter. Not
later than 10:00 a.m., Chicago time, on the date specified in such notice for
such Borrowing, each Lender shall provide to the Administrative Agent at the
Payment Office, same day or immediately available funds covering such Lender's
Percentage of the requested Eurodollar Loan. Upon fulfillment of the applicable
conditions set forth in ARTICLE XI with respect to such Eurodollar Loan, the
Administrative Agent shall make available to the Borrower the proceeds of each
Eurodollar Loan (to the extent received from the Lenders) by wire transfer of
such proceeds to such account(s) as the Borrower shall have specified in the
Borrowing Request.
SECTION 2.3.3 LETTERS OF CREDIT. The Administrative Agent shall receive
written or telegraphic notice from the Borrower on or before 11:00 a.m. Chicago
time at least three (3) Domestic Business Days prior to the proposed issuance
date of a Letter of Credit, and the Administrative Agent shall advise the
Issuing Bank and each Lender thereof promptly thereafter. Each Borrowing Request
for the issuance of a Letter of Credit shall be accompanied by an Issuance
Request, substantially in the form of EXHIBIT 2.3.3A, with appropriate
insertions, setting forth in detail the proposed terms of such requested Letter
of Credit, including, without limitation, the proposed date of issuance, amount,
beneficiary, expiry date and documents to be required upon presentation, if any
(such terms regarding documents required upon presentation to be satisfactory in
form and substance to the Issuing Bank). Each Letter of Credit shall have a
fixed expiration date occurring not later than one (1) year after the date of
issuance thereof (and in no event later than five (5) Business Days prior to the
earlier of (a) the Commitment Termination Date in effect at the time of issuance
thereof and (b) the next scheduled Election Effective Date, if any, in effect at
the time of issuance thereof), may, by its terms, be renewable annually for
additional one-year periods (but in no event later than five (5) Business Days
prior to the earlier of (a) the Commitment Termination Date in effect at the
time of renewal thereof and (b) the next scheduled Election Effective Date, if
any, in effect at the time of renewal thereof) unless notice of non-renewal is
received by the beneficiary thereof in accordance with the terms of such Letter
of Credit, and shall provide that demands for payment thereunder be made at
least three (3) Domestic Business Days prior to the proposed date of payment;
PROVIDED, HOWEVER, that for all purposes of this Agreement (other than the
condition requiring delivery of a Borrowing Request and an Issuance Request and
except that customary renewal fees, rather than issuance fees, of the Issuing
Bank shall be payable with respect to such renewals)
26
<PAGE>
the renewal of a Letter of Credit shall be considered an issuance thereof and
the Borrower shall be required to comply with all the provisions of this
Agreement with respect to any such renewal to the same extent as if a new Letter
of Credit was being issued on such renewal date. Upon fulfillment of the
applicable conditions set forth in ARTICLE XI and subject to the terms hereof,
the Issuing Bank shall issue such Letter of Credit to the requested beneficiary
no later than the close of business on the date of such proposed issuance. Each
Lender shall, upon the issuance of each Letter of Credit and without further
action, hold a participation therein and each Lender hereby irrevocably and
unconditionally purchases a participation in each such Letter of Credit in an
amount equal to such Lender's Percentage of the face amount of such Letter of
Credit. Each Lender shall, to the extent of its Percentage, be responsible for
reimbursing promptly (and in any event within one Business Day), without setoff,
deduction or counterclaim, the Issuing Bank for Reimbursement Obligations which
have not been reimbursed by the Borrower in accordance with SECTION 2.4.2.
SECTION 2.4 LETTER OF CREDIT PROCEDURES.
SECTION 2.4.1 LETTER OF CREDIT OPERATIONS. The Issuing Bank shall,
promptly following its receipt thereof, examine all documents purporting to
represent a demand for payment by a beneficiary under a Letter of Credit to
ascertain that the same appear on their face to be in conformity with the terms
and conditions of such Letter of Credit. If, after examination, the Issuing Bank
shall have determined that a demand for payment under such Letter of Credit does
not conform to the terms and conditions of such Letter of Credit, then the
Issuing Bank shall, as soon as reasonably practicable, give notice to such
beneficiary to the effect that such demand for payment was not in accordance
with the terms and conditions of such Letter of Credit, stating the reasons
therefor. Thereupon, such beneficiary may attempt to correct any such
non-conforming demand for payment under such Letter of Credit if, and to the
extent that, such beneficiary is entitled (without regard to the provisions of
this sentence) and able to do so. The Lenders hereby expressly agree to accept
as correct and conclusive, in the absence of gross negligence or willful
misconduct, any determination by the Issuing Bank that any demand for payment
under a Letter of Credit complies, or does not comply, with the terms and
conditions of such Letter of Credit.
After determining that a demand for payment under such Letter of Credit
conforms to the terms and conditions thereof, the Issuing Bank shall promptly
notify the Lenders by telecopy of the same.
SECTION 2.4.2 BORROWER'S AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS. The
Borrower hereby agrees to reimburse the Issuing Bank, forthwith, for each
payment or disbursement made by the Issuing Bank to settle its obligations under
any draft drawn under any Letter of Credit, with interest on the amount so paid
or disbursed by the Issuing Bank from and including the date of payment or
disbursement to, but not including, the date the Issuing Bank is reimbursed
therefor or the Lenders are deemed to have made a Loan in respect thereof
pursuant to the following proviso, as the case may be, at the rate set forth in
SECTION 4.1.1(A) (any and all obligations of the Borrower to reimburse the
Issuing Bank hereunder with respect to each payment or disbursement made by the
Issuing Bank under a Letter of Credit being herein
27
<PAGE>
referred to as a "REIMBURSEMENT OBLIGATION" and collectively as "REIMBURSEMENT
OBLIGATIONS"); PROVIDED, HOWEVER, that if any such payment or disbursement shall
not be reimbursed to the Issuing Bank after any grace period for the payment
thereof as provided in SECTION 12.1.1 herein and if the Commitment Termination
Date shall not have occurred, then the Reimbursement Obligation in respect
thereof shall automatically, without notice from or to the Borrower and without
any further authorization from the Borrower (and whether or not the amount
thereof satisfies the conditions of SECTION 2.3.1 and whether or not the
conditions of ARTICLE XI are satisfied), be deemed to be a Loan, made by each of
the Lenders to the Borrower in their respective Percentages of the Issuing
Bank's payments or disbursements bearing interest determined pursuant to SECTION
4.1.1(A) and the related Letter of Credit Liability shall be deemed paid
simultaneously with such funding of the deemed Loan; PROVIDED FURTHER, HOWEVER,
that if any such payment or disbursement shall not be reimbursed to the Issuing
Bank and a Loan shall not be deemed to have been made notwithstanding the
preceding proviso due to failure to meet the applicable conditions in ARTICLE
XI, then the Reimbursement Obligation in respect thereof shall be due and
payable, with interest accruing thereon at the rate set forth in SECTION
4.1.2(C), if applicable.
Any action taken by the Issuing Bank, any Lender, the Administrative
Agent, the Documentation Agent or the Collateral Agent in connection with any
Letter of Credit or any draft thereon or demand for payment thereunder shall, if
in good faith and in conformity with all laws, regulations or customs applicable
thereto, be binding upon the Borrower and its Subsidiaries and shall not place
the Issuing Bank, any Lender, the Administrative Agent, the Collateral Agent or
the Documentation Agent under any resulting liability to the Borrower or any of
its Subsidiaries. Without limiting the generality of the foregoing, the Borrower
and its Subsidiaries assume all risks of the acts or omissions of any
beneficiary or transferee of each Letter of Credit and neither the Issuing Bank,
the Lenders, the Administrative Agent, the Collateral Agent nor the
Documentation Agent nor any of their respective officers, directors or agents
shall be liable or responsible for (i) the use which may be made of any Letters
of Credit or any acts or omissions of any beneficiary or transferee in
connection therewith, (ii) the validity or genuineness of any document specified
in, or demand for payment under, any Letter of Credit, or any endorsements
thereon, even if such document or demand should prove to be in any or all
respects invalid, fraudulent or forged (and the Issuing Bank may accept
documents and demands that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary), (iii) failure of any draft to bear any reference
or adequate reference to a Letter of Credit, or failure of any Person to note
the amount of any draft on the reverse side of a Letter of Credit, (iv) errors,
omissions, interruptions or delays in transmission or delivery of any message by
mail, cable, telegram, telecopier, wireless or otherwise, (v) errors in
translation or errors in interpretation of technical terms or (vi) any error,
neglect, default, suspension or insolvency of any of the Issuing Bank's
correspondents. Notwithstanding the foregoing, the Borrower shall not be
obligated to reimburse the Issuing Bank for any wrongful payment or disbursement
made by the Issuing Bank under any Letter of Credit as a result of acts or
omissions constituting gross negligence or willful misconduct on the part of the
Issuing Bank or any of its officers, directors, employees or agents.
28
<PAGE>
THE BORROWER WILL ON DEMAND INDEMNIFY AND KEEP THE ISSUING BANK AND EACH
LENDER HARMLESS FROM AND AGAINST ALL LIABILITIES, LOSSES, DAMAGES, CLAIMS,
COSTS, DEMANDS AND ACTIONS WHICH THE ISSUING BANK OR SUCH LENDER MAY SUFFER OR
INCUR IN CONNECTION WITH ANY LETTER OF CREDIT OR ANY PAYMENT THEREUNDER, EXCEPT
TO THE EXTENT DUE TO THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE ISSUING
BANK OR SUCH LENDER OR RESULTING FROM THE ISSUING BANK'S OR SUCH LENDER'S OWN
UNEXCUSED BREACH OF ANY MATERIAL PROVISION OF ANY LOAN DOCUMENT, PROVIDED THAT
IT IS THE INTENTION OF THE PARTIES HERETO FOR THE ISSUING BANK AND EACH LENDER
TO BE INDEMNIFIED IN THE CASE OF SIMPLE NEGLIGENCE, INCLUDING THEIR OWN
NEGLIGENCE. The obligations of the Borrower under this SECTION 2.4.2 shall not
be impaired by (i) any waiver or time granted to or by the Issuing Bank, any
Lender, the Documentation Agent, the Administrative Agent or the Collateral
Agent, (ii) any release or dealings with any rights or security of the Issuing
Bank, any Lender, the Documentation Agent, the Administrative Agent or the
Collateral Agent (including, without limitation, under any of the Security
Documents or any of the Guaranties), (iii) any invalidity of any Letter of
Credit or (iv) any other circumstances (other than an express release in writing
by the relevant beneficiaries) which might impair such obligations. Anything in
this SECTION 2.4.2 to the contrary notwithstanding, the Borrower does not hereby
waive its right to pursue an action against the Issuing Bank or any Lender for
willful misconduct or gross negligence by the Issuing Bank, such Lender or any
of their officers, employees or agents in connection with a Letter of Credit or
any payment thereunder.
SECTION 2.4.3 LENDERS' AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS. Any
action taken by the Issuing Bank, any Lender, the Administrative Agent, the
Documentation Agent or the Collateral Agent in connection with any Letter of
Credit or any draft thereon or demand for payment thereunder shall, if in good
faith and in conformity with all laws, regulations or customs applicable
thereto, be binding upon the Lenders and shall not place the Issuing Bank, any
Lender, the Administrative Agent, the Collateral Agent or the Documentation
Agent under any resulting liability to any of the other Lenders. Without
limiting the generality of the foregoing, the Lenders assume all risks of the
acts or omissions of each beneficiary or transferee of each Letter of Credit and
neither the Issuing Bank nor any of its officers, directors, employees, or
agents shall be liable or responsible for (i) the use which may be made of any
Letters of Credit or any acts or omissions of any beneficiary or transferee in
connection therewith, (ii) the validity or genuineness of any document specified
in, or demand for payment under, any Letter of Credit, or any endorsements
thereon, even if such document or demand should prove to be in any or all
respects invalid, fraudulent or forged (and the Issuing Bank may accept
documents and demands that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary), (iii) failure of any draft to bear any reference
or adequate reference to a Letter of Credit, or failure of any Person to note
the amount of any draft on the reverse side of a Letter of Credit, (iv) errors,
omissions, interruptions or delays in transmission or delivery of any message by
mail, cable, telegram, telecopier, wireless or otherwise, (v) errors in
translation or errors in interpretation of technical terms or (vi) any error,
neglect, default, suspension or insolvency of any of the Issuing Bank's
correspondents. Notwithstanding the foregoing, no Lender shall be obligated to
reimburse the Issuing Bank for any wrongful payment or disbursement made by the
Issuing Bank
29
<PAGE>
under any Letter of Credit as a result of acts or omissions constituting gross
negligence or willful misconduct on the part of the Issuing Bank or any of its
officers, employees or agents.
SECTION 2.4.4 PROCEDURES FOR DEPOSITING CASH COLLATERAL. Any cash
collateral amounts received by the Collateral Agent pursuant to SECTION 5.7 or
12.3 shall be retained by the Collateral Agent for the benefit of the Lenders as
collateral security for, and the Borrower hereby grants to the Collateral Agent
a security interest in, such cash collateral, the Permitted Cash Collateral
Investments and the proceeds of any thereof to secure, first, the payment of the
Obligations of the Borrower under and in connection with the Letters of Credit
and then the other Obligations of the Borrower under and in connection with this
Agreement and the other Loan Documents. If, and to the extent that (i) all
Obligations of the Borrower in connection with all outstanding Letters of Credit
and all other Obligations have been fully paid and satisfied, and (ii) the
Commitments have terminated, the Collateral Agent shall pay to the Borrower,
upon the Borrower's request therefor, all amounts previously paid by the
Borrower pursuant to SECTION 5.7 or 12.3, plus any interest earned thereon, and
not theretofore applied by the Collateral Agent to reduce amounts payable by the
Borrower to the Issuing Bank and the Lenders under or in connection with the
Letters of Credit or other Obligations. All amounts on deposit pursuant to this
SECTION 2.4.4 shall, until their application to any Obligation or their return
to the Borrower, as the case may be, at the Borrower's written request, be
invested in Permitted Cash Collateral Investments designated by the Borrower,
which Permitted Cash Collateral Investments shall be held by the Collateral
Agent as additional collateral security for the repayment of the Borrower's
Obligations under and in connection with the Letters of Credit and all other
Obligations. Any losses, net of earnings, and reasonable fees and expenses of
such Permitted Cash Collateral Investments shall be charged against the
principal amount invested. The Collateral Agent and the Lenders shall not be
liable for any loss resulting from any Permitted Cash Collateral Investment made
by it at the Borrower's request. The Collateral Agent is not obligated hereby,
or by any other Loan Document, to make or maintain any Permitted Cash Collateral
Investment, except upon written request by the Borrower.
SECTION 2.5 [INTENTIONALLY OMITTED]
SECTION 2.6 INCREASED CAPITAL COSTS. If any Regulatory Change imposes,
modifies, or deems applicable any capital adequacy, capital maintenance, or
similar requirement (including a request or requirement which affects the manner
in which any Lender or the Issuing Bank allocates capital resources to its
commitments, including its Commitments hereunder) and as a result thereof, in
the opinion of such Lender or the Issuing Bank, the rate of return on such
Lender's or the Issuing Bank's capital as a consequence of its Commitments, the
Loans made by such Lender or its issuance of or participation in the Letters of
Credit is reduced to a level below that which such Lender or the Issuing Bank
could have achieved but for such circumstances, then and in each such case upon
notice from time to time by such Lender or the Issuing Bank to the Borrower, the
Borrower shall pay (without duplication of costs paid pursuant to SECTIONS 4.9
and 4.12) to such Lender or the Issuing Bank such additional amount or amounts
as shall compensate such Lender or the Issuing Bank for such reduction in rate
of return. Each Lender and the Issuing Bank, upon determining in good faith that
any additional amounts are
30
<PAGE>
payable pursuant to this SECTION 2.6, will give prompt written notice thereof to
the Borrower with a copy to the Administrative Agent, PROVIDED that the failure
to give any such notice shall not release or diminish the Borrower's obligations
to pay additional amounts pursuant to this SECTION 2.6; PROVIDED FURTHER,
HOWEVER, that the Borrower shall not be obligated to pay additional amounts
attributable to such reduction under this SECTION 2.6 in respect of time periods
more than 180 days prior to the date of such notice. A statement of any Lender
or the Issuing Bank as to any such additional amount or amounts (including
calculations thereof in reasonable detail) shall be rebuttable presumptive
evidence of such cost and amount. In determining such amount, any Lender and the
Issuing Bank may use any method of averaging and attribution that it (in its
sole and absolute discretion) shall deem applicable.
SECTION 2.7 EXTENSION OF SCHEDULED COMMITMENT TERMINATION DATE, INITIAL
COMMITMENT AMORTIZATION DATE AND REVOLVING COMMITMENTS.
(a) Subject to the other provisions of this Agreement, the
Commitments of the Lenders shall be effective for an initial
period from the Effective Date to the original Scheduled
Commitment Termination Date; PROVIDED that the Revolving
Commitments of the Lenders, and concomitantly the Initial
Commitment Amortization Date and the Scheduled Commitment
Termination Date, may be extended for successive one-year
periods expiring, in the case of the Revolving Commitments and
the Scheduled Commitment Termination Date, on the date which
is one year from the then Scheduled Commitment Termination
Date, and in the case of the Initial Commitment Amortization
Date, on the date which is one year from the then scheduled
Initial Commitment Amortization Date, in accordance with the
terms of this SECTION 2.7. If the Borrower shall request in an
Annual Certificate of Extension delivered to the
Administrative Agent not more than one hundred twenty (120)
nor less than sixty (60) days prior to an Anniversary Date,
that the Revolving Commitments of the Lenders be extended for
one year from the then Scheduled Commitment Termination Date
and that the Initial Commitment Amortization Date be extended
for one year from the then scheduled Initial Commitment
Amortization Date, then the Administrative Agent shall
promptly notify each Lender of such request and each Lender
shall notify the Administrative Agent, not fewer than thirty
(30) days prior to such Anniversary Date, whether, in the
exercise of its sole discretion, it will extend the Scheduled
Commitment Termination Date and the Initial Commitment
Amortization Date and, in the event such Lender is a Reduced
Declining Lender such notice will specify a proposed Total
Committed Amount and its proposed Designated Maximum
Commitment. Any Lender which shall not timely notify the
Administrative Agent whether it will extend the Scheduled
Commitment Termination Date and the Initial Commitment
Amortization Date shall be deemed to not have agreed to extend
the Scheduled Commitment Termination Date and the
31
<PAGE>
Initial Commitment Amortization Date. No Lender shall have any
obligation whatsoever to extend the Scheduled Commitment
Termination Date or the Initial Commitment Amortization Date.
Any agreement to extend the Scheduled Commitment Termination
Date and the Initial Commitment Amortization Date shall be
irrevocable, except as provided in SECTION 2.7(C).
(b) If all the Lenders notify the Administrative Agent pursuant to
CLAUSE (A) of this SECTION 2.7 of their agreement to extend
the Scheduled Commitment Termination Date and the Initial
Commitment Amortization Date (each Lender agreeing to extend
the Scheduled Commitment Termination Date and the Initial
Commitment Amortization Date herein called an "ACCEPTING
LENDER"), then the Administrative Agent shall so notify each
Lender and the Borrower, and such extension shall be effective
without other or further action by any party hereto for such
additional one-year period.
(c) If any one or more of the Lenders shall notify or be deemed to
have notified the Administrative Agent pursuant to CLAUSE (A)
of this SECTION 2.7 that it will not extend the then Scheduled
Commitment Termination Date and the then scheduled Initial
Commitment Amortization Date at the then current Total
Committed Amount (any such Lender herein called a "DECLINING
LENDER"), then (A) the Administrative Agent shall promptly so
notify the Borrower and the Accepting Lenders; (B) the
Accepting Lenders shall, upon the Borrower's election to
extend the then Scheduled Commitment Termination Date and the
then scheduled Initial Commitment Amortization Date in
accordance with CLAUSE (I), (II) or (III) below, extend the
then Scheduled Commitment Termination Date and the then
scheduled Initial Commitment Amortization Date; and (C) the
Borrower shall, pursuant to a notice (an "ELECTION NOTICE")
delivered to the Administrative Agent, the Accepting Lenders
and the Declining Lenders not fewer than ten (10) Business
Days prior to the earlier of (x) December 31 next following
such Anniversary Date and (y) the Election Effective Date,
either:
(i) elect to extend the Scheduled Commitment
Termination Date and the then scheduled Initial
Commitment Amortization Date with respect to the
Accepting Lenders and direct the Declining Lenders
to terminate their Commitments, which termination
shall become effective on the Election Effective
Date. On such Election Effective Date (x) the
Borrower shall deliver notice of the effectiveness
of such termination to the Declining Lenders and
to the Administrative Agent, (y) the Borrower
shall
32
<PAGE>
pay in full in immediately available funds (a) all
monetary Obligations of the Borrower hereunder and
(b) all monetary obligations evidenced by the
A-Notes and B-Notes and the Lessor's A-Invested
Amount and Lessor's B-Invested Amount, including,
without limitation, all increased costs, breakage
fees payable under SECTION 4.14 hereof, and all
other costs, fees and expenses payable to each
such Declining Lender hereunder, under the
Operative Documents and under the Operative Loan
Documents (as defined in the Operative Documents),
in each case owing to the Declining Lenders and
otherwise cause the Declining Lenders no longer to
have any liability or obligation under or with
respect to any Letter of Credit issued hereunder,
whether by termination, cancellation, expiration
or amendment of all such Letters of Credit,
replacement of such Letters of Credit, or
otherwise and (z) upon the occurrence of the
events set forth in CLAUSES (X) and (Y), the
Declining Lenders shall cease to be a "Lender"
hereunder for all purposes, other than for
purposes of the last paragraph of SECTION 2.4.2
and SECTIONS 2.6, 4.9, 4.10, 4.12, 4.14, 14.7 and
14.8, and shall cease to have any obligations or
any Commitment hereunder, other than to the
Administrative Agent, the Document Agent and the
Issuing Bank pursuant to SECTION 13.3, to the
Collateral Agent pursuant to Section 10 of the
Collateral Agency Exhibit attached to certain of
the Security Documents and to the Borrower
pursuant to SECTION 14.17, and the Administrative
Agent shall promptly notify the Accepting Lenders
and the Borrower of the new Total Committed Amount
and the respective Percentages of each Accepting
Lender. So long as (a) no Event of Default or
Unmatured Event of Default has occurred and is
continuing, and (b) the Aggregate Revolving
Outstandings do not exceed the new Commitment
Amount, the Administrative Agent shall reallocate
the Percentage of each Lender in the Letters of
Credit issued hereunder at such time; or
(ii) elect to extend the Scheduled Commitment
Termination Date and the Initial Commitment
Amortization Date with respect to (x) the
Accepting Lenders and (y) all of the Declining
Lenders which commit to extend the Scheduled
Commitment Termination Date and the Initial
33
<PAGE>
Commitment Amortization Date but only at a lower
Total Committed Amount (any such Declining Lender
herein called a "REDUCED DECLINING LENDER") and
direct the Declining Lenders to terminate or
reduce, as the case may be, their respective
Commitments, which termination or reduction shall
become effective on the Election Effective Date;
PROVIDED, that if one or more Lenders shall be a
Reduced Declining Lender, then effective on the
Election Effective Date, the Total Committed
Amount shall be reduced to the lower of (A) the
lowest Total Committed Amount proposed by a
Reduced Declining Lender in the notice provided
pursuant to SECTION 2.7(A) and (B) the aggregate
of the Designated Maximum Commitments of all
Accepting Lenders and all Reduced Declining
Lenders and provided further, if one or more
Lenders shall be a Declining Lender, each
remaining Lender's Percentage shall be adjusted to
equal the quotient of (1) such Lender's Designated
Maximum Commitment DIVIDED BY (2) the reduced
Total Committed Amount. On such Election Effective
Date (x) the Borrower shall deliver a notice of
the effectiveness of such termination or
reduction, as the case may be, to such Declining
Lenders and to the Administrative Agent and (y)
the Borrower shall pay in full in immediately
available funds (A) all monetary Obligations of
the Borrower hereunder and (B) all monetary
obligations evidenced by the A-Notes and the
B-Notes and the Lessor's A-Invested Amount and
Lessor's B-Invested Amount, including, without
limitation, all increased costs, breakage fees,
amounts payable under SECTION 4.14 hereof, and all
other costs, fees and expenses payable to each
such Declining Lender hereunder, under the
Operative Documents and under the Operative Loan
Documents (as defined in the Operative
Documents),and otherwise cause such Declining
Lenders (to the extent of the reduction of their
respective Commitments) no longer to have any
liability or obligation under or with respect to
any Letter of Credit issued hereunder, whether by
termination, cancellation, expiration or amendment
of all such Letters of Credit, replacement of such
Letters of Credit, or otherwise and pay to the
Reduced Declining Lenders and the Accepting
Lenders such amounts as are necessary to cause the
amounts owing to the Reduced Declining Lenders and
the Accepting Lenders to reflect their reduced
Commitments
34
<PAGE>
and their new Percentages and (z) upon the
occurrence of the events set forth in CLAUSES (X)
and (Y), each Declining Lender as is terminating
its respective Revolving Commitments shall cease
to be a "Lender" hereunder for all purposes, other
than for purposes of the last paragraph of SECTION
2.4.2 and SECTIONS 2.6, 4.9, 4.10, 4.12, 4.14,
14.7 and 14.8, and shall cease to have any
obligations or any Commitment hereunder, other
than to the Administrative Agent, the
Documentation Agent and the Issuing Bank pursuant
to SECTION 13.3, to the Collateral Agent pursuant
to Section 10 of the Collateral Agency Exhibit
attached to certain of the Security Documents and
to the Borrower pursuant to SECTION 14.17, and the
Administrative Agent shall promptly notify the
Accepting Lenders, the Reduced Declining Lenders
and the Borrower of the new Total Committed Amount
and the respective Percentages of each Lender. So
long as (a) no Event of Default or Unmatured Event
of Default has occurred and is continuing, and (b)
the Aggregate Revolving Outstandings do not exceed
the new Commitment Amount, the Administrative
Agent shall reallocate the Percentage of each
Lender in the Letters of Credit issued hereunder
at such time; or
(iii) (a) elect to extend the Scheduled Commitment
Termination Date and the Initial Commitment
Amortization Date with respect to (1) the
Accepting Lenders and (2) the Reduced Declining
Lenders, and to replace the Declining Lenders that
are not extending the then Scheduled Commitment
Termination Date and the Initial Commitment
Amortization Date at any Total Committed Amount,
effective on the Election Effective Date, with one
or more banks or financial institutions reasonably
acceptable to the Co-Agents and the Issuing Bank
or (b) elect to extend the Scheduled Commitment
Termination Date and the Initial Commitment
Amortization Date with respect to the Accepting
Lenders and to replace (1) one or more of the
Reduced Declining Lenders and (2) the Declining
Lenders that are not extending the then Scheduled
Commitment Termination Date and the Initial
Commitment Amortization Date at any Total
Committed Amount, effective on the Election
Effective Date, with one or more banks or
financial institutions reasonably acceptable to
the Administrative
35
<PAGE>
Agent, the Documentation Agent and the Issuing
Bank; PROVIDED, that (v) if one or more Lenders
shall be a Reduced Declining Lender that is not
being replaced, then effective on the Election
Effective Date, the Total Committed Amount shall
be reduced to the lower of (A) the lowest Total
Committed Amount proposed by a Reduced Declining
Lender that is not being replaced in the notice
provided pursuant to SECTION 2.7(A) and (B) the
aggregate of the Designated Maximum Commitments of
all Accepting Lenders and the Reduced Declining
Lenders that are not being replaced, (w) on such
date the Borrower shall pay in immediately
available funds to such Reduced Declining Lenders
that are not being replaced and to the Accepting
Lenders such amounts as are necessary to cause
amounts owing to such Reduced Declining Lenders to
reflect their reduced Commitments and their new
Percentages, (x) the replacement banks or
financial institutions shall purchase (A) the Note
or Notes, and (B) the A-Note and B-Note or the
A-Notes and B-Notes and the Lessor's A-Invested
Amount and Lessor's B-Invested Amount, as the case
may be, of the Declining Lender or Lenders being
replaced and such Declining Lender's or Lenders'
rights hereunder, under the Participation
Agreement without recourse or expense to, or
warranty by, such Declining Lender or Lenders
being replaced for a purchase price equal to the
aggregate outstanding principal amount of the Note
or Notes payable to such Declining Lender or
Lenders PLUS such Declining Lender's or Lenders'
respective Percentage of any outstanding
Reimbursement Obligations PLUS any accrued but
unpaid interest on such Note or Notes and such
Reimbursement Obligations PLUS the principal
amount of such A-Note and B-Note or A-Notes and
B-Notes and the Lessor's A-Invested Amount and
Lessor's B-Invested Amount, as the case may be,
PLUS interest and accrued yield thereon PLUS any
accrued but unpaid fees in respect of such
Declining Lender's or Lenders' outstanding
Borrowings and Percentage of Commitments hereunder
PLUS such replacement banks or financial
institutions shall assume such Declining Lender's
or Lenders' respective Percentage with respect to
any outstanding Letters of Credit hereunder, (y)
all monetary Obligations of the Borrower owing
under or in connection with this Agreement, and
the Operative Documents to the
36
<PAGE>
Declining Lender or Lenders being replaced
(including, without limitation, such increased
costs, breakage fees payable under SECTION 4.14
hereof, and all other costs, fees and expenses
payable to each such Declining Lender being
replaced hereunder) shall be paid by the Borrower
in full in immediately available funds to such
Declining Lender or Lenders being replaced
concurrently with such replacement and (z) upon
the payment of such amounts referred to in CLAUSES
(X) and (Y), the replacement banks or financial
institutions shall each constitute a "Lender"
hereunder and the Declining Lenders or Lenders
being so replaced shall no longer constitute a
"Lender" hereunder (other than for purposes of the
last paragraph of SECTION 2.4.2 and SECTIONS 2.6,
4.9, 4.10, 4.12, 4.14, 14.7 and 14.8) and shall no
longer have any obligations hereunder, other than
to the Administrative Agent, the Co-Agents and the
Issuing Bank pursuant to SECTION 13.3, to the
Collateral Agent pursuant to Section 10 of the
Collateral Agency Agreement attached to certain of
the Security Documents and to the Borrower
pursuant to SECTION 14.17. So long as (a) no Event
of Default or Unmatured Event of Default has
occurred and is continuing, and (b) the Aggregate
Revolving Outstandings do not exceed the new
Commitment Amount, the Administrative Agent shall
reallocate the Percentage of each Lender in the
Letters of Credit issued hereunder at such time;
or
(iv) elect to revoke and cancel the extension request
in such Annual Certificate of Extension by
giving written notice of such revocation and
cancellation to the Administrative Agent (which
shall promptly notify the Lenders thereof) at
least ten (10) Business Days prior to the
December 31 next following such Anniversary
Date.
If the Borrower fails to provide the Election Notice referred
to in this CLAUSE (C) on or prior to the tenth (10th) Business
Day preceding the December 31 next following the relevant
Anniversary Date, the Borrower shall be deemed to have revoked
and cancelled its extension request in the Annual Certificate
of Extension and to have elected not to extend the
Commitments, the Initial Commitment Amortization Date and the
Scheduled Commitment Termination Date. Upon the election by
the Borrower described in CLAUSES (I)-(IV), the Borrower shall
give prompt notice to the Administrative Agent of such
election, but nothing herein
37
<PAGE>
shall be deemed to require Borrower to make such election
before ten (10) Business Days prior to the December 31 next
following the relevant Anniversary Date.
ARTICLE III
PROVISIONS RELATING TO THE NOTES AND REPAYMENT
SECTION 3.1 THE NOTES. Each Lender's Loans under the Revolving Commitment
shall be evidenced by a Note of the Borrower substantially in the form set forth
in EXHIBIT 3.1 (such Note herein called the "NOTE") with appropriate insertions,
and dated the Initial Borrowing Date (or such other date prior thereto as shall
be satisfactory to the Co-Agents), payable to the order of such Lender in a
maximum principal amount equal to such Lender's Percentage of the Original Total
Committed Amount. The date and amount of each Loan made by such Lender and of
each repayment of principal thereon received by such Lender shall be recorded by
such Lender in its records or, at its option, on the schedule attached to the
Note issued to such Lender. The aggregate unpaid principal amount so recorded
shall be rebuttable presumptive evidence of the principal amount owing and
unpaid on such Note. The failure to so record any such amount or any error in so
recording any such amount shall not, however, limit or otherwise affect the
obligations of the Borrower hereunder or under any Note to repay the principal
amount of the Loans together with all interest accruing thereon.
SECTION 3.2 REPAYMENTS. The Borrower shall repay in full the unpaid
principal amount of each Loan upon the Stated Maturity Date.
SECTION 3.3 DUE DATE EXTENSION. If any payment of principal of, or
interest on, any Eurodollar Loan shall fall due on a day which is not a
Eurodollar Business Day, or if any pay ment of principal of or interest on any
Domestic Loan or any payment of any fee provided for herein or any other amount
due hereunder shall fall due on a day which is not a Domestic Business Day, then
such due date shall be extended to the next succeeding Eurodollar Business Day
or Domestic Business Day, as the case may be (unless, with respect to a payment
relating to a Eurodollar Loan, such due date would fall in another calendar
month, in which event payment shall be made on the next preceding Eurodollar
Business Day) and additional interest and fees shall accrue and be payable for
the period of such extension.
ARTICLE IV
INTEREST, FEES AND SPECIAL
EURODOLLAR LOAN RELATED PROVISIONS
SECTION 4.1 INTEREST ON THE BORROWINGS.
SECTION 4.1.1 INTEREST PRIOR TO MATURITY. Until maturity (whether on the
Stated Maturity Date, upon acceleration or otherwise), the unpaid principal
amount from time to time
38
<PAGE>
outstanding on the Loans and any unpaid Reimbursement Obligations with respect
to the Letters of Credit shall bear interest at a fluctuating rate per annum
equal to:
(a) as to any unpaid principal amount representing Domestic Loans
or any unpaid Reimbursement Obligations with respect to the
Letters of Credit, the sum of the Alternate Base Rate from
time to time in effect, PLUS the Applicable Margin for Loans
with respect to Domestic Loans from time to time in effect,
and
(b) as to any unpaid principal amount representing Eurodollar
Loans, the sum of the Eurodollar Interest Rate for the
applicable Eurodollar Interest Period in effect, PLUS the
Applicable Margin for Loans with respect to Eurodollar Loans
from time to time in effect.
SECTION 4.1.2 INTEREST AFTER MATURITY. After the date any principal amount
of any Loan is due and payable (whether on the Stated Maturity Date, upon
acceleration or otherwise) and after any other monetary Obligation with respect
to Letters of Credit of the Borrower hereunder shall have become due and
payable, and after any applicable grace periods have lapsed, until paid, such
due and payable amounts and Obligations shall bear interest, but only to the
extent permitted by applicable law, at a fluctuating rate per annum equal to:
(a) as to any unpaid principal amount representing Domestic Loans
and, to the extent permitted by applicable law, as to any
unpaid, accrued interest on Domestic Loans, the sum of the
Applicable Default Margin, PLUS the Applicable Margin for
Loans with respect to Domestic Loans from time to time in
effect, PLUS the Alternate Base Rate from time to time in
effect (but not less than the Alternate Base Rate in effect at
maturity); and
(b) as to any unpaid principal amount representing Eurodollar
Loans and, to the extent permitted by applicable law, as to
any unpaid, accrued interest on Eurodollar Loans, the sum of
the Applicable Default Margin, PLUS the Applicable Margin for
Loans with respect to Eurodollar Loans from time to time in
effect, PLUS the Eurodollar Interest Rate for a Eurodollar
Interest Period of one (1) day, one (1) week, or one (1) month
(as the Administrative Agent shall select in the exercise of
its sole discretion) determined as at 9:00 a.m., Chicago time,
on the Eurodollar Business Day next succeeding that on which
the Administrative Agent became aware of such default, all of
the foregoing as determined by the Administrative Agent;
PROVIDED that so long as the principal amount or any part
thereof of any such Eurodollar Loan remains unpaid, the rate
herein provided for shall be recalculated on the same basis as
aforesaid on the last day of each period for which such rate
has been determined as aforesaid. If on any occasion any of
the Reference Lenders is unable, or for any reason fails, so
to notify the Administrative Agent by 10:00 a.m., Chicago time
on
39
<PAGE>
such Eurodollar Business Day, such interest rate shall be
determined on the basis of the quotations furnished by the
other Reference Lenders to the Administrative Agent at or
prior to said 10:00 a.m.; and
(c) as to any other unpaid monetary Obligations with respect to
Letters of Credit, the sum of the Applicable Default Margin,
PLUS the Applicable Margin for Loans with respect to Domestic
Loans from time to time in effect, PLUS the Alternate Base
Rate from time to time in effect.
SECTION 4.2 NOTICE OF EURODOLLAR INTEREST RATE; DETERMINATION CONCLUSIVE.
The Eurodollar Interest Rate with respect to each Eurodollar Interest Period
shall be determined by the Administrative Agent as provided in the definition of
Eurodollar Interest Rate in SECTION 1.1, and notice thereof shall be given
promptly by the Administrative Agent to the Borrower and the Lenders. Each
determination of the Eurodollar Interest Rate by the Administrative Agent shall
be conclusive and binding upon the parties hereto, in the absence of
demonstrable error. At the request in writing of the Borrower, however, the
Administrative Agent shall deliver to the Borrower a statement showing in
reasonable detail the computations used by the Administrative Agent in
determining the Eurodollar Interest Rate.
SECTION 4.3 EURODOLLAR INTEREST PERIODS. Subject to the provisions of
SECTION 4.1.2(B) and subject to the requirements of the definition of Eurodollar
Interest Period, the Borrower may elect to continue a Eurodollar Loan from one
Eurodollar Interest Period into the subsequent Eurodollar Interest Period, in
the notice required by SECTION 2.3.2 above. If no such election is made and such
Eurodollar Loan is not repaid, the Borrower shall be deemed to have elected a
one (1) month Eurodollar Interest Period.
SECTION 4.4 COMMITMENT FEE; OTHER FEES.
(a) The Borrower agrees to pay to the Administrative Agent for the
account of each Lender, for the period commencing on the
Effective Date, and continuing through the Commitment
Termination Date, a commitment fee at a rate PER ANNUM equal
to the Commitment Fee Rate on such Lender's Percentage of the
sum of the average daily unused portion of the Commitment
Amount (it being understood that, with respect to any Lender,
the principal amount of its Loans and the outstanding
principal amount of its Percentage of Letter of Credit
Liabilities shall be considered utilizations of the Commitment
Amount). Such commitment fees shall be payable by the Borrower
in arrears on the last Business Day of March, June, September
and December of each year, the first such payment to be made
on December 31, 1996 for the period then ending for which no
fees shall theretofore have been paid, and on the Commitment
Termination Date.
40
<PAGE>
(b) The Borrower agrees to pay to the Administrative Agent for the
account of each Lender a restructuring fee pursuant to that
certain fee letter agreement dated the date hereof between the
Borrower and the Administrative Agent.
SECTION 4.5 LETTER OF CREDIT FEES. (a) The Borrower agrees to pay to the
Administrative Agent for the account of each Lender with respect to each Letter
of Credit issued hereunder, for the period from and including the date of
issuance of such Letter of Credit to (but not including) the date on which such
Letter of Credit expires, a letter of credit fee at a rate PER ANNUM equal to
the Applicable Margin for Letters of Credit on such Lender's Percentage of the
face amount of such Letter of Credit. Such letter of credit fees shall be
payable by the Borrower in arrears on the last Business Day of March, June,
September and December of each year, the first such payment to be made on the
last day of the first calendar quarter for which a Letter of Credit is first
outstanding hereunder for which no fees shall theretofore have been paid, and on
the date such Letter of Credit expires.
(b) The Borrower agrees to pay to the Issuing Bank an issuance fee and a
renewal fee for each Letter of Credit issued hereunder, payable at the time of
issuance or renewal of such Letter of Credit, as the case may be, and
negotiation fees on each sight draft drawn under a Letter of Credit and
amendment fees in respect of the amendment of each Letter of Credit, payable on
demand, such issuance fees, renewal fees, negotiation fees and amendment fees to
be in amounts mutually agreed by the Borrower and the Issuing Bank.
SECTION 4.6 PAYMENT OF INTEREST; CALCULATION OF INTEREST AND FEES.
Interest accrued on each Note prior to maturity (whether by acceleration or
otherwise) shall be payable:
(a) on Eurodollar Loans, on the last day of each applicable
Eurodollar Interest Period and, if such Eurodollar Interest
Period shall exceed three (3) months, on the day of each third
month during such Eurodollar Interest Period which is
numerically equivalent to the Eurodollar Period Commencement
Date for such Eurodollar Interest Period or if there exists no
numerically corresponding day in such month, on the last
Eurodollar Business Day of such month (each such date herein
called a "EURODOLLAR INTEREST PAYMENT DATE");
(b) on Domestic Loans, in arrears, on the last Business Day of
each March, June, September, and December of each year,
commencing with the first quarterly period during which
Domestic Loans are outstanding hereunder for which no interest
shall theretofore have been paid;
and at the Stated Maturity Date for each Loan. After maturity (whether by
acceleration or otherwise), interest shall be payable on demand. All interest
on Domestic Loans and all commitment and letter of credit fees due under this
Agreement shall be calculated on the basis of the actual number of days elapsed
in a year consisting of 365 days (or 366 days in a leap year, as
41
<PAGE>
applicable). All interest on the Eurodollar Loans shall be calculated on the
basis of the actual number of days elapsed in a year consisting of 360 days.
Where interest is calculated on the basis of the Alternate Base Rate, such rate
shall change simultaneously with each change in the Alternate Base Rate.
SECTION 4.7 EURODOLLAR DEPOSITS UNAVAILABLE OR EURODOLLAR INTEREST RATE
UNASCERTAINABLE. In the event that, prior to any Eurodollar Period Commencement
Date in respect of any Eurodollar Loans, the Administrative Agent shall have
determined (which determination shall be conclusive and binding on all parties
hereto) that Dollar deposits of the relevant amount and for the relevant
Eurodollar Interest Period for such Eurodollar Loans are not available to the
Lenders in the interbank Eurodollar market or that, by reason of circumstances
affecting the interbank Eurodollar market, adequate and reasonable means do not
exist for ascertaining the Eurodollar Interest Rate applicable to such
Eurodollar Interest Period or the Required Lenders advise the Administrative
Agent that the Eurodollar Interest Rate as determined by the Administrative
Agent will not adequately and fairly reflect the cost to such Required Lenders
of maintaining or funding Eurodollar Loans for the relevant Eurodollar Interest
Period, the Administrative Agent shall promptly give notice of such
determination to the Borrower and the Lenders and (i) the Borrower's request for
a proposed Eurodollar Loan shall be deemed a request for a Domestic Loan, (ii)
any outstanding Eurodollar Loans (unless the Administrative Agent subsequent to
such determination of unavailability shall determine that such Dollar deposits
are again available) shall be converted, without any notice to or from the
Borrower, into Domestic Loans on the last day of the then current Eurodollar
Interest Period for any outstanding Eurodollar Loan, and (iii) the obligation of
the Lenders to make or maintain Eurodollar Loans shall forthwith terminate,
provided that if circumstances subsequently change so that the Lenders shall not
continue to be so affected, the Lenders shall by notice to the Borrower
reinstate their obligations to make, convert, maintain or continue Domestic
Loans as, or into, Eurodollar Loans.
SECTION 4.8 CHANGES IN LAW RENDERING EURODOLLAR LENDING UNLAWFUL. In the
event that any change in (including the adoption of any new) applicable Laws or
regulations, or in the interpretation or application thereof by any governmental
or other regulatory authority charged with the administration thereof, should
make it unlawful for any Lender to make, continue or maintain any Loan as, or to
convert any Loan to, a Eurodollar Loan, the Commitment of such Lender to make,
continue and maintain any Loan as, and to convert any Loan to, a Eurodollar Loan
shall, upon the happening of such event, forthwith terminate and such Lender
shall, by written notice to the Borrower, declare that such Commitment has so
terminated; and if any such change or adoption shall make it unlawful for such
Lender to maintain any Eurodollar Loan made by it hereunder, such Lender shall,
upon the happening of such event, notify the Borrower thereof in writing stating
the reasons therefor, and the Borrower shall, at the maturity thereof (or such
earlier date as may be required by the relevant law, regulation, interpretation
or application), repay such Eurodollar Loan with respect to such Lender in full.
Upon the happening of any such event, such Eurodollar Loan shall automatically
convert to a Domestic Loan at the end of the current Eurodollar Interest Period
with respect thereto (or such earlier date as may be required by the relevant
law, regulation, interpretation
42
<PAGE>
or application) provided that if circumstances subsequently change so that such
Lender shall not continue to be so affected, such Lender shall by notice to the
Borrower reinstate its obligations to make, convert, maintain or continue Loans
as, or into, Eurodollar Loans.
SECTION 4.9 SPECIAL FEES IN RESPECT OF RESERVE REQUIREMENTS. With respect
to Eurodollar Loans, the Borrower agrees to pay to each Lender on appropriate
Eurodollar Interest Payment Dates, as additional interest, such amounts as will
compensate such Lender for any cost to such Lender, from time to time, of any
reserve, special deposit, special assessment or similar capital requirements
against assets of, deposits with or for the account of, or credit extended by,
such Lender which are imposed on, or deemed applicable by, such Lender, from
time to time, under or pursuant to (i) any Law, treaty, regulation or directive
now or hereafter in effect (including, without limitation, Regulation D of the
Board of Governors of the Federal Reserve System but excluding any reserve
requirement included in the definition of Eurodollar Interest Rate in SECTION
1.1,) (ii) any interpretation or application thereof by any governmental
authority, agency or instrumentality charged with the administration thereof or
by any court, central bank or other fiscal, monetary or other authority having
jurisdiction over the Eurodollar Loans or the office of such Lender where its
Eurodollar Loans are lodged, or (iii) any requirement imposed or requested by
any court, governmental authority, agency or instrumentality or central bank,
fiscal, monetary or other authority, whether or not having the force of law. A
certificate as to the amount of any such cost or any change therein (including
calculations, in reasonable detail, showing how such Lender computed such cost
or change) shall be promptly furnished by such Lender to the Borrower and, in
the absence of manifest error, shall be rebuttable presumptive evidence of such
cost or change. The Borrower will not be responsible for paying any amounts
pursuant to this SECTION 4.9 accruing prior to 180 days prior to the receipt by
the Borrower of the certificate referred to in the preceding sentence. Within
fifteen (15) days after such certificate is furnished to the Borrower, the
Borrower will pay directly to such Lender such additional amount or amounts as
will compensate such Lender for such cost or change.
SECTION 4.10 TAXES. All payments by the Borrower of principal of, and
interest on, the Loans and all other amounts payable hereunder shall be made
free and clear of and without deduction for any present or future income,
excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or
other charges of any nature whatsoever imposed by any taxing authority, but
excluding franchise taxes and taxes imposed on or measured by any Lender's net
income or receipts imposed on such Lender as a result of a present or former
connection between the government or taxing authority imposing such tax and such
Lender or any political subdivision or taxing authority thereof or therein
(other than a connection arising solely from such Lender having executed,
delivered or performed its obligations or received a payment under, or enforced
this Agreement or the Notes) (such non-excluded taxes, fees, duties,
withholdings, charges and other items being called "TAXES"). In the event that
any withholding or deduction from any payment to be made by the Borrower
hereunder is required in respect of any Taxes pursuant to any applicable law,
rule or regulation, or if any Taxes are directly asserted against the
Administrative Agent or any Lender with respect to any payment received by the
Administrative Agent or such Lender hereunder, the Administrative Agent or such
43
<PAGE>
Lender, as the case may be, shall promptly notify the Borrower thereof, and the
Borrower will promptly pay to the Administrative Agent for its or such Lender's
account such additional amount or amounts as is necessary in order that the net
amount received by the Administrative Agent and each Lender after any
withholding or deduction and the payment of such Taxes (including any Taxes on
such additional amount) shall equal the amount such person would have received
had not such withholding or deduction been required or such Taxes been asserted.
If the Borrower fails to pay any Taxes when due to the appropriate taxing
authority, the Borrower shall indemnify the Lenders for any incremental Taxes,
interest or penalties that may become payable by any Lender as a result of any
such failure. For purposes of this SECTION 4.10, a distribution hereunder by the
Administrative Agent or any Lender to or for the account of any Lender shall be
deemed a payment by the Borrower.
Upon the request of the Borrower or the Administrative Agent, each Lender
that is organized under the laws of a jurisdiction other than the United States
shall, prior to the due date of any payments in respect of the Borrowings,
execute and deliver to the Borrower and the Administrative Agent, on or about
January 15 of each calendar year, one or more (as the Borrower or the
Administrative Agent may reasonably request) United States Internal Revenue
Service Forms 4224 or Forms 1001 or such other forms or documents (or successor
forms or documents), appropriately completed, as may be applicable to establish
the extent, if any, to which a payment to such Lender is exempt from withholding
or deduction of Taxes.
SECTION 4.11 REASONABLE EFFORTS. Each Lender agrees that it will use all
reasonable efforts in order to avoid or to minimize, as the case may be, the
payment by the Borrower of any additional amounts under SECTION 4.9, SECTION
4.10 or SECTION 4.12 or the subjecting of any payment by the Borrower to any
withholding tax, and that it will, as promptly as practicable, notify the
Borrower of the existence of any event which will require the payment by the
Borrower of any such additional amounts or the subjecting of any payment by the
Borrower to any withholding tax; PROVIDED, HOWEVER, that the foregoing shall not
in any way affect the rights of any Lender or the obligations of the Borrower
under said Sections, and PROVIDED FURTHER that no Lender shall be obligated to
make its Eurodollar Loans hereunder at any office located in the United States
of America, and PROVIDED FURTHER that no Lender shall be required to use any
such efforts that are disadvantageous to such Lender in the sole opinion of such
Lender.
SECTION 4.12 INCREASED COSTS. If (i) Regulation D of the Board of
Governors of the Federal Reserve System, or (ii) after the date hereof, the
adoption of any applicable Law or treaty or any change in any applicable Law or
treaty or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or any
office of such Lender designated from time to time by such Lender as the office
which shall be making or maintaining the Eurodollar Loans of such Lender
hereunder or through which such Lender will be determining its Eurodollar
Interest Rate (herein called a "EURODOLLAR OFFICE"))
44
<PAGE>
with any request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency:
(a) shall subject any Lender (or any Eurodollar Office of such
Lender) to any tax, levy, impost, fee, duty, assessment or
other charge with respect to its Eurodollar Loans, its Notes
or its obligation to make Eurodollar Loans, or shall change
the basis of taxation of payments to any Lender of the
principal of or interest on its Eurodollar Loans or any other
amounts due under this Agreement in respect of its Eurodollar
Loans or its obligation to make Eurodollar Loans (except for
changes in the rate of tax imposed on or measured by the
overall net income or receipts of such Lender or its
Eurodollar Office imposed by the jurisdiction in which such
Lender's principal office or its Eurodollar Office is
located); or
(b) shall impose, modify or deem applicable any reserve
(including, without limitation, any reserve imposed by the
Board of Governors of the Federal Reserve System, but
excluding any reserve included in the determination of the
Eurodollar Interest Rate pursuant to SECTION 1.1), special
deposit, special assessment or similar capital requirement
against assets of, deposits with or for the account of, or
credit extended by, any Lender (or any Eurodollar Office of
such Lender); or
(c) shall impose on any Lender (or its Eurodollar Office) any
other condition affecting this Agreement, its Eurodollar
Loans, its Notes or its obligation to make Eurodollar Loans,
and the result of any of the foregoing is to increase the cost to (or in the
case of Regulation D referred to above, to impose a cost on) such Lender (or any
Eurodollar Office of such Lender) of making or maintaining any Eurodollar Loan,
or to reduce the amount of any sum received or receivable by such Lender (or any
Eurodollar Office of such Lender) under this Agreement or under its Notes with
respect thereto, then within fifteen (15) days after demand by such Lender
(which demand shall be accompanied by a certificate setting forth the basis of
such demand and including calculations in reasonable detail), the Borrower shall
pay directly to such Lender such additional amount or amounts as will compensate
such Lender for such costs or expenses. The Borrower will not be responsible for
paying any amounts pursuant to this SECTION 4.12 accruing prior to 180 days
prior to the receipt by the Borrower of the certificate referred to in the
preceding sentence. Any certificate as to any such cost or expense submitted by
such Lender to the Borrower shall be rebuttable presumptive evidence of such
cost or expense. In determining such amount, any Lender may use any method of
averaging and attribution that it (in its sole and absolute discretion) shall
deem applicable.
SECTION 4.13 DISCRETION OF THE LENDERS AS TO MANNER OF FUNDING.
Notwithstanding any provision of this Agreement to the contrary, each Lender
shall be entitled to fund and maintain its funding of all or any part of its
Loans in any manner it sees fit, it being
45
<PAGE>
understood, however, that for the purposes of this Agreement all determinations
hereunder shall be made as if such Lender had actually funded and maintained
each Eurodollar Loan during each Eurodollar Interest Period for such Eurodollar
Loan through the purchase of deposits having a maturity corresponding to such
Eurodollar Interest Period and bearing an interest rate equal to the Eurodollar
Interest Rate for such Eurodollar Interest Period. It is understood by the
parties hereto that this SECTION 4.13 is not intended to, nor shall it be
construed so as to, relieve any Lender of any obligation to make a Loan
hereunder pursuant to the other provisions of this Agreement.
SECTION 4.14 EURODOLLAR LOAN-RELATED INDEMNIFICATION PROVISIONS. UPON
DEMAND BY ANY LENDER, THE BORROWER SHALL INDEMNIFY SUCH LENDER AGAINST ANY
ACTUAL LOSS OR EXPENSE WHICH SUCH LENDER MAY SUSTAIN OR INCUR (BUT NOT ANY
PENALTY OR PREMIUM), AS A CONSEQUENCE OF (I) THE BORROWER'S FAILURE TO MAKE A
PRINCIPAL OR INTEREST PAYMENT WITH RESPECT TO ANY EURODOLLAR LOANS ON THE DUE
DATE THEREOF, (II) ANY PAYMENT, PREPAYMENT (MANDATORY OR OPTIONAL) OR CONVERSION
OF EURODOLLAR LOANS BY THE BORROWER ON ANY DATE OTHER THAN ON THE LAST DAY OF
ANY RELEVANT EURODOLLAR INTEREST PERIOD, (III) ANY FAILURE BY THE BORROWER TO
BORROW, CONTINUE, CONVERT INTO OR PREPAY A EURODOLLAR LOAN ON THE DATE FOR SUCH
BORROWING, CONTINUATION, CONVERSION OR PREPAYMENT SPECIFIED IN THE RELEVANT
BORROWING REQUEST, OR NOTICE OF CONVERSION, CONTINUATION OR PREPAYMENT MADE BY
THE BORROWER TO THE ADMINISTRATIVE AGENT, (IV) ANY CONVERSION ON ANY DATE OTHER
THAN ON THE LAST DAY OF ANY RELEVANT EURODOLLAR INTEREST PERIOD BY REASON OF THE
OPERATION OF SECTION 4.7 OR 4.8, OR (V) SUCH LENDER'S BEING A DECLINING LENDER
OR REDUCED DECLINING LENDER AS PROVIDED IN SECTION 2.7(C) OR SUCH LENDER BEING
REPLACED PURSUANT TO SECTION 4.15, INCLUDING IN ALL INSTANCES, BUT NOT LIMITED
TO, ANY LOSS OR EXPENSE SUSTAINED OR INCURRED IN LIQUIDATING OR EMPLOYING
DEPOSITS FROM THIRD PARTIES ACQUIRED TO EFFECT, FUND OR MAINTAIN SUCH EURODOLLAR
LOANS OR ANY PART THEREOF. A certificate from a Lender as to the amount of any
such loss or expense to such Lender, specifying the basis upon which such loss
or expense is computed (and including calculations in reasonable detail), shall,
in the absence of manifest error, be rebuttable presumptive evidence of such
loss or expense. Within fifteen (15) days after such certificate is furnished to
the Borrower, the Borrower will pay directly to such Lender such additional
amount or amounts as will compensate such Lender for such loss or expense.
SECTION 4.15 REPLACEMENT OF LENDER ON ACCOUNT OF INCREASED COSTS,
EURODOLLAR LENDING UNLAWFUL, RESERVE REQUIREMENTS, TAXES, CERTAIN DISSENTS, ETC.
If any Lender is owed increased costs under SECTION 2.6 above, if any Lender
shall claim the inability to make or maintain Eurodollar Loans pursuant to
SECTION 4.8 above, if any Lender is owed any cost or expense pursuant to SECTION
4.9 or 4.12 above, if any payment to any Lender by the Borrower is subject to
any withholding tax pursuant to SECTION 4.10, or if any Lender does not agree to
an amendment, modification, waiver or consent, the Borrower shall have the
right, if no Event of Default or Unmatured Event of Default then exists, to
replace such Lender with another bank or financial institution PROVIDED that (i)
if it is not a Lender or an affiliate thereof, such bank or financial
institution shall be reasonably acceptable to the Agents and the Issuing Bank
and (ii) such bank or financial institution shall unconditionally offer in
writing (with a copy to the Administrative Agent and the Documentation Agent) to
purchase, in accordance with SECTION
46
<PAGE>
14.6 hereof and Section 7.5(i) of the Participation Agreement, all of such
Lender's rights and obligations under this Agreement and the Notes and the
appropriate PRO RATA share of such Lender's A-Notes, Lessor's A-Invested Amount,
B-Notes, and Lessor's B-Invested Amount, without recourse or expense to, or
warranty by, such Lender being replaced for a purchase price equal to the
aggregate outstanding principal amount of the Note payable to such Lender PLUS
such Lender's Percentage of any outstanding Reimbursement Obligation, PLUS any
accrued but unpaid interest on such Note and such Reimbursement Obligations PLUS
the principal and stated amount of such A-Notes, Lessor's A-Invested Amount,
B-Notes, and Lessor's B-Invested Amount, PLUS any accrued but unpaid Fixed Rent,
PLUS accrued but unpaid fees in respect of such Lender's Borrowings and
Percentage of the Commitments hereunder to the date of such purchase on a date
therein specified. If such Lender accepts such purchase offer and such purchase
is consummated, the Borrower shall be obligated to pay, simultaneously with such
purchase and sale, the increased costs, amounts, expenses and taxes under
SECTIONS 2.6, 4.8, 4.9, 4.10, and 4.12 above, all breakage fees payable under
SECTION 4.14 and all other costs, fees and expenses payable to such Lender
hereunder and under the Operative Documents and under the Operative Loan
Documents (as defined in the Operative Documents), to the date of such purchase
as well as all other Obligations due and payable to or for the benefit of such
Lender; PROVIDED, that (x) if such Lender accepts such an offer and such bank or
financial institution fails to purchase such rights and obligations on such
specified date in accordance with the terms of such offer, the Borrower shall
continue to be obligated to pay the increased costs, amounts, expenses and taxes
under SECTIONS 2.6, 4.8, 4.9, 4.10 and 4.12 above to such Lender and (y) if such
Lender fails to accept such purchase offer, the Borrower shall not be obligated
to pay such Lender such increased costs pursuant to SECTIONS 2.6, 4.8, 4.9, 4.10
and 4.12 above from and after the date of such purchase offer.
SECTION 4.16 MAXIMUM INTEREST. It is the intention of the parties hereto
to conform strictly to applicable usury laws and, anything herein to the
contrary notwithstanding, the obligations of the Borrower to each Lender under
this Agreement shall be subject to the limitation that payments of interest
shall not be required to the extent that receipt thereof would be contrary to
provisions of law applicable to such Lender limiting rates of interest which may
be charged or collected by such Lender. Accordingly, if the transactions
contemplated hereby would be usurious under applicable law (including the
Federal and state laws of the United States of America, or of any other
jurisdiction whose laws may be mandatorily applicable) with respect to a Lender
then, in that event, notwithstanding anything to the contrary in this Agreement,
it is agreed as follows:
(a) the provisions of this SECTION 4.16 shall govern and control;
(b) the aggregate of all consideration which constitutes interest
under applicable law that is contracted for, charged or
received under this Agreement, or under any of the other
aforesaid agreements or otherwise in connection with this
Agreement by such Lender shall under no circumstances exceed
the maximum amount of interest allowed by applicable law (such
maximum lawful interest rate, if any, with respect
47
<PAGE>
to such Lender herein called the "HIGHEST LAWFUL RATE"), and
any excess shall be credited to the Borrower by such Lender
(or, if such consideration shall have been paid in full, such
excess refunded to the Borrower);
(c) all sums paid, or agreed to be paid, to such Lender for the
use, forbearance and detention of the indebtedness of the
Borrower to such Lender hereunder shall, to the extent
permitted by applicable law, be amortized, prorated, allocated
and spread throughout the full term of such indebtedness until
payment in full so that the actual rate of interest is uniform
throughout the full term thereof; and
(d) if at any time the interest provided pursuant to SECTION 4.1
together with any other fees payable pursuant to this
Agreement and deemed interest under applicable law, exceeds
that amount which would have accrued at the Highest Lawful
Rate, the amount of interest and any such fees to accrue to
such Lender pursuant to this Agreement shall be limited, not
withstanding anything to the contrary in this Agreement to
that amount which would have accrued at the Highest Lawful
Rate, but any subsequent reductions, as applicable, shall not
reduce the interest to accrue to such Lender pursuant to this
Agreement below the Highest Lawful Rate until the total amount
of interest accrued pursuant to this Agreement and such fees
deemed to be interest equals the amount of interest which
would have accrued to such Lender if a varying rate per annum
equal to the interest provided pursuant to SECTION 4.1 had at
all times been in ef fect, PLUS the amount of fees which would
have been received but for the effect of this SECTION 4.16.
For purposes of Article 5069-1.04, Vernon's Texas Civil Statutes, as amended, to
the extent, if any, applicable to a Lender, the Borrower agrees that the Highest
Lawful Rate shall be the "indicated (weekly) rate ceiling" as defined in said
Article, provided that such Lender may also rely, to the extent permitted by
applicable laws, on alternative maximum rates of interest under other laws
applicable to such Lender if greater.
Tex. Rev. Civ. Stat. Ann. Art. 5069, Ch. 15 (which regulates certain
revolving credit loan accounts and revolving tri-party accounts) shall not apply
to this Agreement or the Notes.
48
<PAGE>
ARTICLE V
REDUCTION OR TERMINATION
OF THE COMMITMENTS; PREPAYMENTS
SECTION 5.1 VOLUNTARY REDUCTION OR TERMINATION OF THE COMMITMENTS. The
Borrower may from time to time on at least three (3) Business Days' prior
written or telegraphic notice received by the Administrative Agent (which shall
promptly advise each Lender thereof) permanently reduce the Commitment Amount or
the Letter of Credit Commitment Amount (such reduction to be made PRO RATA among
the Lenders according to their respective Percentages) but only upon repayment
of the amount, if any, by which the aggregate outstandings under such facility
exceeds the then reduced Commitment Amount in accordance with SECTION 5.7;
PROVIDED, HOWEVER, that (i) if as a result thereof, the Borrower shall prepay
Eurodollar Loans on any day other than the last day of the relevant Eurodollar
Interest Period for such Eurodollar Loans then it shall also pay any loss or
expense pursuant to SECTION 4.14 and (ii) any permanent reduction shall be in a
minimum principal amount of $5,000,000 and in integral multiples of $100,000.
The Borrower may at any time on like notice, terminate all of the Commitments
upon payment in full of the Notes, all other Obligations with respect to the
Loans and all Letter of Credit Liabilities (including, without limitation, all
increased costs pursuant to SECTION 2.6, breakage fees pursuant to SECTION 4.14
and all other fees, costs and expenses) owing under this Agreement.
Additionally, any election by the Borrower to reduce the Total Committed Amount
pursuant to SECTION 2.7(C)(I), (II) or (III) shall be deemed to be a permanent
reduction of the Total Committed Amount and the Commitment Amount (such
reduction to be made among the Accepting Lenders and the Reduced Declining
Lenders according to such SECTION 2.7(C)(I), (II) or (III), as the case may be).
SECTION 5.2 VOLUNTARY PREPAYMENTS. The Borrower may from time to time,
upon at least one (1) Business Day for Domestic Loans and three (3) Business
Days for Eurodollar Loans prior written or telegraphic notice received by the
Administrative Agent (which shall promptly advise each Lender thereof), prepay
the Loans in whole or in part, without premium or penalty; PROVIDED, HOWEVER,
that the Borrower may only prepay Eurodollar Loans in whole or in part on the
last day of the relevant Eurodollar Interest Period for such Eurodollar Loan
UNLESS the Borrower pays all losses and expenses pursuant to SECTION 4.14 and
PROVIDED FURTHER after giving effect to such prepayment, the outstanding
Eurodollar Loans, if any, having a Eurodollar Interest Period ending on the same
date, if any, shall be in a minimum principal amount of $5,000,000. Any
voluntary partial prepayment shall be in a minimum principal amount of
$1,000,000 and in integral multiples of $100,000. Any voluntary prepayment of
principal of the Loans shall include accrued interest to the date of prepayment
on the principal amount being prepaid.
SECTION 5.3 MANDATORY SCHEDULED REDUCTIONS OF THE COMMITMENT AMOUNT. On
the last Business Day of each calendar quarter, commencing on the Initial
Commitment Amortization Date and continuing until the Commitment Termination
Date, the Commitment Amount shall, without any further action, automatically and
permanently be reduced by
49
<PAGE>
$8,593,750, provided, however, that on the Commitment Termination Date, the
Commitment Amount shall be zero.
SECTION 5.4 [INTENTIONALLY OMITTED].
SECTION 5.5 MANDATORY PREPAYMENTS AND REDUCTION OF COMMITMENT AMOUNT ON
ACCOUNT OF ASSET TRANSFERS.
(i) If, at any time and from time to time after the date hereof,
the Borrower or any of its Subsidiaries shall Transfer any
Asset as permitted by SECTION 9.3.8(II), the Commitment Amount
shall be automatically and permanently reduced (1) on the
earlier to occur of (A) five (5) Business Days after the date
of receipt by the Borrower or any Subsidiary of the Borrower
of the consideration on account of such Transfer (other than a
Transfer pursuant to the exercise of an Option to Purchase)
and (B) the date which is 15 days after the date of such
Transfer and (2) on the earlier to occur of (A) five (5)
Business Days after the date of receipt by the Borrower or any
Subsidiary of the Borrower of the consideration due on account
of any such Transfer made pursuant to the exercise of an
Option to Purchase or (B) the date which is 25 days after the
date of any such Transfer made pursuant to the exercise of an
Option to Purchase. Such mandatory reduction of the Commitment
Amount shall be in an amount equal to the Net Proceeds
received or to be received from such Transfer or, if such
Transfer is to an Affiliate of the transferor, the higher of
(x) the Fair Market Value of the Asset so transferred and (y)
the Net Proceeds received or to be received.
(ii) On each date when a reduction in the Commitment Amount
pursuant to this SECTION 5.5 is effective, the Borrower shall
make any and all prepayments required by SECTION 5.7.
SECTION 5.6 [INTENTIONALLY OMITTED].
SECTION 5.7 MANDATORY PREPAYMENTS ON ACCOUNT OF LOANS AND LETTERS OF
CREDIT EXCEEDING COMMITMENT AMOUNTS. In the event the aggregate outstanding
principal amount of the Loans shall at any time exceed the Loan Commitment
Amount, the Borrower shall immediately prepay the Loans in an amount equal to
such excess. In the event the aggregate of Letter of Credit Liabilities exceeds
the Letter of Credit Commitment Amount, the Borrower shall either reduce the
Letter of Credit Liabilities by an amount equal to such excess or deposit cash
collateral with the Collateral Agent on account of and to secure its Obligations
with respect to Letters of Credit then in effect and not otherwise fully
collateralized pursuant to SECTION 2.4.4, such cash deposits to be in an amount
equal to such excess. In addition, in the event the sum of the aggregate
outstanding principal amount of the Loans plus the aggregate amount of all
Letter of Credit Liabilities then outstanding exceeds the Commitment Amount, the
50
<PAGE>
Borrower shall first make a mandatory prepayment of the outstanding principal
amount of the Loans, and second, deposit cash collateral with the Collateral
Agent on account of and to secure its Obligations with respect to the Letters of
Credit then in effect and not otherwise fully collateralized pursuant to SECTION
2.4.4, such prepayments and/or cash deposits to be in an aggregate amount equal
to such excess.
ARTICLE VI
CONVERSION OF LOANS BETWEEN
EURODOLLAR LOANS AND DOMESTIC LOANS
On any Eurodollar Business Day, the Borrower may convert any outstanding
Domestic Loans into Eurodollar Loans or any outstanding Eurodollar Loans into
Domestic Loans; PROVIDED, HOWEVER, that (i) no such conversion of any Eurodollar
Loan into a Domestic Loan may be made except on the last day of the relevant
Eurodollar Interest Period for such Eurodollar Loan UNLESS the Borrower pays all
losses and expenses pursuant to SECTION 4.14, (ii) any conversion of a Domestic
Loan into a Eurodollar Loan shall be preceded by written notice from the
Borrower that it elects such conversion, which notice shall contain the
information required in SECTION 2.3.2 and shall be received by the
Administrative Agent by 11:00 a.m. (Chicago time) at least three (3) Eurodollar
Business Days prior to the date requested for such conversion (or four (4)
Eurodollar Business Days in the case of a Eurodollar Loan having a twelve (12)
month Eurodollar Interest Period) (and the Administrative Agent shall advise
such Lender thereof promptly thereafter), (iii) except as provided in Section
4.7, the Lenders shall not be obligated to effect any conversion into Eurodollar
Loans hereunder so long as any Unmatured Event of Default or any Event of
Default has occurred and is continuing, and (iv) after giving effect to each
conversion, Eurodollar Loans having a Eurodollar Interest Period ending on the
same date, if any, shall be in a minimum principal amount of $5,000,000.
ARTICLE VII
MAKING AND PRORATION OF PAYMENTS; OFFSET
SECTION 7.1 MAKING OF PAYMENTS. Unless otherwise expressly provided, all
payments (including those made pursuant to the provisions of ARTICLE V) by the
Borrower under this Agreement, the Notes or any other Loan Document shall be
made, without setoff, deduction or counterclaim, in immediately available funds
by the Borrower to the Administrative Agent at the Payment Office, for the PRO
RATA account of the Lenders entitled to receive such payment. All such payments
shall be made not later than 11:00 a.m. (Chicago time) at the place of payment,
on the date due; and funds received after that hour shall be deemed to have been
received by the Administrative Agent on the next succeeding Eurodollar Business
Day or Domestic Business Day, as the case may be. The Administrative Agent shall
promptly remit in same day funds to each Lender its share of all such payments
received by the Administrative Agent for the account of such Lender.
51
<PAGE>
SECTION 7.2 PRORATION OF PAYMENTS. If any Lender or other holder of a Note
shall obtain any payment or other recovery (whether voluntary, involuntary, by
application of off set pursuant to applicable law or SECTION 7.3, or otherwise)
on account of all or part of its Loans or the Reimbursement Obligations owing to
it, or interest thereon, owing hereunder or under any other Loan Document (other
than any payment or recovery under SECTION 2.7(C), SECTION 4.9, SECTION 4.12,
SECTION 4.14, SECTION 4.15 or SECTION 14.6) in excess of such Lender's PRO RATA
share of payments and other recoveries then and therewith obtained by all
Lenders, then such Lender receiving such excess payment or other recovery shall
purchase for cash without recourse from the other Lenders participating
interests in the Obligations of the Borrower to such Lenders in such amount as
shall be necessary to cause such purchasing Lender to share such excess payment
or other recovery ratably with each of them; PROVIDED, HOWEVER, that if all or
any portion of the excess payment or other recovery is thereafter recovered from
such purchasing Lender or other holder, the purchase shall be rescinded and the
purchase price restored to the extent of such recovery, but without interest.
SECTION 7.3 OFFSET. In addition to and not in limitation of all rights of
offset that any Lender or other holder of a Note may have under applicable law,
to the fullest extent permitted by applicable law, each Lender shall, upon the
occurrence of any Event of Default, have the right to appropriate and apply to
the payment of such Note and any other Obligations any and all balances,
credits, deposits, accounts or moneys of the Borrower then or thereafter with
such Lender.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
To induce the Lenders and the Issuing Bank to extend their Commitments
hereunder to make the Loans hereunder and to issue the Letters of Credit and
acquire participation therein hereunder, the Borrower represents and warrants to
the Administrative Agent, the Documentation Agent, the Collateral Agent, the
Issuing Bank and the Lenders that:
SECTION 8.1 ORGANIZATION, ETC. The Borrower and each Subsidiary of the
Borrower are each a corporation duly incorporated, a limited liability company
duly organized or a partnership duly formed, as the case may be, and are each
validly existing and in good standing (or, in the case of a partnership, validly
existing) under the laws of the state of its respective incorporation,
organization or formation; and the Borrower and each Subsidiary of the Borrower
are each duly qualified and in good standing as a foreign corporation, limited
liability company or partnership authorized to do business in each jurisdiction
where, because of the nature of its activities or properties, such qualification
is required and where the failure so to qualify would have a material adverse
effect on the consolidated business condition (financial or otherwise),
operations, performance or properties of the Borrower and its Subsidiaries
(taken as a whole).
52
<PAGE>
SECTION 8.2 AUTHORIZATION; NO CONFLICT. The execution and delivery of this
Agreement, the Borrowings hereunder, the execution and delivery of the Notes and
the Loan Documents, and the performance by the Borrower and the other Obligors
of their respective Obligations under this Agreement, the Notes and the other
Loan Documents, are within the Borrower's and the other Obligors' corporate,
limited liability company, or partnership powers, as the case may be, have been
duly authorized by all necessary corporate, limited liability company or
partnership action, as the case may be, have received all necessary governmental
consents, authorizations, orders and approvals (if any shall be required), and
do not and will not contravene or conflict with any provision (a) of Law, (b) of
the charter, bylaws, certificate of formation, limited liability company
agreement or partnership agreement of the Borrower or any other Obligor, or (c)
of any material agreement binding upon the Borrower or any other Obligor or any
of them.
SECTION 8.3 VALIDITY AND BINDING NATURE. This Agreement is, and the Notes
and the Loan Documents when duly executed and delivered will be, legal, valid
and binding obligations of the Borrower and each other Obligor party thereto
enforceable against each of the Borrower and such other Obligors in accordance
with their respective terms subject as to enforcement only to bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and general principles of equity.
SECTION 8.4 REPRESENTATION WITH RESPECT TO FINANCIAL STATEMENTS.
(a) The audited consolidated financial statements of Transok,
Inc., dated as of December 31, 1995, and the related
consolidated statements of earnings and cash flow of the
Borrower and its Subsidiaries, copies of which have been
furnished to each Lender, have been prepared in conformity
with GAAP, and present fairly the consolidated financial
condition of the corporations and other entities covered
thereby as at the dates thereof and the results of operations
for the periods then ended.
(b) The unaudited financial statements of the Borrower dated as of
September 30, 1996, prepared on a consolidated and
consolidating basis signed by a duly authorized financial
officer of the Borrower and consisting of at least a balance
sheet as at the close of such quarter, statements of cash
flows and statements of earnings for such quarter, copies of
which have been furnished to each Lender, have been prepared
in conformity with GAAP, and present fairly the consolidated
and consolidating financial condition of the corporations and
other entities covered thereby as at the dates thereof and the
results of operations for the periods then ended and since
September 30, 1996, there has been no material adverse change
in the consolidated business condition (financial or
otherwise), operations, performance or properties of, the
Borrower and its Subsidiaries (taken as a whole).
53
<PAGE>
SECTION 8.5 PENDING OR THREATENED LITIGATION AND CONTINGENT LIABILITIES.
No litigation (including, without limitation, derivative actions and take-or-pay
actions), arbitration proceedings or governmental proceedings are pending or to
the best knowledge of the Borrower and its Subsidiaries threatened against the
Borrower or any of its Subsidiaries which would, if adversely determined,
materially and adversely affect the consolidated business condition (financial
or otherwise), operations, performance or properties of the Borrower and its
Subsidiaries (taken as a whole) (excluding any rulemaking or similar proceedings
of general applicability to natural gas pipelines and any appeal or petition for
review related thereto) or continued operations of the Borrower and its
Subsidiaries, or which purports to affect the legality, validity or
enforceability of this Agreement, the Notes or any other Loan Document, except
as set forth in EXHIBIT 8.5.
SECTION 8.6 EXISTING LIENS. None of the Assets of the Borrower or any
Subsidiary of the Borrower is subject to any Lien except (i) for current taxes
not delinquent or taxes being contested in good faith and by appropriate
proceedings; (ii) liens arising in the ordinary course of business for sums not
due or sums being contested in good faith and by appropriate proceedings and not
involving any deposits or advances or borrowed money or the deferred purchase
price of property or services, including, but not limited to, reciprocal liens
customarily granted pursuant to joint venture agreements and joint operating
agreements to secure payment of joint operating costs, PROVIDED such costs are
directly related to the business and operations of the pertinent joint venture,
and liens imposed by law, such as mechanic's, materialman's, and carrier's liens
and liens arising in connection with customary pooling or unitization agreements
entered into by the Borrower or its Subsidiaries in the ordinary course of
business; (iii) liens (other than any lien imposed under ERISA) incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security or old
age pension benefits; (iv) any liens in favor of the Collateral Agent for the
benefit of the Lenders and liens created under the Security Documents; (v) liens
on real or personal property leased pursuant to leases permitted under SECTION
9.3.3(VI) for nondelinquent lease payments thereunder; (vi) severance tax liens
on purchased gas arising by operation of law; (vii) to the extent shown in the
financial statements referred to in SECTION 8.4; (viii) to the extent shown in
EXHIBIT 8.6; (ix) Options to Purchase granted in the ordinary course of
business; (x) liens permitted by SECTION 9.3.4; (xi) deposits of cash to secure
insurance in the ordinary course of business, the performance of bonds, tenders,
contracts (other than contracts for the payment of money), leases, licenses,
franchises, statutory obligations, surety and appeal bonds and performance bonds
and other obligations of a like nature incurred in the ordinary course of
business; (xii) easements, rights-of-way, covenants, reservations, exceptions,
encroachments, zoning and similar restrictions and other similar encumbrances or
title defects which, in the aggregate, are not substantial in amount, and which
do not in any case singly or in the aggregate materially detract from the value
or usefulness of the property subject thereto for the business conducted or
materially interfere with the ordinary conduct of the business of the Borrower
and its Subsidiaries; (xiii) bankers' liens arising by operation of law; (xiv)
Liens arising pursuant to any order of attachment, distraint or similar legal
process arising in connection with any court proceeding the payment of which is
covered in full (subject to customary deductibles) by insurance; (xv) inchoate
Liens arising under ERISA
54
<PAGE>
to secure contingent liabilities of the Borrower and its Subsidiaries; (xvi)
rights of lessee and sublessee in property leased by the Borrower or any of its
Subsidiaries not prohibited elsewhere herein; and (xvii) Liens of record on
Assets acquired in connection with the Merger permitted in Section 4.06 of the
Merger Agreement.
SECTION 8.7 EXISTING SUBSIDIARIES. As of the date hereof, the Borrower has
no Subsidiaries and owns no interest in any other entity except those listed in
EXHIBIT 8.7. The Borrower has no Material Subsidiaries except those listed on
EXHIBIT 8.7 (as such exhibit may be deemed amended pursuant to SECTION 9.1.6).
SECTION 8.8 EXISTING EMPLOYEE BENEFIT PLANS. Each employee benefit plan
sponsored or maintained by the Borrower or any of its Subsidiaries for their
employees or former employees ("EMPLOYEE BENEFIT PLAN") complies in all material
respects with all applicable requirements of Law. No Reportable Event (as
defined in ERISA) for which the disclosure requirements under Regulation 2615.3
promulgated by the Pension Benefit Guaranty Corporation (the "PBGC") has not
been waived has occurred with respect to any Employee Benefit Plan that is
subject to Title IV of ERISA (hereinafter "PENSION PLAN") and there has been no
withdrawal from any such plan or steps taken to do so which has resulted or
could result in material liability for the Borrower or any of its Subsidiaries
under Title IV of ERISA.
SECTION 8.9 INVESTMENT COMPANY ACT REPRESENTATION. Neither the Borrower
nor any of its Subsidiaries is an "investment company" or a company "controlled"
by an "investment company," within the meaning of the Investment Company Act of
1940, as amended.
SECTION 8.10 PUBLIC UTILITY HOLDING COMPANY ACT REPRESENTATION. Neither
the Borrower nor any of its Subsidiaries is a "holding company," or a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
SECTION 8.11 REPRESENTATION WITH RESPECT TO REGULATIONS G, T, U AND X. No
part of the proceeds of the Borrowings will be used to purchase or carry Margin
Stock in violation of Regulation G, T, U or X, nor will the execution,
performance or delivery by the Borrower of the Notes or the Security Documents,
or the execution, performance and delivery by any Guarantor of its respective
Guaranty and of those Security Documents to which such Guarantor is a party, nor
the application of the proceeds of the Borrowings in accordance herewith,
violate Regulation G, T, U or X. Neither the Borrower nor any of its
Subsidiaries is engaged principally, or as one of its important activities in
the business of extending credit for the purpose of buying or carrying Margin
Stock, and both before and after giving effect to all of the transactions
contemplated herein, and the purchases and acquisitions permitted under Section
9.3.2, and application of the proceeds of any Borrowings, less than 25% of the
Assets of each of the Borrower and each of its Subsidiaries consists of Margin
Stock.
55
<PAGE>
SECTION 8.12 REPRESENTATION WITH RESPECT TO TRUE AND COMPLETE DISCLOSURE.
To the best of the Borrower's knowledge and belief, all factual information
heretofore or contemporaneously furnished by or on behalf of the Borrower, any
Subsidiary of the Borrower, the Holding Company or the Parent Company to any
Lender, the Issuing Bank, the Documentation Agent, the Collateral Agent or the
Administrative Agent for purposes of or in connection with this Agreement or any
transaction contemplated hereby is, and all other such factual information
hereafter furnished by or on behalf of the Borrower, any Subsidiary of the
Borrower, the Holding Company or the Parent Company to any Lender, the Issuing
Bank, the Collateral Agent, the Documentation Agent or the Administrative Agent
will be, true and accurate (taken as a whole) on the date as of which such
information is dated or certified and does not omit any material fact necessary
to make such information (taken as a whole) not misleading at such time.
SECTION 8.13 STATUS OF TITLE TO ASSETS. The Borrower and each of its
Subsidiaries have valid title to, or valid leasehold interest in, all of the
Assets of the Borrower and its Subsidiaries, free and clear of liens, burdens
and imperfections other than such imperfections or other burdens of title to
such Assets as do not in the aggregate materially detract from the value thereof
to, or for the use thereof in, their businesses (taken as a whole), the Liens
permitted by SECTION 9.3.4 and Options to Purchase granted in the ordinary
course of business.
SECTION 8.14 TAXES. The Borrower and each of its Subsidiaries has to the
best knowledge of the Borrower filed all tax returns or extensions and reports
required by law to have been filed by them and have paid all taxes and
governmental charges thereby shown to be owing, except such taxes or charges
which are being contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on their
respective books and except for taxes and governmental charges, and any tax
returns, extensions, reports or audits in connection therewith, disclosed in
EXHIBIT 8.14 and except for Taxes for which the Parent Company is fully
indemnified under Section 8.03 of the Merger Agreement.
SECTION 8.15 UNCONDITIONAL PURCHASE OBLIGATIONS. Except as permitted in
SECTION 9.3.9, neither the Borrower nor any of its Subsidiaries has entered
into, is a party to, or has any obligations under, any material contract for the
purchase of materials, supplies or other property or services, if such contract
requires that payment be made by it regardless of whether or not delivery is
ever made of such materials, supplies or other property or services.
SECTION 8.16 ENVIRONMENTAL WARRANTIES. Except as set forth in EXHIBIT 8.16
and except for matters for which the Parent Company is fully indemnified
(subject to the dollar limitations set forth in Section 8.01 or Section 8.02 of
the Merger Agreement) pursuant to such Section 8.01 or Section 8.02.:
(a) to the best knowledge of the management of the Borrower, all
facilities and property (including underlying groundwater)
owned, leased or
56
<PAGE>
operated by the Borrower or any of its Subsidiaries have been,
and continue to be, owned, leased or operated by the Borrower
and its Subsidiaries in material compliance with all
Environmental Laws except where such failure to comply singly
or in the aggregate, will not have or reasonably be expected
to have, a material adverse effect on the consolidated
business condition (financial or otherwise), operations,
performance or properties of the Borrower and its Subsidiaries
(taken as a whole);
(b) to the best knowledge of the Borrower, there have been no
past, and there are no pending or threatened
(i) claims, complaints, notices or inquiries to, or requests
for information received by, the Borrower or any of its
Subsidiaries with respect to any alleged violation of
any Environmental Law, except where such violation
singly or in the aggregate, will not have, or reasonably
be expected to have, a material adverse effect on the
consolidated business condition (financial or
otherwise), operations, performance or properties of the
Borrower and its Subsidiaries (taken as a whole) or
(ii) claims, complaints, notices or inquiries to, or requests
for information received by, the Borrower or any of its
Subsidiaries regarding potential liability under any
Environmental Law or under any common law theories
relating to operations or the condition of any
facilities or property (including underlying
groundwater) owned, leased or operated by the Borrower
or any of its Subsidiaries that, singly or in the
aggregate, have, or may reasonably be expected to have,
a material adverse effect on the consolidated business
condition (financial or otherwise), operations,
performance or properties of the Borrower and its
Subsidiaries (taken as a whole);
(c) to the best knowledge of the management of the Borrower, there
have been no Releases of Hazardous Materials at, on or under
any property now or previously owned or leased by the Borrower
or any of its Subsidiaries that, singly or in the aggregate,
have, or may reasonably be expected to have, a material
adverse effect on the consolidated business condition
(financial or otherwise), operations, performance or
properties of the Borrower and its Subsidiaries (taken as a
whole);
(d) the Borrower and its Subsidiaries have been issued and are in
material compliance with all permits, certificates, approvals,
licenses and other authorizations relating to environmental
matters and necessary or desirable
57
<PAGE>
for their businesses, except where failure to have been so
issued or comply, singly or in the aggregate, will not have,
or reasonably be expected to have, a material adverse effect
on the consolidated business condition (financial or
otherwise), operations, performance or properties of the
Borrower and its Subsidiaries (taken as a whole);
(e) no property now (or to the best knowledge of the management of
the Borrower previously) owned, leased or operated by the
Borrower or any of its Subsidiaries is listed or proposed for
listing on the National Priorities List pursuant to CERCLA, on
the CERCLIS or on any other similar state list of sites
requiring investigation or clean-up;
(f) to the best knowledge of the Borrower, there are no
underground storage tanks, active or abandoned, including
petroleum storage tanks, on or under any property now or
previously owned, leased or operated by the Borrower or any of
its Subsidiaries that, singly or in the aggregate, have, or
may reasonably be expected to have, a material adverse effect
on the consolidated business condition (financial or
otherwise), operations, performance or properties of the
Borrower and its Subsidiaries (taken as a whole);
(g) to the best knowledge of the Borrower, neither the Borrower
nor any Subsidiary of the Borrower has directly transported or
directly arranged for the transportation of any Hazardous
Material to any location which is listed or proposed for
listing on the National Priorities List pursuant to CERCLA, on
the CERCLIS or on any similar state list or which is the
subject of federal, state or local enforcement actions or
other investigations which may lead to material claims against
the Borrower or such Subsidiary thereof for any remedial work,
damage to natural resources or personal injury, including
claims under CERCLA;
(h) to the best knowledge of the Borrower, there are no
polychlorinated biphenyls, radioactive materials or friable
asbestos present at any property now or previously owned or
leased by the Borrower or any Subsidiary of the Borrower that,
singly or in the aggregate, have, or may reasonably be
expected to have, a material adverse effect on the
consolidated business condition (financial or otherwise),
operations, performance or properties of the Borrower and its
Subsidiaries (taken as a whole); and
(i) no conditions exist at, on or under any property now or
previously owned or leased by the Borrower or any Subsidiary
of the Borrower which would have a material adverse effect on
the consolidated business condition (financial or otherwise),
operations, performance or properties of the
58
<PAGE>
Borrower and its Subsidiaries (taken as a whole) arising out
of liability under any Environmental Law.
SECTION 8.17 REGULATORY COMPLIANCE. The Borrower and each of its
Subsidiaries is in possession of, and is operating in compliance with, all
franchises, grants, authorizations, approvals, licenses, permits, consents,
certificates and orders required to own, lease or use their respective Assets
(including, without limitation, those required to be obtained from the Railroad
Commission of Texas, the Federal Energy Regulatory Commission, the Oklahoma
Corporation Commission and any successor agencies) and to permit the conduct of
its business as now conducted and as proposed to be conducted, except (i) for
those franchises, grants, authorizations, approvals, licenses, permits,
consents, certificates and orders which are routine or administrative in nature
and are expected in the reasonable judgment of the Borrower to be obtained or
given in the ordinary course of business after the Closing Date, (ii) where
failure to so possess, or operate in compliance with, such franchises, grants,
authorizations, approvals, licenses, permits, consents, certificates and orders
would not singly or in the aggregate have, and could not reasonably be expected
to have, a material adverse effect on the consolidated business condition
(financial or otherwise), operations, performance or properties of the Borrower
and its Subsidiaries (taken as a whole), (iii) as disclosed in EXHIBIT 8.17 and
(iv) matters for which the Parent Company is fully indemnified (subject to the
dollar limitations set forth in Section 8.01 and Section 8.02 of the Merger
Agreement) pursuant to such Section 8.01 or Section 8.02. The Borrower, each of
its Subsidiaries and their respective Assets are in compliance with all
applicable statutes and regulations of, and all applicable restrictions imposed
by, all governmental authorities and regulatory bodies (including, without
limitation, the Federal Energy Regulatory Commission, the Railroad Commission of
Texas, the Oklahoma Corporation Commission and any successor agencies) except
(i) where failure to so comply would not singly or in the aggregate have, and
could not reasonably be expected to have, a material adverse effect on the
consolidated business condition (financial or otherwise), operations,
performance or properties of the Borrower and its Subsidiaries (taken as a
whole) and (ii) as specifically disclosed in EXHIBIT 8.17 and matters for which
the Parent Company is fully indemnified (subject to the dollar limitations set
forth in Section 8.01 and Section 8.02 of the Merger Agreement) pursuant to such
Section 8.01 or Section 8.02.
ARTICLE IX
BORROWER'S COVENANTS
Until the expiration or termination of the Commitments of the Lenders
hereunder and thereafter until all Obligations are paid and performed (other
than continuing indemnity obligations) in full, the Borrower agrees that, unless
at any time the Required Lenders shall consent in writing, it will observe or
cause to be observed, as the case may be, the following covenants, agreements
and obligations:
SECTION 9.1 REPORTS, CERTIFICATES AND OTHER INFORMATION. The Borrower will
furnish or cause to be furnished to each Lender and each Agent (or in the case
of the
59
<PAGE>
information and documents described in SECTIONS 9.1.4 AND 9.1.6, to the
Administrative Agent with enough copies to provide one to each Agent and each
Lender or in the case of information requested by any Agent or any Lender
pursuant to SECTION 9.1.8, a copy for such requestor);
SECTION 9.1.1 AUDIT REPORT. Within one hundred twenty (120) days after the
end of each fiscal year of the Borrower, beginning with the fiscal year ended
December 31, 1996, a copy of an annual audit report of the Borrower, including
therein consolidated balance sheets of the Borrower and its Subsidiaries as of
the end of such fiscal year and consolidated statements of earnings of the
Borrower and its Subsidiaries for such fiscal year, and, consolidated statements
of cash flow for the Borrower and its Subsidiaries for such fiscal year, in
conformity with GAAP and, in the case of such annual audit reports for fiscal
years commencing with fiscal year ended December 31, 1996, applied on a basis
consistent with the audited consolidated financial statements of the Parent
Company as of December 31, 1995, duly certified by independent certified public
accountants of nationally recognized standing selected by the Borrower and
consisting of at least a balance sheet as of the close of such fiscal year,
statements of cash flow and statements of earnings for such fiscal year. Such
annual audit reports shall be accompanied by a certificate (which certificate
shall not be part of such audit report) from a duly authorized financial officer
of the Borrower showing compliance with SECTION 9.4 and containing a statement
by such authorized officer that in examining the financial statements and the
covenants contained in SECTION 9.4 such authorized officer did not become aware
of any Event of Default or Unmatured Event of Default, or if the authorized
officer has become aware of any such event, describing it and the steps, if any,
being taken to cure it.
SECTION 9.1.2 INTERIM FINANCIAL REPORTS. Within seventy-five (75) days
after the end of the first three fiscal quarters of each fiscal year, commencing
with the fiscal quarter ending September 30, 1996, copies of the unaudited
financial statements of the Borrower prepared on a consolidated and
consolidating basis and in the same manner as the audit report referred to in
SECTION 9.1.1 (except that allocation of taxes need not be shown on such
quarterly unaudited consolidating financial statements), signed by a duly
authorized financial officer of the Borrower and consisting of at least a
balance sheet as at the close of such quarter, statements of cash flows and
statements of earnings for such quarter. Such quarterly financial statements
shall be accompanied by a certificate (which certificate shall not be part of
such quarterly financial statements) from a duly authorized financial officer of
the Borrower, and showing compliance with SECTION 9.4 and containing a statement
by such authorized officer that in examining the financial statements and the
covenants contained in SECTION 9.4 such authorized officer did not become aware
of any Event of Default or Unmatured Event of Default, or if the authorized
officer has become aware of any such event, describing it and the steps, if any,
being taken to cure it.
SECTION 9.1.3 COMPLIANCE CERTIFICATES. Concurrently with the delivery of
the reports described in SECTIONS 9.1.1 and 9.1.2 and from time to time promptly
upon request by the Lenders, a compliance certificate substantially in the form
of EXHIBIT 9.1.3A or EXHIBIT 9.1.3B, as the case may be, duly executed by an
authorized financial officer of the Borrower, containing a computation of, and
showing compliance with, each of the financial
60
<PAGE>
ratios and restrictions contained in SECTION 9.4 and containing a computation of
the Leverage Ratio, all such computations to be made as of the end of the
immediately preceding fiscal year if furnished concurrently with the report
described in SECTION 9.1.1, and as of the end of the immediately preceding
fiscal quarter if furnished concurrently with the report described in SECTION
9.1.2 or at the request of the Lenders.
SECTION 9.1.4 REPORTS TO SEC, SHAREHOLDERS AND OTHER REGULATORY AGENCIES.
Copies of (i) each material public filing and report made by the Borrower, any
of its Subsidiaries, the Parent Company or any Material Tejas Subsidiary with or
to any securities exchange or the Securities and Exchange Commission, (ii) as
may be reasonably requested by any Lender or any Agent, each material public
filing and report (other than routine operating reports) made by the Borrower or
any of its Subsidiaries, with or to any governmental authority or regulatory
body (including, without limitation, the Federal Energy Regulatory Commission,
the Railroad Commission of Texas, the Louisiana Public Service Commission, the
Louisiana Conservation Commission, the Oklahoma Corporation Commission and any
successor agencies), and (iii) other customarily provided material public
communications from the Borrower, any of its Subsidiaries, the Parent Company or
any Material Tejas Subsidiary, promptly upon the filing or making thereof.
SECTION 9.1.5 NOTICES RELATING TO DEFAULT, LITIGATION AND CERTAIN ERISA
MATTERS. Promptly upon learning of the occurrence of any of the following,
written notice thereof, describing the same and the steps being taken by the
Borrower or any of its Subsidiaries affected with respect thereto: (i) the
occurrence of an Event of Default or an Unmatured Event of Default, or (ii) the
institution of, or any adverse determination in, any litigation, arbitration
proceeding or governmental proceeding which in the opinion of Borrower's
management is or should reasonably be expected to be material to the Borrower
and its Subsidiaries on a consolidated basis. Promptly upon an officer of the
Borrower knowing of the occurrence of any of the following written notice
thereof, describing the same and the steps being taken by the Borrower or any of
its Subsidiaries affected with respect thereto: (i) the occurrence of a
Reportable Event (as defined in ERISA) for which the disclosure requirements
under Regulation 2615.3 promulgated by the PBGC have not been waived with
respect to a Pension Plan, (ii) the institution of steps to withdraw from, or
the institution of any steps to terminate, any Pension Plan of the Borrower, its
Subsidiaries or a corporation or other entity which together with the Borrower
or a Subsidiary of the Borrower is under common control or a member of an
affiliated service group or any other entity required to be aggregated with the
Borrower or a Subsidiary of the Borrower under Code Sections 414(b) or (c) as
modified by Code Section 414(h) or Code Sections 414(m) or (o) ("ERISA
AFFILIATE") or the failure to make a required contribution to any such plan if
such failure is sufficient to give rise to a Lien under section 302(f) of ERISA
or Section 412 of the Code, or (iii) the taking of any action with respect to
any such Pension Plan which could result in the requirement that the Borrower or
any of its Subsidiaries furnish a bond or other security to the PBGC or such
plan, or the occurrence of any event with respect to any such plan which could
result in material liability for the Borrower or any of its Subsidiaries.
61
<PAGE>
SECTION 9.1.6 CHANGES IN MATERIAL SUBSIDIARIES. Within fifteen (15) days
after the formation, Activation, or acquisition of any Material Subsidiary or
upon the designation of a Material Subsidiary as such, a written report of any
changes in the list of its respective Material Subsidiaries which report shall
be deemed to be an amendment to EXHIBIT 8.7.
SECTION 9.1.7 PROJECTED CASH FLOW STATEMENTS. On or before September 30 of
each calendar year, commencing September 30, 1997, projected cash flow
statements, earnings forecasts and financial ratios, prepared on a consolidated
basis for the Borrower and its Subsidiaries, including, without limitation,
projected gas systems volumes, average gas spread, costs, capital expenditures,
cash flow from operations and debt retirement together with schedules containing
supporting data used in calculating the foregoing.
SECTION 9.1.8 OTHER INFORMATION. From time to time such other information
concerning the Borrower and its Subsidiaries as any Lender or any Agent may
reasonably request from the Borrower.
SECTION 9.2 AFFIRMATIVE COVENANTS. The Borrower will and will cause each
of its Subsidiaries to:
SECTION 9.2.1 BOOKS, RECORDS AND INSPECTIONS. Maintain complete and
accurate books and records; permit access by any Lender or any Agent to the
books and records of the Borrower and any of its Subsidiaries at such times
during normal business hours as such Lender or such Agent may reasonably
request; and permit any Lender or any Agent to inspect the properties and
operations of the Borrower and any of its Subsidiaries at such times during
normal business hours as such Lender or such Agent may reasonably request.
SECTION 9.2.2 INSURANCE. Maintain, directly or indirectly, with
responsible insurance companies such insurance with respect to their properties
and business as may be required by law and such other insurance, in such types
and amounts and against such hazards and liabilities, as is customarily
maintained by well-insured companies in the industry; and (i) furnish to any
Lender or any Agent promptly after a request by such Lender or such Agent during
any period an Event of Default shall have occurred and be continuing, but in no
event more frequently than once per calendar quarter, a certificate from an
authorized officer of the Borrower setting forth all insurance maintained by the
Borrower and its Subsidiaries; PROVIDED, HOWEVER, that the Borrower may provide
to the Lender requesting such information any insurance certificate having
already been prepared by the Borrower within such calendar quarter pursuant to
this SECTION 9.2.2 and such certificate shall suffice for purposes of this
section, and (ii) on or before November 1st of each calendar year, furnish to
each Lender and each Agent a certificate from an authorized officer of the
Borrower setting forth in detail the insurance maintained by the Borrower and
its Subsidiaries.
SECTION 9.2.3 TAXES, ASSESSMENTS, ETC. Pay when due all taxes, assessments
and other governmental charges except as contested in good faith and by
appropriate proceedings and for which adequate reserves in accordance with GAAP
have been set aside on its books.
62
<PAGE>
SECTION 9.2.4 MAINTENANCE OF EMPLOYEE BENEFIT PLANS. Maintain each
employee benefit plan as to which the Borrower or any of its Subsidiaries may
have any liability, in compliance in all material respects with all applicable
requirements of law and regulations.
SECTION 9.2.5 USE OF LOAN PROCEEDS AND LETTERS OF CREDIT. Use the proceeds
of the Loans hereunder and the Letters of Credit for general corporate purposes
including, without limitation, support of trade payables of the Borrower and its
Subsidiaries; PROVIDED, HOWEVER, that no part of the proceeds of the Loans or
any Letter of Credit will be used to purchase or carry any Margin Stock in
violation of Regulation G, T, U or X.
SECTION 9.2.6 TITLE TO PROPERTIES. Maintain at all times valid title to,
or valid leasehold or right-of-way interest, easement or license in, all their
respective Assets free and clear of Liens, burdens and imperfections other than
such imperfections or other burdens of title to such Assets as do not in the
aggregate materially detract from the value thereof to, or for the use thereof
in, the business of the Borrower and its Subsidiaries (taken as a whole), the
Liens permitted by SECTION 9.3.4 and Options to Purchase granted in the ordinary
course of business.
SECTION 9.2.7 NEW OR ACTIVATED SUBSIDIARIES; MATERIAL SUBSIDIARIES. Cause
any Subsidiary of the Borrower which Subsidiary (a) is a Material Subsidiary
that is formed, acquired, or Activated after the date hereof or (b) becomes a
Material Subsidiary after the date hereof, to become a Guarantor with respect
to, and jointly and severally liable with all other Guarantors for, all the
obligations under this Agreement and the Notes by executing and delivering to
the Lenders a guaranty substantially in the form of the Guaranties delivered
pursuant to SECTION 10.3 and an Intercompany Subordinated Demand Note
substantially in the form of the Intercompany Subordinated Demand Notes
delivered pursuant to SECTION 10.4 and by causing such Subsidiary's, as the case
may be, capital stock, partnership or membership interest therein to be pledged
pursuant to a Pledge Agreement delivered pursuant to SECTION 10.1 or a
Partnership/Limited Liability Company Security Agreement pursuant to SECTION
10.2, as appropriate; and cause any Subsidiary of the Borrower that is not a
Material Subsidiary and that owns directly any interest in a Guarantor to become
a Guarantor with respect to, and jointly and severally liable with all other
Guarantors, for all obligations under this Agreement and the Notes by executing
and delivering to the Lenders a guaranty substantially in the form of the
Guaranties delivered pursuant to SECTION 10.3. In addition, the Borrower may
cause any Subsidiary which is not a Material Subsidiary to become a Guarantor
hereunder by executing and delivering a Guaranty and an Intercompany
Subordinated Demand Note and by causing its capital stock, partnership or
membership interest to be pledged, all as provided in the foregoing sentence.
SECTION 9.2.8 ENVIRONMENTAL COVENANT. Use, operate and maintain all
respective facilities and properties of the Borrower and its Subsidiaries in
material compliance with all Environmental Laws, keep all necessary permits,
approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in material compliance therewith, and
handle all Hazardous Materials in material compliance with all applicable
Environmental Laws, and promptly cure or defend any actions and proceedings
relating to compliance with Environmental Laws, in each case where failure to do
so may reasonably be
63
<PAGE>
expected to have a material adverse effect on the consolidated business
condition (financial or otherwise), operations, performance or properties of the
Borrower and its Subsidiaries (taken as a whole).
SECTION 9.2.9 COMPLIANCE WITH LAWS, ETC. Comply in all material respects
with, and own, operate and maintain the Borrower's and its Subsidiaries' Assets
in material compliance with, all applicable federal, state and local laws,
rules, regulations and orders, including, without limitation, compliance with
all applicable laws, rules, regulations and orders of the Federal Energy
Regulatory Commission, the Railroad Commission of Texas, the Oklahoma
Corporation Commission, and any successor agencies; and obtain, maintain in full
force and effect, and comply in all material respects with all applicable
authorizations, consents, approvals, licenses, rulings, permits, tariffs, rates,
certifications, exemptions and filings required by any governmental authority
or regulatory body (including, without limitation, the Federal Energy Regulatory
Commission, the Railroad Commission of Texas, the Oklahoma Corporation
Commission, and any successor agencies) as shall now or hereafter be necessary
under applicable laws, ordinances, regulations or any interpretation or
administration thereof in connection with the ownership, operation and
maintenance of the Assets of the Borrower and its Subsidiaries; and in each case
where non-compliance therewith may reasonably be expected to have a material
adverse effect on the consolidated business condition (financial or otherwise),
operations, performance or properties of the Borrower and its Subsidiaries
(taken as a whole).
SECTION 9.2.10 [Intentionally Omitted].
SECTION 9.2.11 INDEMNITY. The Borrower from time to time and on a timely
basis and in accordance with appropriate procedures will enforce its rights to
the indemnities provided in Article VIII of the Merger Agreement.
SECTION 9.3 NEGATIVE COVENANTS. The Borrower will:
SECTION 9.3.1 RESTRICTIONS ON REDEMPTION AND PURCHASE OF SECURITIES AND
PAYMENT OF DIVIDENDS; ISSUANCE OF CAPITAL STOCK. Not, and not permit any of its
Subsidiaries to, redeem, purchase or otherwise acquire any shares of the capital
stock of the Borrower or any Subsidiary of the Borrower other than as permitted
by SECTION 9.3.6, and not declare or pay any dividends on the capital stock of
the Borrower (other than stock dividends), make any distribution or (except for
payments on Indebtedness permitted pursuant to SECTION 9.3.3(V),(IX), (XV),
(XIX) or (XXIII)) payment to stockholders, or set aside any funds for any such
purpose, and not prepay, purchase or redeem, and not permit any of its
Subsidiaries to purchase, any subordinated Indebtedness of the Borrower (any
such foregoing redemption, purchase, acquisition, declaration, payment,
distribution, prepayment or set aside herein called a "DISTRIBUTION" and all of
the foregoing collectively called "DISTRIBUTIONS") except:
(i) the Borrower may make Distributions on any date so long as
such Distributions, do not exceed the positive difference,
if any, between (i) the sum of (A) Incremental Earnings PLUS
(B) Incremental Losses, to the date
64
<PAGE>
of such Distribution, MINUS (ii) Aggregate Distributions and
Investments to and including the date of such Distribution
(without giving effect to such Distribution on such date);
PROVIDED that no Event of Default or Unmatured Event of
Default has occurred and is continuing or would occur as a
result of any such Distribution;
(ii) [Intentionally Omitted];
(iii) the Borrower may make payments of principal and accrued
interest on the RSNs PROVIDED that (A) such payment is
permitted by and in accordance with the terms of such
Indebtedness and any subordination provisions and agreements
applicable thereto and (B) no Unmatured Event of Default of
the type described in SECTION 12.1.1, 12.1.2, 12.1.4,
12.1.8, 12.1.9, 12.1.16, or Event of Default shall have
occurred and be continuing or would occur as a result of any
such payment;
(iv) any Subsidiary of the Borrower may declare and pay dividends
to its owners ratably, in accordance with their respective
ownership interests;
(v) the Borrower may make payments to the Parent Company or any
Affiliate thereof for all reasonable amounts owing to the
Parent Company or any Affiliate thereof in the ordinary
course of business for the Borrower's direct benefit or the
Borrower's PRO RATA share of such ordinary course items,
including, but not limited to, insurance, taxes, and
professional fees; PROVIDED such ordinary course items are
incurred pursuant to an arrangement or contract that
complies with SECTION 9.3.15 and upon the reasonable request
of any Lender or any Agent, the Borrower shall provide
calculations in reasonable detail setting forth such
ordinary course items; and
(vi) the Borrower may make payments to Material Subsidiaries in
respect of Indebtedness described in SECTION 9.3.3(XVI) to
the extent permitted by the subordination provisions in such
promissory notes as described in SECTION 9.3.3(XVI).
The Borrower will not permit any Guarantor to issue any shares of capital stock
having any voting rights including, without limitation, in connection with a
stock dividend, UNLESS such shares are promptly pledged to, and a first and
prior lien or security interest therein is promptly granted to, the Collateral
Agent, for the benefit of the Lenders, pursuant to a duly authorized, executed
and delivered Pledge Agreement, from each holder of such shares, as additional
security for the Loans and all other Obligations hereunder, all Obligations to
any Lender pursuant to Hedging Obligations or all Obligations pursuant to such
holder's Guaranty. The holder of such shares shall further deliver to the
Collateral Agent stock certificates and undated stock powers executed in blank
and any and all instruments, documents, approvals, consents or
65
<PAGE>
opinions of counsel reasonably requested by the Collateral Agent or any other
Agent in connection with any such Pledge Agreements required to be executed
pursuant to the foregoing.
SECTION 9.3.2 STOCK PURCHASES. Not, and not permit any of its Subsidiaries
to, make a Borrowing hereunder or use any Letter of Credit or the proceeds of a
Loan to consummate a tender offer, merger, stock purchase transaction, or
investment in the securities of any other Person unless the board of directors,
partners, members, or other governing body of such Person and any shareholder,
partner or member vote required by law or corporate charter shall have approved
such tender offer, merger, stock purchase transaction or investment.
SECTION 9.3.3 PERMITTED INDEBTEDNESS. Not, and not permit any of its
Subsidiaries to, create, incur, assume or permit to exist or otherwise become or
be liable in respect of any Indebtedness unless approved in writing by the
Required Lenders, except:
(i) Indebtedness under this Agreement and the other Loan
Documents;
(ii) Indebtedness in respect of the Medium Term Notes and any
Indebtedness refinancing such Medium Term Notes or in
extension or renewal thereof;
(iii) current accounts payable and accrued liabilities arising
in the ordinary course of business;
(iv) Indebtedness incurred in connection with the Liens
permitted by SECTION 9.3.4;
(v) Indebtedness of any Material Subsidiary of the Borrower
payable to the Borrower PROVIDED that such Indebtedness
shall be evidenced by the Intercompany Subordinated Demand
Note of such Material Subsidiary payable to the order of
the Borrower, and endorsed over to the Collateral Agent
pursuant to the terms of, and subject to the Liens created
under, the Notes Security Agreement, and PROVIDED FURTHER,
that such Indebtedness shall be subordinated pursuant to
the terms of a subordination agreement in substantially the
form of the Subordination Agreement referred to in
SECTION 11.1.10;
(vi) (a) Capitalized Lease Obligations; provided the amount of
Capitalized Lease Obligations payable by the Borrower and
its Subsidiaries during any calendar year does not exceed
$20,000,000 in the aggregate and (b) Indebtedness of the
Borrower and its Subsidiaries of the type described in
CLAUSE (D) of the definition of "INDEBTEDNESS"; PROVIDED the
amount of rentals payable by the Borrower and its
Subsidiaries under all arrangements (other than the
66
<PAGE>
Lease) for such Indebtedness described in such CLAUSE (D)
during any calendar year does not exceed $7,500,000 in the
aggregate;
(vii) Indebtedness of the Borrower or any of its Subsidiaries in
respect of Hedging Obligations from time to time entered
into in accordance with customary industry practice;
(viii) [Intentionally omitted];
(ix) Indebtedness of the Borrower and the Lessee under the
Operative Documents, all as in effect on the date hereof;
(x) Indebtedness of the Borrower to the Holding Company or the
Parent Company evidenced by the RSNs in an aggregate
original principal amount not to exceed $100,000,000;
(xi) Indebtedness permitted under SECTION 9.3.5;
(xii) Indebtedness for current taxes and deferred taxes not
delinquent or being contested in good faith and by
appropriate proceedings;
(xiii) Indebtedness of the Borrower to the Parent Company or its
Affiliates permitted under SECTION 9.3.1(V);
(xiv) Indebtedness in respect of one or more letters of credit
(other than Letters of Credit) in an aggregate undrawn
face amount not to exceed $4,000,000 for all such letters
of credit;
(xv) Indebtedness of any Material Subsidiary of the Borrower
(the "PAYOR") to any other Subsidiary of the Borrower (the
"PAYEE") PROVIDED that (a) such Indebtedness shall be
evidenced by a promissory note of the Payor payable to the
order of the Payee, (b) such promissory note is subordinated
to the Guaranty of the Payor and the other obligations of
the Payor to the Lenders and the Agents pursuant to
subordination provisions in such promissory note no less
favorable to the Lenders than those provisions set forth in
EXHIBIT 9.3.3(XV) hereto;
(xvi) Indebtedness of the Borrower to any Subsidiary of the
Borrower PROVIDED that (a) such Indebtedness shall be
evidenced by a promissory note of the Borrower payable to
the order of such Subsidiary, (b) such promissory note is
subordinated to the Obligations of the Borrower pursuant to
subordination provisions in
67
<PAGE>
such promissory note no less favorable to the Lenders than
those provisions set forth in EXHIBIT 9.3.3(XV) hereto;
(xvii) [Intentionally omitted];
(xviii) [Intentionally omitted];
(xix) Indebtedness of any Subsidiary of the Borrower that is not
a Material Subsidiary, payable to the Borrower or any
Material Subsidiary, PROVIDED the aggregate outstanding
principal amount of all such Indebtedness does not at any
time exceed the positive difference, if any, of (x)
$35,000,000 PLUS Incremental Earnings PLUS Incremental
Losses to such time, MINUS (y) Aggregate Distributions and
Investments to and including such time;
(xx) [Intentionally omitted];
(xxi) Indebtedness of the Borrower not to exceed in the
aggregate the greater of (a) $50,000,000 and (b) the
aggregate unused portion of the Commitment Amount (it
being understood that the principal amount of all Loans
and the outstanding principal amount of all Letters of
Credit Liabilities shall be considered utilizations of the
Commitment Amount), pursuant to one or more unsecured
lines of credit; and
(xxii) [Intentionally omitted];
(xxiii) Indebtedness of any Subsidiary of the Borrower that is not
a Material Subsidiary, payable to any other Subsidiary of
the Borrower that is not a Material Subsidiary.
SECTION 9.3.4 LIENS. Not, and not permit any of its Subsidiaries to,
create or permit to exist any Lien with respect to any Assets (it being
understood that any Asset sold, transferred, conveyed, assigned or otherwise
disposed of to any Person (other than to the Borrower or any of its
Subsidiaries) as permitted by SECTION 9.3.8 (other than SECTIONS 9.3.8(IV) and
9.3.8(XIV)) shall not be subject to the provisions of this SECTION 9.3.4 upon
the consummation of such sale, transfer, conveyance, assignment or disposition)
now owned or hereafter acquired, except
(i) those in favor of the Collateral Agent pursuant to the
Security Documents;
(ii) the Liens referred to in CLAUSES (VII) and (VIII) of
SECTION 8.6, and the types of Liens referred to in the
other clauses of SECTION 8.6 and the Liens listed on
Exhibit 8.6;
68
<PAGE>
(iii) [Intentionally omitted];
(iv) Liens on (A) cash collateral, (B) letters of credit or (C)
Permitted Investments pledged as collateral in favor of
counterparties to Hedging Obligations of the type
described in CLAUSE (B) of the definition of "HEDGING
OBLIGATIONS" and permitted by SECTION 9.3.3(VII);
(v) Liens or encumbrances on Receivables created in
connection with a Receivables Financing permitted
pursuant to SECTION 9.3.19 and Liens or encumbrances on
the rights of the Borrower or any of its Subsidiaries
related to such Receivables which are transferred to the
purchaser of such Receivables in connection with any
such permitted Receivables Financing; PROVIDED that such
Liens secure only, or such encumbrances relate solely
to, the obligations of the Borrower or any of its
Subsidiaries in connection with such Receivables
Financing; and
(vi) Liens on Assets securing Indebtedness of Capitalized Lease
Obligations provided such Liens attach solely to the
assets subject of the capitalized lease.
SECTION 9.3.5 GUARANTIES, LOANS, ADVANCES OR INVESTMENTS. Not, and not
permit any of its Subsidiaries to, become or be a guarantor or surety of,
endorse or otherwise become or be contingently liable upon (by direct or
indirect agreement, contingent or otherwise, or by operation of law, to provide
funds for payment, to supply funds to, or otherwise invest in, a debtor, or
otherwise assure a creditor against loss) the debt, obligation, undertaking or
other liability of any other Person, or otherwise become or be responsible in
any manner (whether by agreement to purchase any obligations, stock, assets,
goods or services, or to supply or advance any funds, assets, goods or services,
or otherwise) with respect to, any undertaking of any other Person, or make or
permit to exist any loans or advances to or investments in any other Person,
except for
(i) (a) the endorsement, in the ordinary course of collection,
of instruments payable to the Borrower or any of its
Subsidiaries or to the order of the Borrower or any of its
Subsidiaries and (b) advances and prepayments to trade
creditors and employees incurred in the ordinary course of
business;
(ii) the Guaranties;
(iii) guaranties or similar assurances incurred by the Borrower
or its Subsidiaries in respect of obligations of the
Borrower or its Subsidiaries permitted hereunder and
incurred in the ordinary course of a Permitted Business
provided that such obligations so guarantied
69
<PAGE>
are not Funded Debt or lease obligations other than Funded
Debt or lease obligations permitted hereunder;
(iv) the guaranty by the Borrower or its Subsidiaries of
Hedging Obligations of the Borrower or Subsidiaries of the
Borrower permitted under SECTION 9.3.3(VII);
(v) [Intentionally omitted];
(vi) the Transok Guaranty (as defined in the Participation
Agreement);
(vii) [Intentionally omitted];
(viii) [Intentionally omitted];
(ix) [Intentionally omitted];
(x) [Intentionally omitted];
(xi) [Intentionally omitted];
(xii) [Intentionally omitted];
(xiii) [Intentionally omitted];
(xiv) guaranties and indemnities by the Borrower or any of its
Subsidiaries pursuant to a Receivables Financing of the
Borrower or any Subsidiary of the Borrower permitted
hereunder;
(xv) [Intentionally omitted];
(xvi) [Intentionally omitted];
(xvii) (a) loans from the Borrower to its Material Subsidiaries
pursuant to Indebtedness permitted under SECTION 9.3.3(V);
(b) loans from any Subsidiary of the Borrower to any
Material Subsidiary of the Borrower pursuant to
Indebtedness permitted under SECTION 9.3.3(XV); loans from
any Subsidiary of the Borrower to the Borrower pursuant to
Indebtedness permitted under SECTION 9.3.3(XVI); (c) loans
from any Subsidiary of the Borrower that is not a Material
Subsidiary to any Subsidiary of the Borrower that is not a
Material Subsidiary pursuant to Indebtedness permitted
under SECTION 9.3.3(XXIII); and (d) loans from the
Borrower or from a Material Subsidiary of the Borrower to
any Subsidiary of the Borrower that is not a Material
70
<PAGE>
Subsidiary not to exceed an aggregate principal amount
equal to the positive difference, if any, of (x)
$35,000,000 PLUS Incremental Earnings PLUS Incremental
Losses to the date of such loan MINUS (y) Aggregate
Distributions and Investments to and including the date of
such loan (without giving effect to such loan on such
date) for all such loans;
(xviii) loans from the Borrower to the Holding Company and/or the
Parent Company not to exceed an aggregate principal
amount equal to the sum of (a) $100,000,000 (excluding
accrued and unpaid interest), PLUS (b) so long as no
Event of Default or Unmatured Event of Default has
occurred and is continuing or would occur as a result of
any such loan, an amount equal to the positive
difference, if any, of (x) the sum of Incremental
Earnings PLUS Incremental Losses to the date of such
loan MINUS (y) Aggregate Distributions and Investments
to and including the date of such loan (without giving
effect to such loan on such date); PROVIDED that (a) the
Borrower may not make any loan to the Parent Company if
an Unmatured Event of Default of the type described in
SECTION 12.1.1, 12.1.2, 12.1.4, 12.1.8, 12.1.9 or
12.1.16, or Event of Default has occurred and is
continuing or would occur as a result of any such loan,
(b) the obligations of the Holding Company or the Parent
Company, as the case may be, with respect to any such
loans are evidenced by promissory notes of the Holding
Company or the Parent Company, as the case may be,
payable to the order of the Borrower (as from time to
time amended, modified or supplemented, each "PARENT
COMPANY NOTE"), (c) such Parent Company Notes are
endorsed and delivered by the Borrower to the Collateral
Agent pursuant to the terms of, and subject to the Liens
created under, the Notes Security Agreement and (d) the
Indebtedness evidenced by such Parent Company Notes
ranks PARI PASSU with all senior unsecured debt of the
Holding Company or the Parent Company, as the case may
be;
(xix) Equity Investments by the Borrower or any of its
Subsidiaries in any one or more Persons that is not the
Borrower or a Material Subsidiary of the Borrower in an
aggregate amount not to exceed at the time of such Equity
Investment the sum of (a) $35,000,000 PLUS (b) the
positive difference, if any, between (1) Incremental
Earnings to such date, if any, and zero if no Incremental
Earnings to such date and (2) all Aggregate Distributions
and Investments to and including such date (without giving
effect to Equity Investments on such date); PROVIDED that
any Equity Investment pursuant to this CLAUSE (XIX) will
only be made in cash;
71
<PAGE>
(xx) Equity Investments in Material Subsidiaries;
(xxi) [Intentionally omitted];
(xxii) [Intentionally omitted];
(xxiii) Permitted Investments; and
(xxiv) Equity Investments outstanding as of the Effective Date
and set forth in EXHIBIT 9.3.5 (XXIV).
SECTION 9.3.6 RESTRICTIONS ON FUNDAMENTAL CHANGES. Without the prior
written consent of the Required Lenders, not, and not permit any of its
Subsidiaries to, be a party to any merger into or consolidation with, or
purchase or otherwise acquire all or substantially all of the assets of, any
other Person, except that (1) the Borrower or any of its Subsidiaries may merge
into or consolidate with any other Person and the Borrower or any of its
Subsidiaries may purchase or otherwise acquire the assets of any other Person,
IF upon the consummation of any such merger, consolidation, purchase or
acquisition, (A) the Borrower or, if the Borrower is not a party to such merger,
such Subsidiary is the surviving entity and the nature of its business is not
materially changed from its core Hydrocarbons, transportation, construction,
procurement, sales, leasing, storage, transmission, gathering, marketing,
processing and other related activities, (B) the Borrower or such Subsidiary has
the power and authority under the pertinent agreement, as applicable, and under
applicable law, to subject the assets of such acquired Person or the assets so
acquired to the provisions of this Agreement, including, without limitation,
SECTION 9.3.4, (C) the Borrower or such Subsidiary does so subject such assets
to the provisions of this Agreement, including without limitation, SECTION
9.3.4, and (D) no Event of Default or Unmatured Event of Default shall have
occurred, exist or be continuing or shall result after giving effect to such
merger, consolidation, purchase or acquisition and (2) the Borrower or any
Subsidiary of the Borrower may merge into, or consolidate with, or purchase or
otherwise acquire the assets of, any other Subsidiary of the Borrower, if (A)
the surviving entity (if either such Subsidiary is a Guarantor) shall be the
Borrower, a Subsidiary that is liable with all other Guarantors pursuant to a
Guaranty for all obligations of the Borrower under this Agreement and the Notes
or a Subsidiary that is liable for all obligations of the Borrower under this
Agreement and each other Loan Document to which the Borrower is a party, (B) the
Collateral Agent shall have received documentation duly executed by the
surviving entity in form and substance satisfactory to the Required Lenders and
the Agents, which documentation shall at a minimum consist of (x) the execution
and delivery of a Guaranty or restated Guaranty (if the surviving Subsidiary is
not a Guarantor prior to the consummation of such merger or consolidation but is
a Material Subsidiary or a Subsidiary which directly owns an interest in a
Guarantor) and supporting documentation substantially similar to the
documentation described in SECTION 11.1, as applicable or (y) the execution and
delivery of an assumption agreement of the obligations of the Borrower under or
in connection with, among others, this Agreement, the Notes and the Security
Documents (if the Borrower merges or consolidates with a Subsidiary and such
Subsidiary is the surviving entity) and supporting documentation substantially
similar to the
72
<PAGE>
documentation described in SECTION 11.1, as applicable, and (C) no Event of
Default or Unmatured Event of Default shall have occurred and be continuing or
would otherwise be existing after or result from such merger or consolidation.
The Borrower shall not, and shall not permit any of its Subsidiaries to, sell
or dispose of any capital stock of any Subsidiary of the Borrower except for
Transfer of minority interests in any Subsidiary of the Borrower pursuant to
SECTION 9.3.8(IX).
SECTION 9.3.7 FISCAL YEAR. Not, and not permit any of its Subsidiaries to,
change its fiscal year as in effect on the date hereof without the consent of
the Required Lenders, which consent shall not be unreasonably withheld.
SECTION 9.3.8 TRANSFER OF ASSETS. Not, and not permit any of its
Subsidiaries to, Transfer any Asset (including, without limitation, any sale or
assignment with or without recourse of any Receivable and any Transfer pursuant
to an Option to Purchase) whether or not such Asset constitutes all or a
substantial part of its Assets, except:
(i) retirement of assets in the ordinary course of business;
(ii) the Transfer of any Asset or Assets; PROVIDED that (x)
the Commitment Amount is reduced as a result thereof in
accordance with SECTION 5.5, (y) promptly, and in any
event within five (5) Business Days after the receipt by
the Borrower or such Subsidiary of the Net Proceeds of
such Transfer, the Borrower shall provide the
Administrative Agent with written notice of such
Transfer, of the amount of the Fair Market Value and the
Net Proceeds thereof, and of the Borrower's election to
make such Transfer pursuant to this CLAUSE (II), and (z)
in the event of any Transfer of any Asset or related
Assets with a Fair Market Value estimated by the
Borrower in good faith to be in excess of $25,000,000 to
the Parent Company or any Affiliate of the Parent
Company (other than to the Borrower or a Subsidiary of
the Borrower), the Lenders shall have received a written
appraisal (dated a date, and using a method of appraisal
and assumptions, reasonably acceptable to the Required
Lenders), from an independent appraiser reasonably
acceptable to the Required Lenders, of the Fair Market
Value of such Asset;
(iii) at any time after the Effective Date, (a) the Transfer of
any Asset or Assets having a Fair Market Value at the time
of Transfer of $40,000,000 or less in the aggregate for
all such Transfers in any fiscal year, and (b) the
Transfer of any Asset or Assets having a Fair Market Value
at the time of such Transfer equal to or less than the
lesser of (x) $80,000,000 and (y) the then Unused Asset
Transfer Allowance; PROVIDED that (x) promptly, and in any
event within fifteen (15) days after the receipt by the
Borrower or such Subsidiary
73
<PAGE>
of the Net Proceeds of such Transfer, the Borrower shall
provide the Administrative Agent with written notice of
such Transfer, of the amount of the Fair Market Value
and the Net Proceeds thereof, and of the Borrower's
election to make such Transfer pursuant to this CLAUSE
(III), and (y) in the event of any Transfer of any Asset
(or related Assets) with a Fair Market Value estimated
by the Borrower in good faith to be in excess of
$25,000,000 to the Parent Company or any Affiliate of
the Parent Company (other than to the Borrower or a
Subsidiary of the Borrower), the Lenders shall have
received a written appraisal (dated a date, and using a
method of appraisal and assumptions, reasonably
acceptable to the Required Lenders), from an independent
appraiser reasonably acceptable to the Required Lenders,
of the Fair Market Value of such Asset; PROVIDED
FURTHER, that Transfers to Coral Energy Resources, L.P.,
a Delaware partnership ("CORAL") or any Affiliate
thereof, of a portion of the Borrower's and its
Subsidiaries' respective economic interests in certain
contracts having an aggregate Fair Market Value not to
exceed $25,000,000 shall not be considered a Transfer
(any portion transferred in excess thereof to be
considered a Transfer) for purposes of the $40,000,000
and $80,000,000 limits set forth above and for purposes
of CLAUSE (B) of the definition of "Unused Asset
Transfer Allowance," if at the time of such Transfer
Coral or such Affiliate thereof is an Affiliate of the
Borrower;
(iv) the Transfer of any Asset to the Borrower or any
Guarantor;
(v) Transfers in connection with the settlement of Hedging
Obligations permitted under SECTION 9.3.3(VII);
(vi) the sale of inventory in the ordinary course of business;
(vii) the Transfer of the interest in the Palo Duro Pipeline
leased by the Borrower or one or more of its Subsidiaries
to Central and South West Corporation or an Affiliate
pursuant to the Merger Agreement;
(viii) the Transfer of Receivables in accordance with SECTION
9.3.19;
(ix) the Transfer of minority interests in any Subsidiary of
the Borrower provided that after giving effect to such
Transfer, such Subsidiary remains a Subsidiary of the
Borrower;
(x) [Intentionally omitted];
(xi) the assignment or termination of any Hedging Obligation;
74
<PAGE>
(xii) [Intentionally omitted];
(xiii) [Intentionally omitted]; and
(xiv) the Transfer by a Subsidiary of the Borrower (other than a
Material Subsidiary of the Borrower or a Guarantor) to a
Subsidiary of the Borrower or to the Borrower.
The foregoing notwithstanding, the Borrower shall not, nor shall the Borrower
permit any of its Subsidiaries to, Transfer any Assets, other than the sale of
inventory and payment of trade payables in the ordinary course of business, to
any Person pursuant to this SECTION 9.3.8 if an Event of Default or Unmatured
Event of Default shall have occurred and be continuing or would otherwise be
existing after or result from any such Transfer.
SECTION 9.3.9 UNCONDITIONAL PURCHASE OBLIGATIONS. Not, and not permit any
of its Subsidiaries to, enter into or be a party to any material contract for
the purchase of materials, supplies or other property or services, if such
contract requires that payment be made by it regardless of whether or not
delivery is ever made of such materials, supplies or other property or services
except for (i) take-or-pay arrangements and Hedging Obligations permitted under
SECTION 9.3.3(VII) entered into in the ordinary course of business in accordance
with industry standards by the Borrower and its Subsidiaries relating to the
purchase and sale of energy-related commodities, including Hydrocarbons, (ii)
those set forth on EXHIBIT 9.3.9 and (iii) arrangements entered into by the
Borrower and its Subsidiaries relating to the purchase of assets or stock of
another Person.
SECTION 9.3.10 OTHER AGREEMENTS. Not, and not permit any of its
Subsidiaries to, enter into any agreement containing any provision which would
be violated or breached by the performance of their Obligations hereunder or
under any instrument or document delivered or to be delivered by them hereunder
or in connection herewith in each case if such violation would singly or in the
aggregate have or may reasonably be expected to have a material adverse effect
on the consolidated business condition (financial or otherwise), operations,
performance or properties of the Borrower and its Subsidiaries (taken as a
whole) or on the ability of the Borrower and its Subsidiaries to perform their
respective obligations under each of the Loan Documents or which could result in
any liability to any Agent or any Lender.
SECTION 9.3.11 BUSINESS ACTIVITIES. Not, and not permit any of its
Subsidiaries to, engage in any business activities other than Hydrocarbon
transportation, construction, procurement, sales, leasing, storage,
transmission, gathering, marketing, processing and other related business
activities ("Permitted Business").
SECTION 9.3.12 CAPITAL EXPENDITURES, ETC. Not, and not permit any of its
Subsidiaries to, make or commit to make any Capital Expenditures the effect of
which would materially change the nature of its business away from its core
Permitted Businesses.
75
<PAGE>
SECTION 9.3.13 NEGATIVE PLEDGES, RESTRICTIVE AGREEMENTS, ETC. Not, and not
permit any of its Subsidiaries to, enter into any agreement (other than this
Agreement, any other Loan Document, any of the Operative Documents, or the
Medium Term Notes or organizational documents for Subsidiaries which documents
are in existence prior to June 6, 1996) prohibiting (a) the creation or
assumption of any Lien upon its properties, revenues or assets, whether now
owned or hereafter acquired; (b) the ability of the Borrower or any Guarantor or
the Parent Company to amend or otherwise modify this Agreement or any other Loan
Document; or (c) the ability of any Subsidiary of the Borrower to make any
payments, directly or indirectly, to the Borrower by way of dividends, advances,
repayments of loans or advances, reimbursements of management and other
intercompany charges, expenses and accruals or other returns on investments, or
any other agreement or arrangement which restricts the ability of any such
Subsidiary to make any payment, directly or indirectly, to the Borrower.
SECTION 9.3.14 [INTENTIONALLY OMITTED].
SECTION 9.3.15 TRANSACTIONS WITH AFFILIATES. Not, and not permit any of
its Subsidiaries to, enter into any transaction (including, without limitation,
the purchase or sale of any property or service) with, or make any payment or
transfer to, any Affiliate (other than the Borrower or a Guarantor) except in
the ordinary course of business and pursuant to the reasonable requirements of
the Borrower's or such Subsidiary's business and upon fair and reasonable terms
no less favorable to the Borrower or such Subsidiary than the Borrower or such
Subsidiary would obtain in a comparable arms-length transaction.
SECTION 9.3.16 RESTRICTIONS ON DECREASE IN CAPITAL STOCK. Not take any
action, or permit any of its Subsidiaries to take any action, which will result
in a decrease in the percentage of the outstanding shares of capital stock of,
or in the percentage of the partnership interests in, any of the Material
Subsidiaries of the Borrower or any Guarantor by the Borrower and any Subsidiary
of the Borrower other than as permitted by SECTION 9.3.6 or SECTION 9.3.8(IX)
herein.
SECTION 9.3.17 [INTENTIONALLY OMITTED].
SECTION 9.3.18 MODIFICATIONS OF CERTAIN AGREEMENTS. Not, and not permit
any of its Subsidiaries to, consent to any amendment, supplement or other
modification of any of the subordination terms or subordination provisions
contained in or applicable to any document or instrument evidencing or
applicable to any Subordinated Debt.
SECTION 9.3.19 RECEIVABLES FINANCING. Not, and not permit any of its
Subsidiaries to, sell, transfer, convey, assign or otherwise dispose of, with or
without recourse, any Receivables of any kind; PROVIDED, HOWEVER, the foregoing
restriction will not prohibit the sale of Receivables of the Borrower and its
Subsidiaries so long as (a) such Receivables are sold pursuant to a Receivables
Financing for no less than 80% of face value and (b) the aggregate outstanding
amount of Receivables so sold at no time exceeds $75,000,000.
76
<PAGE>
SECTION 9.4 FINANCIAL COVENANTS. The Borrower will and will cause each of
its Subsidiaries to:
SECTION 9.4.1MINIMUM STOCKHOLDERS' EQUITY. Not permit the Stockholders'
Equity of the Borrower at any time to be less than $210,000,000 as adjusted at
the end of each calendar quarter, commencing with the calendar quarter ending
December 31, 1996, by adding 50% of the Consolidated Net Income, if positive, of
the Borrower and its Subsidiaries on a consolidated basis for such quarter.
SECTION 9.4.2EBITDA TO TOTAL INTEREST EXPENSE. Not permit the ratio of
EBITDA to Total Interest Expense for any consecutive period of four fiscal
quarters ending on the last day of each fiscal quarter during any of the
following periods to be less than the ratio set forth opposite such period
below:
PERIOD RATIO
------ -----
September 30, 1996 to September 30, 1998 1.85 : 1.00
October 1, 1998 to September 30, 1999 2.25 : 1.00
October 1, 1999 and thereafter 2.75 : 1.00;
provided, that for purposes of determining compliance with this SECTION 9.4.2
for the periods ending on each of September 30, 1996, December 31, 1996 and
March 31, 1997, the actual quarterly EBITDA and Total Interest Expense from the
Closing Date to each such respective date shall be annualized, and thereafter,
all calculations will be based upon the four fiscal quarters ending on the last
day of each fiscal quarter.
SECTION 9.4.3FUNDED DEBT TO CAPITALIZATION. Not permit the ratio of (a)
the sum of Funded Debt PLUS Operating Lessor's Debt to (b) Capitalization
expressed as a percentage to exceed 68% at any time.
77
<PAGE>
ARTICLE X
COLLATERAL SECURITY
As collateral security for its Obligations hereunder and under the Notes
and the other Loan Documents, the Borrower and its Subsidiaries shall, as
applicable, either (i) acknowledge and reaffirm the Security Documents executed
and delivered pursuant to the Original Credit Agreement or (ii) execute and
deliver or cause to be executed and delivered to the Collateral Agent the
following:
SECTION 10.1 PLEDGE AGREEMENT. A pledge agreement (herein, together with
each Pledge Agreement as defined in and executed and delivered pursuant to the
Original Credit Agreement, as from time to time amended, modified or
supplemented, individually called a "PLEDGE AGREEMENT" and collectively called
the "PLEDGE AGREEMENTS") in substantially the form of EXHIBIT 10.1A or 10.1B, as
appropriate, from the Borrower and any Subsidiary of the Borrower (including all
entities which shall become Subsidiaries of the Borrower after the Closing Date)
owning stock of any Material Subsidiary including those set forth in EXHIBIT 8.7
(and including all entities which shall become Material Subsidiaries after the
Closing Date), together with all the issued and outstanding capital stock of all
such Material Subsidiaries of the Borrower owned by the Borrower and its
Subsidiaries.
SECTION 10.2 PARTNERSHIP/LIMITED LIABILITY COMPANY SECURITY AGREEMENT. A
Security Agreement, Undertaking and Financing Statement (herein, together with
each Partnership/Limited Liability Company Security Agreement as defined in and
executed and delivered pursuant to the Original Credit Agreement, as from time
to time amended, modified or supplemented, individually called a
"PARTNERSHIP/LIMITED LIABILITY COMPANY SECURITY AGREEMENT" and collectively
called the PARTNERSHIP/LIMITED LIABILITY COMPANY SECURITY AGREEMENTS") in
substantially the form of EXHIBIT 10.2 from the Borrower and each Subsidiary of
the Borrower (including all entities which shall become Subsidiaries after the
Closing Date) owning a partnership interest or membership interest in any
Material Subsidiary (including all entities which shall become Material
Subsidiaries after the Closing Date).
SECTION 10.3 GUARANTIES. A Guaranty (herein, together with each Guaranty
as defined in and executed and delivered pursuant to the Original Credit
Agreement, as from time to time amended, modified or supplemented, individually
called a "GUARANTY" and collectively called the "GUARANTIES") from each
Guarantor in substantially the form of EXHIBIT 10.3.
SECTION 10.4 NOTES SECURITY AGREEMENT. A Security Agreement, Assignment,
Undertaking and Financing Statement (herein, together with the Notes Security
Agreement (as defined in and executed and delivered pursuant to the Original
Credit Agreement) as amended by the First Amendment to Security Agreement,
Assignment, Undertaking and Financing Statement in substantially the form of
EXHIBIT 11.1.11 hereto, as from time to time amended, modified or supplemented,
called the "NOTES SECURITY AGREEMENT") from the Borrower in substantially the
form of EXHIBIT 10.4A, pledging (i) a subordinated demand promissory note from
each Material Subsidiary of the Borrower in favor of the Borrower in
substantially the form of EXHIBIT 10.4B (herein, together with the Intercompany
Subordinated Demand Notes as defined in and executed and delivered pursuant to
the Original Credit Agreement, as from time to time amended, modified or
supplemented, collectively called the "INTERCOMPANY SUBORDINATED DEMAND NOTES"),
(ii) [intentionally omitted], and (iii) all Parent Company Notes.
SECTION 10.5 GUARANTY OF THE HOLDING COMPANY. The Guaranty dated as of
June 6, 1996 from the Holding Company (herein, as the same may amended,
modified, supplemented, extended or renewed, called the "HOLDING COMPANY
GUARANTY") and the Security Agreement, Undertaking and Financing Statement dated
as of June 6, 1996 from the Holding Company (herein, as the same may amended,
modified, supplemented, extended or renewed, called the "HOLDING COMPANY
SECURITY AGREEMENT").
78
<PAGE>
ARTICLE XI
CONDITIONS TO BORROWING
The obligation of each Lender to fund or make any Borrowing is subject to
the following conditions precedent:
SECTION 11.1 CONDITIONS PRECEDENT TO INITIAL BORROWING. The obligation of
each Lender to fund or make its Borrowing on the Initial Borrowing Date is, in
addition to the conditions precedent specified in SECTIONS 11.2 and 11.3,
subject to the conditions precedent that the Administrative Agent shall have
received all of the following, each duly executed and dated the date of the
Initial Borrowing Date (or such other date prior thereto as shall be
satisfactory to the Agents), in form and substance satisfactory to the Agents,
and each (except for the Notes, of which only one original shall be signed for
each Lender) in sufficient number of signed counterparts to provide one for
each Agent and each Lender:
SECTION 11.1.1 EXECUTED ORIGINAL NOTES. The Notes of the Borrower payable
to the order of each of the Lenders, which shall be exchanged for the Notes
issued pursuant to the Original Credit Agreement marked "amended, renewed and
extended", and delivered to the Borrower.
SECTION 11.1.2 CERTIFICATE OF OFFICERS OF THE BORROWER AND CERTAIN
SUBSIDIARIES. Certificates, in form and substance satisfactory to the Agents, of
a Secretary or an Assistant Secretary and the President or a Vice President of
the Holding Company, the Borrower and each Subsidiary of the Borrower which is a
party to a Loan Document, together with certified copies of the articles of
incorporation and bylaws, certificate of formation and limited liability company
agreement, or the partnership agreement, as the case may be, and signatures and
incumbency of officers of the Holding Company, the Borrower and each such
Subsidiary of the Borrower and resolutions with respect to the transactions
contemplated herein; provided that in lieu of delivering articles of
incorporation, bylaws, certificates of formation, limited liability company
agreements or partnership agreements for the Holding Company and for
Subsidiaries of the Borrower for which such documents were provided to the
Administrative Agent pursuant to the Original Credit Agreement and which
documents so provided have not changed, such certificate may state that such
documents were so delivered and have not changed.
SECTION 11.1.3 CONSENTS, ETC. Certified copies of all documents evidencing
any necessary corporate action, consents and governmental approvals (if any)
with respect to this Agreement, the Notes, any Security Document or any other
documents provided for herein or therein and certified copies of all notices or
requests for consents required to be obtained in order to enable the Holding
Company, the Borrower and each Subsidiary of the Borrower, as applicable, to
acknowledge and reaffirm the liens pursuant to the Security Documents and
execute the pertinent collateral documents described in ARTICLE X.
79
<PAGE>
SECTION 11.1.4 OPINION OF COUNSEL FOR THE BORROWER. The opinions of
Hutcheson & Grundy, L.L.P., counsel for the Holding Company, the Borrower and
certain Subsidiaries of the Borrower, addressed to the Lenders in substantially
the form of EXHIBIT 11.1.4.
SECTION 11.1.5 [INTENTIONALLY OMITTED].
SECTION 11.1.6 THE PLEDGE AGREEMENT. An acknowledgment and reaffirmation,
and any necessary financing statements relating thereto, as to each of the
Pledge Agreements duly executed by each of the Persons that executed and
delivered a Pledge Agreement pursuant to the Original Credit Agreement, in
substantially the form of EXHIBIT 11.1.6.
SECTION 11.1.7 [INTENTIONALLY OMITTED].
SECTION 11.1.8 GUARANTIES. A consent, acknowledgment, and agreement as to
each of the Guaranties duly executed by each Guarantor described in EXHIBIT
11.1.8 in substantially the form of EXHIBIT 11.1.8A and as to the Holding
Company Guaranty duly executed by the Holding Company in substantially the form
of EXHIBIT 11.1.8B.
SECTION 11.1.9 CERTIFICATE OF FINANCIAL CONDITION. Certificate of
Financial Condition from the chief financial officer of the Borrower, in
substantially the form of EXHIBIT 11.1.9, together with all related financial
statements, opinions and other material documents containing information on
which such certificate is based.
SECTION 11.1.10 SUBORDINATION AGREEMENT. An acknowledgement and
reaffirmation as to the Subordination Agreement as defined in and executed and
delivered pursuant to the Original Credit Agreement (herein, together with any
subordination agreement substantially in the form of EXHIBIT 11.1.10 that may
hereafter be executed and delivered pursuant to SECTION 9.3.3(V) as from time to
time amended, modified, restated or supplemented, the "SUBORDINATION AGREEMENT")
duly executed by the Borrower in substantially the form of EXHIBIT 11.1.10A.
SECTION 11.1.11 NOTES SECURITY AGREEMENT. An amendment to the Notes
Security Agreement duly executed by the Borrower in substantially the form of
EXHIBIT 11.1.11, and any necessary financing statements relating thereto, and
all the original Parent Company Notes outstanding as of the Initial Borrowing
Date properly endorsed to the Collateral Agent (which such Parent Company Notes
shall be exchanged for the Parent Company Note delivered and endorsed to the
Collateral Agent pursuant to the Original Credit Agreement).
SECTION 11.1.12 PARTNERSHIP/LIMITED LIABILITY COMPANY SECURITY AGREEMENT.
An acknowledgment and reaffirmation, and any necessary financing statements
relating thereto, as to each of the Partnership/Limited Liability Company
Security Agreements duly executed by each of the Persons that executed and
delivered a Partnership/Limited Liability Company Agreement pursuant to the
Original Credit Agreement, in substantially the form set forth in EXHIBIT
11.1.12.
80
<PAGE>
SECTION 11.1.13 HOLDING COMPANY. An acknowledgment and reaffirmation, and
any necessary financing statements relating thereto, as to the Holding Company
Security Agreement duly executed by the Holding Company in substantially the
form of EXHIBIT 11.1.13.
SECTION 11.1.14 [INTENTIONALLY OMITTED].
SECTION 11.1.15 [INTENTIONALLY OMITTED].
SECTION 11.1.16 FINANCIAL STATEMENTS. Copies, certified by the Borrower as
true, correct and complete copies, of all the financial statements described in
SECTION 8.4(B).
SECTION 11.1.17 OTHER DOCUMENTS. Such other documents as any Agent or any
Lender may reasonably request.
SECTION 11.2 OTHER CONDITIONS PRECEDENT TO MAKING INITIAL BORROWING. The
obligation of each Lender to fund or make any Borrowing on the Initial Borrowing
Date is, in addition to the conditions precedent specified in SECTIONS 11.1 and
11.3, subject to the conditions precedent that:
SECTION 11.2.1 FEES. The Borrower shall have paid to the Administrative
Agent for the benefit of the Lenders or the Agents, as the case may be, all
remaining fees due and payable to the Agents and the Lenders as described in
SECTION 4.4 herein.
SECTION 11.2.2 PURCHASE OF A-NOTES AND B-NOTES. The amendments to the
Operative Documents, and the purchase of and payment for the A-Notes, the
Lessor's A-Invested Amount, the B-Notes and the Lessor's B-Invested Amount by
the Lenders so as to reallocate the commitments of the Lenders under the
Participation Agreement, shall have been concurrently consummated in accordance
with the first amendment to Participation Agreement.
SECTION 11.2.3 [INTENTIONALLY OMITTED].
SECTION 11.2.4 [INTENTIONALLY OMITTED].
SECTION 11.2.5 [INTENTIONALLY OMITTED].
SECTION 11.3 ALL BORROWINGS. The obligation of each Lender to fund or make
any Borrowing (including the Initial Borrowing) is subject to the following
further conditions precedent that:
SECTION 11.3.1 NO DEFAULT; WARRANTIES TRUE AND CORRECT. (i) No Event of
Default, or Unmatured Event of Default, shall have occurred and be continuing,
or will result from the making of such Borrowing and (ii) the representations
and warranties of the Borrower, the Holding Company and each Subsidiary
contained in ARTICLE VIII, any Guaranty or any Security Document shall be true
and correct as of the date of such requested Borrowing, except
81
<PAGE>
to the extent such representations and warranties relate solely to an earlier
date (it being understood that the financial statements referred to in SECTION
8.4 are dated as of December 31, 1995 and September 30, 1996, as the case may
be). Each Borrowing under this Agreement shall be deemed to constitute a
representation and warranty by the Borrower on the date of such Borrowing as to
the matters set forth in this SECTION 11.3.1.
SECTION 11.3.2 MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the opinion of the Majority Lenders, (i) since September 30,
1996, in the consolidated business condition (financial or otherwise),
operations, performance or properties of the Borrower and its Subsidiaries
(taken as a whole), (ii) since the Effective Date, affecting the rights and
remedies of the Lenders under the Loan Documents, or (iii) since the Effective
Date, in the ability of the Borrower, the Holding Company or the Guarantors to
perform their respective Obligations under the Loan Documents to which they are
a party.
ARTICLE XII
EVENTS OF DEFAULT AND THEIR EFFECT
SECTION 12.1 EVENTS OF DEFAULT. Each of the following shall constitute an
Event of Default under this Agreement:
SECTION 12.1.1 NON-PAYMENT OF THE LOANS, LETTER OF CREDIT OBLIGATIONS,
FEES OR OTHER AMOUNTS. Default, and continuance thereof for five (5) Domestic
Business Days, in the payment when due (i) of any principal of any Loan or any
Reimbursement Obligation, or (ii) of any interest on any Loan, of any Obligation
in connection with or with respect to any Letter of Credit, of any Fixed Rent or
any Additional Rent under the Lease, of any fees payable by the Borrower
hereunder or in connection herewith, or of any other monetary Obligation.
SECTION 12.1.2 NON-PAYMENT OF OTHER INDEBTEDNESS FOR BORROWED MONEY.
Default in the payment when due (subject to any applicable grace period),
whether by acceleration or otherwise, of any other indebtedness for borrowed
money of, or guaranteed by, the Borrower or any of its Subsidiaries having a
principal amount, individually or in the aggregate, in excess of $10,000,000
(except any such indebtedness for borrowed money of any Subsidiary of the
Borrower to the Borrower or any such indebtedness for borrowed money of the
Borrower under the RSNs) or default in the performance or observance of any
obligation or condition with respect to any such other indebtedness for borrowed
money if the effect of such default in performance or observance is to
accelerate the maturity of any such indebtedness for borrowed money or to permit
the holder or holders thereof, or any trustee or agent for such holders, to
cause such indebtedness for borrowed money to become due and payable prior to
its expressed maturity.
SECTION 12.1.3 LEASE. An Event of Default shall have occurred and be
continuing under any of the Operative Documents; provided that from and after
any waiver of such Event
82
<PAGE>
of Default under any of such Operative Documents, such Event of Default shall no
longer be an Event of Default hereunder.
SECTION 12.1.4 BANKRUPTCY, INSOLVENCY, ETC. The Borrower, any of its
Subsidiaries, the Parent Company, the Holding Company or any Material Tejas
Subsidiary becomes insolvent or generally fails to pay, or admits in writing its
inability to pay, debts as they become due; or the Borrower, any of its
Subsidiaries, the Parent Company, the Holding Company or any Material Tejas
Subsidiary applies for, consents to, or acquiesces in, the appointment of, a
trustee, receiver or other custodian for the Borrower, any of its Subsidiaries,
the Parent Company, the Holding Company or any Material Tejas Subsidiary or any
property of any thereof, or makes a general assignment for the benefit of
creditors; or, in the absence of such application, consent or acquiescence, a
trustee, receiver or other custodian is appointed for the Borrower, any of its
Subsidiaries, the Parent Company, the Holding Company or any Material Tejas
Subsidiary or for a substantial part of the property of any thereof and is not
discharged within sixty (60) days; or any bankruptcy, reorganization, debt
arrangement, or other case or proceeding under any bankruptcy or insolvency law,
or any dissolution or liquidation proceeding (except the voluntary dissolution,
not under any bankruptcy or insolvency law, of a Subsidiary of the Borrower), is
commenced in respect of the Borrower, any of its Subsidiaries, the Parent
Company, the Holding Company or any Material Tejas Subsidiary and if such case
or proceeding is not commenced by the Borrower, any of its Subsidiaries, the
Parent Company, the Holding Company or any Material Tejas Subsidiary, it is
consented to or acquiesced in by the Borrower, any of its Subsidiaries, the
Parent Company, the Holding Company or any Material Tejas Subsidiary or remains
for sixty (60) days undismissed; or the Borrower, any of its Subsidiaries, the
Parent Company, the Holding Company or any Material Tejas Subsidiary takes any
corporate action to authorize, or in furtherance of, any of the foregoing.
SECTION 12.1.5 NON-PERFORMANCE OF CERTAIN COVENANTS AND OBLIGATIONS. The
Borrower shall default in the due performance and observance of any of its
obligations under SECTION 9.1.5(I), 9.3.2 or 9.3.6 (other than SECTION
9.3.6(1)(C)).
SECTION 12.1.6 NON-PERFORMANCE OF OTHER COVENANTS AND OBLIGATIONS. The
Borrower or any Subsidiary of the Borrower shall default in the due performance
and observance of any other provision of this Agreement (and not constituting an
Event of Default under any of the preceding provisions of this SECTION 12.1) or
in any other Loan Document executed by it (and not constituting an Event of
Default under SECTION 12.1.12), and such default shall continue unremedied for a
period of fifteen (15) days after notice thereof to the Borrower from any Agent
or any Agent at the request of any Lender.
SECTION 12.1.7 BREACH OF WARRANTIES AND MISLEADING STATEMENTS. (a) Any
representation or warranty made or deemed made by the Borrower, the Parent
Company, the Holding Company or any Subsidiary of the Borrower herein (other
than in SECTION 8.16) or in any other Loan Document executed by it is breached
or is false or misleading in any material respect on the date made or deemed
made, or (b) any schedule, certificate, financial statement, report, notice, or
other writing now or hereafter furnished by the Borrower, the Parent
83
<PAGE>
Company, the Holding Company or any Subsidiary of the Borrower to any Agent, the
Issuing Bank or any Lender in connection with the Loan Documents and the
transactions contemplated therein is false or misleading in any material respect
(taken as a whole) on the date as of which the facts therein set forth are
stated or certified, or (c) (i) any representation or warranty made or deemed
made by the Borrower in SECTION 8.16 shall be false or misleading in any
material respect, (ii) the Borrower or any of its Subsidiaries shall obtain
knowledge of any fact or matter which would have made any representation or
warranty made or deemed made in SECTION 8.16(A), (B), (C), (F), (G) or (H) false
or misleading at the time such representation or warranty was made or deemed
made had the Borrower had knowledge of such fact or matter at the time such
representation or warranty was made or deemed made or (iii) any representation
or warranty made or deemed made in SECTION 8.16(D) was false or misleading when
made or deemed made.
SECTION 12.1.8 CHANGE IN OWNERSHIP. Unless the Borrower or the Parent
Company shall have obtained the prior written consent of the Required Lenders,
failure by the Parent Company to own free and clear of all Liens and other
encumbrances (except for agreements prohibiting the creation of any Lien or
security interest on the voting stock of the Borrower and Liens of the type
permitted by SECTIONS 8.6(I), (III) and (XV) of this Agreement), directly or
indirectly through any of its Subsidiaries, 100% of the outstanding voting stock
or membership interests of the Borrower; or failure by the Borrower to own (free
and clear of all Liens and other encumbrances except (i) those in favor of the
Collateral Agent under the Pledge Agreements and the Partnership/Limited
Liability Company Security Agreements and (ii) for agreements prohibiting the
creation of any Lien or security interest on the voting stock, membership
interests or partnership interests, as the case may be, of the Guarantors)
directly or indirectly through any of its Subsidiaries, 100% of the outstanding
voting stock, membership interests or partnership interests, as the case may be,
of the Guarantors (other than failure to own 100% of such outstanding voting
stock, membership interests or partnership interests, as the case may be, as a
result of Transfers of minority interests in Subsidiaries permitted by SECTION
9.3.8(IX) or as a result of any transactions permitted by SECTION 9.3.6).
SECTION 12.1.9 JUDGMENTS. A judgment, decree or order for the payment of
money in an amount of $5,000,000 or more in excess of valid and collectible
insurance in respect thereof the payment of which is not being disputed or
contested by the insurer or insurers shall be rendered against the Borrower or
any of its Subsidiaries (or, in the event the Borrower or such Subsidiary shall
have an indemnity reasonably acceptable to the Required Lenders from a Person
satisfactory to the Required Lenders (which Person acknowledges in writing its
liability for such indemnity) in respect of such judgment, decree or order for
the payment of money, after giving effect to such indemnity, the Borrower's or
such Subsidiary's liability in respect of such judgment, decree or order is in
excess of $5,000,000, as the case may be), and either (a) enforcement
proceedings shall have been commenced by any creditor upon such judgment, decree
or order or (b) such judgment shall become final and non-appealable and shall
have remained outstanding for a period of sixty (60) consecutive days.
84
<PAGE>
SECTION 12.1.10 EMPLOYEE BENEFIT PLANS. With respect to any Pension Plan,
there shall exist a deficiency of more than $5,000,000 in the aggregate in the
plan assets available to satisfy the benefit liabilities under such plan on
account of which the Borrower or any of its Subsidiaries could incur a liability
in excess of $5,000,000 in the aggregate, and steps are or have been undertaken
to terminate such plan or such plan is terminated or the Borrower or any of its
Subsidiaries withdraws from or institutes steps to withdraw from such plan or
any Reportable Event with respect to such plan shall occur.
SECTION 12.1.11 LIEN OR GUARANTY FAILURE. The failure of any of the
Security Documents to constitute a valid and perfected first and prior lien
upon, and security interest in, any property or properties purported to be
pledged or covered thereby, or, if for any reason whatsoever, any of the
Guaranties or Security Documents becomes unenforceable or the security afforded
thereby becomes unenforceable with respect to any property or properties
purported to be pledged or covered thereby; or the Borrower or any Subsidiary of
the Borrower or the Parent Company shall, directly or indirectly, contest in any
manner the effectiveness, validity, binding nature or enforceability of, or
disclaim their liability under, this Agreement or any other Loan Document to
which it is a party.
SECTION 12.1.12 DEFAULT UNDER ANY SECURITY DOCUMENT. A default shall occur
under the terms of any Security Document or Guaranty and continue for more than
the applicable period of grace, if any, therein set forth.
SECTION 12.1.13 [INTENTIONALLY OMITTED].
SECTION 12.1.14 [INTENTIONALLY OMITTED].
SECTION 12.1.15 [INTENTIONALLY OMITTED].
SECTION 12.1.16 NON-PAYMENT OF OTHER INDEBTEDNESS FOR BORROWED MONEY
BY THE PARENT COMPANY. Default in the payment when due (subject to any
applicable grace period), whether by acceleration or otherwise, of any
indebtedness for borrowed money of, or guaranteed by, the Parent Company and/or
the Holding Company, having a principal amount, individually or in the
aggregate, in excess of $25,000,000; or any indebtedness for borrowed money of
the Parent Company and/or the Holding Company having a principal amount,
individually or in the aggregate, in excess of $25,000,000 shall become due
before its stated maturity by acceleration of the maturity thereof PROVIDED that
default in respect of indebtedness for borrowed money guaranteed by the Parent
Company and/or the Holding Company (other than indebtedness for borrowed money
of the Borrower) shall not be an Event of Default under this SECTION 12.1.16
unless either (i) a request or demand for payment in respect of such guaranty
shall have been made or (ii) enforcement proceedings in respect of such guaranty
shall have been commenced.
SECTION 12.2 EFFECT OF EVENT OF DEFAULT. If any Event of Default described
in SECTION 12.1.4 shall occur with respect to the Borrower, the Commitments of
the Lenders hereunder (if not theretofore terminated) shall immediately
terminate and the outstanding
85
<PAGE>
principal amount of the Loans and all other Obligations shall automatically be
and become immediately due and payable, all without notice or demand of any
kind; and, in the case of any other Event of Default, the Administrative Agent
may (and, upon written request of the Required Lenders, shall) declare the
Commitments of the Lenders hereunder (if not theretofore terminated) to be
terminated and/or declare all or any portion of the outstanding principal amount
of the Loans and other Obligations to be due and payable, whereupon the
Commitments of the Lenders hereunder (if not theretofore terminated) shall
immediately terminate and/or, as the case may be, the full unpaid amount of such
Loans and other Obligations which shall be so declared due and payable shall be
and become immediately due and payable, all without notice of any kind. The
Administrative Agent shall promptly advise the Borrower and each Lender of any
such declaration, but failure to do so shall not impair the effect of such
declaration. Notwithstanding the foregoing, the effect as an Event of Default of
any event described in SECTION 12.1.1, or SECTION 12.1.4 with respect to the
Borrower, may be waived by the written concurrence of the holders of one hundred
percent (100%) of the aggregate unpaid principal amount of the Borrowings and
the effect as an Event of Default of any other event described in SECTION 12.1
may be waived by the written concurrence of the Required Lenders.
SECTION 12.3 CASH COLLATERALIZATION OF LETTERS OF CREDIT UPON EVENT OF
DEFAULT. Upon the occurrence of an Event of Default, an amount equal to the
amount of the then contingent liability of the Issuing Bank (and the other
Lenders) under each outstanding Letter of Credit shall, at the option of the
Majority Lenders and without demand upon or notice to the Borrower, be deemed
(as between the Borrower, Issuing Bank and the Lenders) to have been paid or
disbursed by the Issuing Bank (and the other Lenders) under such Letter of
Credit (notwithstanding that such amount may not in fact have been so paid or
disbursed), and the Borrower shall be obligated forthwith, upon demand or notice
to the Borrower, to reimburse the Lenders for, by depositing with the Collateral
Agent, which amount may be invested as provided in SECTION 2.4.4, the amount
deemed to have been so paid or disbursed. Any amounts so received by the
Collateral Agent pursuant to the provisions of the preceding sentence shall be
held as collateral security as provided in SECTION 2.4.4 until such time as such
Event of Default is waived or remedied, at which time, if no other Event of
Default shall then exist, any such cash collateral and any interest thereon not
theretofore applied to reduce amounts payable by the Borrower to the Issuing
Bank under such Letter of Credit and not required to remain on deposit as a
result of SECTION 5.7 shall be returned promptly to the Borrower.
ARTICLE XIII
THE ADMINISTRATIVE AGENT, DOCUMENTATION AGENT AND ISSUING BANK
SECTION 13.1AUTHORIZATION. Each Lender and the holder of each Note
authorizes each of the Administrative Agent, the Documentation Agent and the
Issuing Bank to act on behalf of such Lender or holder to the extent provided
herein or in any document or instrument delivered hereunder or in connection
herewith, and to take such other action as may be reasonably incidental thereto.
The Lenders hereby further authorize the Collateral Agent to release any
Collateral constituting any interest in a Guarantor or a Subsidiary owning an
interest
86
<PAGE>
in any Guarantor in connection with a disposition of a minority interest in such
Subsidiary permitted by this Agreement.
SECTION 13.2 POWER. Each of the Administrative Agent and the Documentation
Agent shall have and may exercise such powers under this Agreement and the other
Loan Documents as are specifically delegated to the Administrative Agent and the
Documentation Agent by the terms hereof, together with such powers as are
reasonably incidental thereto. The Administrative Agent and the Documentation
Agent and the Issuing Bank shall not have any implied duties or any obligation
to take any action under this Agreement except any action specifically provided
by this Agreement to be taken by the Administrative Agent or the Documentation
Agent or the Issuing Bank, as the case may be.
SECTION 13.3 INDEMNIFICATION OF THE ADMINISTRATIVE AGENT, THE
DOCUMENTATION AGENT OR THE ISSUING BANK. The Lenders agree to indemnify and do
hereby indemnify each of the Administrative Agent, the Documentation Agent and
the Issuing Bank (to the extent not reimbursed by the Borrower or the
Guarantors) ratably according to the Lenders' respective Percentages from and
against any and all claims, liabilities, obligations, losses, damages,
penalties, costs, expenses and disbursements of any kind or nature whatsoever
which may be paid by, imposed on, incurred by, or asserted against any of the
Administrative Agent, the Documentation Agent or the Issuing Bank in any way
relating to or arising out of this Agreement, any Note, any Loan Document, any
Letter of Credit, or any other document executed in connection herewith or any
action taken or omitted by any of the Administrative Agent, the Documentation
Agent or the Issuing Bank under this Agreement, any Note, any other Loan
Document or any other document executed in connection herewith or therewith,
PROVIDED that no Lender shall be liable for any portion of such claims,
liabilities, obligations, losses, damages, penalties, costs, expenses and
disbursements resulting from such Administrative Agent's, Documentation Agent's
or Issuing Bank's gross negligence or wilful misconduct. Without limiting the
generality of the foregoing, each Lender agrees to reimburse each of the
Administrative Agent, the Documentation Agent and the Issuing Bank promptly upon
demand for its ratable share of any out-of-pocket expenses (including reasonable
counsel fees) incurred by any of the Administrative Agent, the Documentation
Agent or the Issuing Bank under, or in the enforcement of, or for legal advice
in respect of rights or responsibilities under, this Agreement, any Note, any
other Loan Document or any other document executed in connection herewith or
therewith to the extent that the Administrative Agent, the Documentation Agent
and the Issuing Bank are not reimbursed for such expenses by the Borrower or any
Guarantor PROVIDED that no Lender shall be liable for any such expenses
resulting from the Administrative Agent's, the Documentation Agent's or the
Issuing Bank's gross negligence or wilful misconduct. If any indemnity furnished
to any of the Administrative Agent, the Documentation Agent or the Issuing Bank
for any purpose shall, in the opinion of such Administrative Agent, such
Documentation Agent or such Issuing Bank, be insufficient or become impaired,
such Administrative Agent, Documentation Agent or such Issuing Bank may call for
additional indemnity and not commence or cease to do the acts indemnified
against until such additional indemnity is furnished.
87
<PAGE>
SECTION 13.4 ACTION ON INSTRUCTIONS OF THE REQUIRED LENDERS. As to any
matters not expressly provided for by this Agreement (including, without
limitation, enforcement or collection of the Notes), neither the Administrative
Agent, the Documentation Agent nor the Issuing Bank shall be required to
exercise any discretion or take any action, but the Administrative Agent, the
Documentation Agent and the Issuing Bank shall be required to act or to refrain
from acting (and shall be fully protected in so acting or refraining from
acting) upon the instructions of the Required Lenders, and such instructions
shall be binding upon the Lenders (including, without limitation, all subsequent
holders of the Notes); PROVIDED, HOWEVER, that neither the Administrative Agent,
the Documentation Agent the Issuing Bank shall be required to take any action
which exposes the Administrative Agent, the Documentation Agent or the Issuing
Bank to personal liability or which is contrary to this Agreement, any Loan
Document or applicable law; PROVIDED, FURTHER, HOWEVER, that neither the
Administrative Agent, the Documentation Agent nor the Issuing Bank shall be
required to do any act hereunder or under any Loan Document or any other
document or instrument delivered hereunder or in connection herewith or take any
action toward the execution or enforcement of the agency hereby created, or to
prosecute or defend any suit in respect of this Agreement, any Loan Document,
any Letter of Credit or the Notes or any collateral security, unless the
Administrative Agent, the Documentation Agent and the Issuing Bank are fully and
specifically indemnified to their satisfaction by the Lenders against any and
all claims, liabilities, obligations, losses, damages, penalties, costs,
disbursements and expenses of any kind or nature whatsoever relating to or
arising out of such action (other than any portions of such claims, liabilities,
obligations, losses, damages, penalties, costs, disbursements and expenses
resulting from such Administrative Agent's, Documentation Agent's or Issuing
Bank's gross negligence or wilful misconduct). The relationship between the
Administrative Agent, the Documentation Agent and the Issuing Bank on the one
hand and the Lenders on the other hand is and shall be that of agent and
principal only and nothing herein contained shall be construed to constitute the
Administrative Agent, the Documentation Agent or the Issuing Bank a trustee for
any holder of a Note or of a participation therein or in a Letter of Credit nor
to impose on the Administrative Agent, the Documentation Agent or the Issuing
Bank duties and obligations other than those expressly provided for herein.
SECTION 13.5 EXCULPATION. Neither the Administrative Agent nor the
Documentation Agent nor any of their respective directors, officers, employees
or agents shall (i) be responsible to the Lenders for any recitals,
representations or warranties contained in, or for the execution, validity,
genuineness, effectiveness or enforceability of this Agreement, any Note, any
Loan Document or any other instrument or document delivered hereunder or in
connection herewith, (ii) be responsible for the validity, genuineness,
perfection, effectiveness, enforceability, existence, value or enforcement of
any guaranty or collateral security, (iii) be under any duty to inquire into or
pass upon any of the foregoing matters, or to make any inquiry concerning the
performance by the Borrower or any other Obligor of its obligations, or (iv) in
any event, be liable as such for any action taken or omitted by it or them,
except for its or their own gross negligence or willful misconduct. The agency
hereby created shall in no way impair or affect any of the rights and powers of,
or impose any duties or obligations upon, the Administrative Agent and the
Documentation Agent in their individual capacity.
88
<PAGE>
SECTION 13.6 EMPLOYMENT OF COUNSEL, ETC. The Administrative Agent, the
Documentation Agent and the Issuing Bank may execute any of their respective
duties under this Agreement, any Loan Document and any instrument, agreement or
document executed, issued or delivered pursuant hereto or thereto or in
connection herewith or therewith, by or through employees, agents,
correspondents, confirming banks, and attorneys-in-fact and shall not be
answerable to the Lenders for the default or misconduct of any such employee,
agent, correspondents, confirming banks, or attorney-in-fact selected by it with
reasonable care. The Administrative Agent, the Documentation Agent and the
Issuing Bank shall be entitled to rely on advice of counsel (including counsel
who are the employees of the Administrative Agent, the Documentation Agent and
the Issuing Bank) selected by such Administrative Agent or such Documentation
Agent or such Issuing Bank concerning all matters pertaining to the agency
hereby created and its duties to the Lenders under this Agreement, any Loan
Document and any instrument, agreement or document executed, issued or delivered
pursuant hereto or thereto or in connection herewith or therewith.
SECTION 13.7 RELIANCE ON DOCUMENTS. Each of the Administrative Agent, the
Documentation Agent and the Issuing Bank shall be entitled to rely upon any
notice, consent, waiver, amendment, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper Person or Persons.
SECTION 13.8 CREDIT INVESTIGATION. Each Lender acknowledges that it has
made such inquiries and taken such care on its own behalf (including, without
limitation, that it had this Agreement, the form of its Note and the Guaranties,
the Security Documents and such other documents or matters as it deemed
appropriate relating hereto and thereto reviewed by its own legal counsel as it
deemed appropriate, and it is satisfied with the form of this Agreement, its
Note and the Security Documents) as would have been the case had the Commitments
hereunder been granted and the Borrowings made and the Letters of Credit issued
directly by such Lender to the Borrower without the intervention of the
Collateral Agent, the Administrative Agent, the Documentation Agent, the Issuing
Bank or any other Lender. Each Lender agrees and acknowledges that neither the
Administrative Agent nor the Documentation Agent nor the Issuing Bank make any
representations or warranties about the creditworthiness of the Borrower, any
Subsidiary, any Guarantor, the Parent Company, the Holding Company or any other
party to this Agreement or with respect to the legality, validity, sufficiency
or enforceability of this Agreement, any Note, any other Loan Document or the
existence or value of any collateral security therefor.
SECTION 13.9 RESIGNATION. Any of the Administrative Agent, the Issuing
Bank, and the Documentation Agent may resign as such at any time upon at least
thirty (30) days prior notice to the Borrower and the Lenders. In the event of
any such resignation of the Administrative Agent, the Borrower, with the consent
of the Documentation Agent, shall as promptly as practicable appoint a successor
agent to the Administrative Agent, which shall be the Documentation Agent. In
the event no such successor is appointed, the Required Lenders shall as promptly
as practicable appoint a successor agent to such resigning Administrative
89
<PAGE>
Agent. In the event no such successor is so appointed within thirty (30) days of
any such notice, any Lender may apply to a court of competent jurisdiction for
the appointment of a successor agent hereunder to such resigning Administrative
Agent. After any retiring Administrative Agent's or Documentation Agent's
resignation hereunder as the Administrative Agent or the Documentation Agent or
the Issuing Bank, the provisions of (i) this ARTICLE XIII shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was the
Administrative Agent or Documentation Agent or the Issuing Bank, as the case may
be, under this Agreement; (ii) SECTION 14.8 shall continue to inure to its
benefit; and ARTICLE II shall continue to inure to the benefit of the Issuing
Bank.
SECTION 13.10 ANNUAL ADMINISTRATIVE AGENCY FEES. The obligations of the
Administrative Agent hereunder are subject to the condition precedent that the
Borrower shall pay to the Administrative Agent on each anniversary date of the
Effective Date until the Obligations of the Borrower are paid in full in same
day or immediately available funds a fee in an amount that has been agreed upon
by the Borrower and the Administrative Agent.
SECTION 13.11 THE ADMINISTRATIVE AGENT, ISSUING BANK AND DOCUMENTATION
AGENT AS LENDERS. With respect to any Note or other Obligation held or issued by
or owed to it, each of the Issuing Bank, the Documentation Agent and the
Administrative Agent shall have and may exercise the same rights and powers
hereunder, under the Notes and under the other Loan Documents and is subject to
the same obligations and liabilities as and to the extent set forth herein for
any other Lender. The terms "Lenders" or "Required Lenders," or "Majority
Lenders" or any similar terms shall, unless the context clearly otherwise
indicates, include the Issuing Bank, the Administrative Agent and the
Documentation Agent in their individual capacity as a Lender or as the, or one
of the, Required Lenders or Majority Lenders. The Issuing Bank, the
Administrative Agent and the Documentation Agent may lend money to and generally
engage in any kind of banking, trust or other business with the Borrower, the
Parent Company, the Holding Company, any Guarantor, any Subsidiary of any
thereof, or any other Person as if it were not acting pursuant hereto.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
SECTION 14.1 NO WAIVER. No delay on the part of the Administrative Agent,
the Documentation Agent, the Issuing Bank or any Lender in the exercise of any
right, power or remedy shall operate as a waiver thereof, nor shall any single
or partial exercise by any of them of any right, power or remedy preclude any
other or further exercise thereof, or the exercise of any other right, power or
remedy.
SECTION 14.2 AMENDMENTS, MODIFICATIONS, WAIVERS AND CONSENTS. No amendment
to, modification or waiver of, or consent with respect to, any provision of this
Agreement or the Notes shall in any event be effective unless the same shall be
in writing and signed and delivered by the Required Lenders or by the
Administrative Agent on behalf of and with the written consent of the Required
Lenders to the Borrower or, as to any provision of this Agreement or the Notes,
which only may be amended by the Lenders, by the Lenders or by the
Administrative Agent on behalf of and
90
<PAGE>
with the written consent of the Lenders, to the Borrower and then any such
amendment, modification, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. No amendment,
modification, waiver or consent (i) shall affect this sentence, increase the
amount of any of the Commitments of the Lenders hereunder, extend the maturity
of any Borrowing, postpone or forgive the payment of interest thereon, reduce
the amount in SECTION 5.3, postpone or reduce the fees hereunder (other than
fees payable to the Issuing Bank pursuant to SECTION 4.5(B) and the fees payable
to the Administrative Agent pursuant to SECTION 13.10), reduce the rate of
interest payable with respect to any Borrowing, release any collateral security
for any Obligation (including without limitation any Guaranty), except as
otherwise specifically provided in any Loan Document, or reduce the aggregate
percentage required to effect an amendment, modification, waiver or consent
without the unanimous consent of the Lenders, or (ii) shall extend the maturity
of, postpone or forgive the payment of interest on, extend the due date for any
scheduled repayment or prepayment of principal of, or reduce the principal
amount of, or rate of interest on, any Borrowing (A) without the consent of the
holder of the Note evidencing such Borrowing in the case of any such extension,
postponement, forgiveness or reduction relating to Loans or (B) without the
consent of the Issuing Bank and all the Lenders in the case of any such
extension, postponement, forgiveness or reduction relating to Letters of Credit.
No provisions of ARTICLE XIII (or of this sentence) shall be deleted, amended,
modified or waived without the consent of the Administrative Agent, the Issuing
Bank and the Documentation Agent. No provisions of SECTION 2.4 (or of this
sentence) shall be deleted, amended, modified or waived without the consent of
the Issuing Bank.
SECTION 14.3 CONFIRMATIONS. The Borrower and each holder of a Note agree
from time to time, upon written request received by it from the other, to
confirm to the other in writing the aggregate unpaid principal amount of the
Loans then outstanding under such Note; and each such holder agrees from time to
time, upon written request received by it from the Borrower, to make that Note
held by it (including the schedule attached thereto) available for reasonable
inspection by the Borrower, at the office of such holder.
SECTION 14.4 NOTICES, DEMANDS, INSTRUCTIONS AND OTHER COMMUNICATIONS. All
notices, demands, instructions and other communications required or permitted to
be given to or made upon any party hereto shall be in writing and shall be
personally delivered or sent by registered or certified mail, postage prepaid,
return receipt requested, or by telecopier; PROVIDED, HOWEVER that no Borrowing
Request and no conversion notice pursuant to ARTICLE VI shall become effective
until actually received by the Administrative Agent and no Issuance Request
shall become effective until actually received by the Issuing Bank, and shall be
deemed to be given for purposes of this Agreement on the day that such writing
is delivered or sent to the intended recipient thereof in accordance with the
provisions of this SECTION 14.4. Unless otherwise specified in a notice sent or
delivered in accordance with the foregoing provisions of this SECTION 14.4,
notices, demands, instructions and other communications shall be given to or
made upon the respective parties hereto at their respective addresses (or to
their respective telecopier
91
<PAGE>
numbers) indicated on SCHEDULE I, or as set forth in the relevant Assignment and
Acceptance, as the case may be.
SECTION 14.5 ACCOUNTING TERMS AND COMPUTATIONS. Wherever any accounting
term shall be used herein or in any other Loan Document, or the character or
amount of any asset or liability or item of income or expense is required to be
determined, or any consolidation or other accounting computation is required to
be made, for the purposes of this Agreement and each other Loan Document, such
accounting term, such determination or such computation shall, to the extent
applicable and except as otherwise specified in this Agreement or such other
Loan Document, be defined or made (as the case may be) in accordance with
generally accepted accounting principles ("GAAP") applied (in the case of
determinations or computations) on a basis consistent with those in effect at
the time of such determination or computation. In the event any changes in GAAP
after the Effective Date would materially affect the calculation of the
financial covenants in SECTION 9.4 or of the Leverage Ratio or Consolidated
Stockholders' Equity, the Borrower and the Lenders agree to enter into good
faith negotiations for an agreement to revise such financial covenants or the
definitions of "LEVERAGE RATIO" or "CONSOLIDATED STOCKHOLDERS' EQUITY" or
"STOCKHOLDER'S EQUITY" to take into account such changes in GAAP; PROVIDED that
until the Borrower and the Lenders have entered into such an agreement, such
financial calculations shall continue to be made in accordance with GAAP as in
effect immediately prior to such change.
SECTION 14.6 SALES AND TRANSFERS, ETC., OF BORROWINGS AND NOTES;
PARTICIPATIONS IN BORROWINGS AND NOTES.
(a) Any Lender may at any time sell to one or more banks or other
entities (other than a direct competitor of the Borrower or
any of its Subsidiaries or a person engaged as one of its
principal activities in the Hydrocarbons transportation,
marketing or storage business ("PARTICIPANTS")) participating
interests in any Borrowing owing to such Lender, any Note held
by such Lender, any Commitment of such Lender or any other
interest of such Lender hereunder, PROVIDED that no Lender may
sell any participating interests in any such Borrowing, Note,
Commitment or other interest hereunder without also selling to
such Participant the appropriate PRO RATA share of such
Borrowings, Notes, Commitments and other interests hereunder
and the appropriate PRO RATA share of the A-Notes, the
Lessor's A-Invested Amount, the B-Notes and the Lessor's
B-Invested Amount under the Operative Documents and the
Operative Loan Documents (as defined in the Operative
Documents), and PROVIDED FURTHER that no Lender shall
transfer, grant or assign any participation under which the
participant shall have rights to approve any amendment to or
waiver of this Agreement except to the extent such amendment
or waiver would (i) increase the amount of such Lender's
Commitment, (ii) reduce the principal of, or interest on, any
of such Lender's Borrowings, or any fees payable to such
Lender hereunder, (iii) postpone any date fixed for any
92
<PAGE>
scheduled payment of principal of, or interest on, any of such
Lender's Borrowings, or any fees or other amounts payable to
such Lender hereunder or (iv) release all or substantially all
collateral security for any Obligation (including, without
limitation, any Guaranty), except as otherwise specifically
provided in any Loan Document. In the event of any such sale
by a Lender of participating interests to a Participant, such
Lender's obligations under this Agreement to the other parties
to this Agreement shall remain unchanged, such Lender shall
remain solely responsible for the performance thereof, such
Lender shall remain the holder of any such Note for all
purposes under this Agreement and the Borrower, the
Administrative Agent and the Documentation Agent shall
continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under
this Agreement. The Borrower agrees that if amounts
outstanding under this Agreement and the Notes are due and
unpaid, or shall have been declared or shall have become due
and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of setoff in
respect of its participating interest in amounts owing under
this Agreement and any Note to the same extent as if the
amount of its participating interest were owing directly to it
as a Lender under this Agreement or any Note; PROVIDED that
such right of setoff shall be subject to the obligation of
such Participant to share with the Lenders, and the Lenders
agree to share with such Participant, as provided in SECTION
7.2. The Borrower also agrees that each Participant shall be
entitled to the benefits of SECTIONS 2.6, 4.9, 4.12 and 4.14
with respect to its participation in the Commitments and the
Borrowings outstanding from time to time; PROVIDED that no
Participant shall be entitled to receive any greater amount
pursuant to such Sections than the transferor Lender would
have been entitled to receive in respect of
the amount of the participation transferred by such transferor
Lender to such Participant had no such transfer occurred.
(b) Any Lender may at any time sell to any Lender or any affiliate
thereof, and, with the consent of the Administrative Agent and
the Issuing Bank and the Borrower (which shall not be
unreasonably withheld or delayed), to one or more banks or
financial institutions ("PURCHASING LENDERS") all or any part
of its rights and obligations under this Agreement, the Notes
and the other Loan Documents, pursuant to an Assignment and
Acceptance in the form attached as EXHIBIT 14.6 hereto,
executed by such Purchasing Lender, such transferor Lender
(and, in the case of a Purchasing Lender which is not then a
Lender or an affiliate thereof, consented to by the Borrower
and the Administrative Agent and the Issuing Bank) and the
Administrative Agent and delivered to the Administrative
Agent; PROVIDED that each such sale to a Purchasing Lender
shall be in an amount of $5,000,000 or more; and PROVIDED,
FURTHER, that
93
<PAGE>
no Lender may sell any Loans to a Purchasing Lender without
also selling to such Purchasing Lender the appropriate PRO
RATA share of its Borrowings and participations in Letters of
Credit hereunder, and its Commitments hereunder and the
appropriate PRO RATA share of the A-Notes, the Lessor's
A-Invested Amount, the B-Notes and the Lessor's B-Invested
Amount under the Operative Documents and the Operative Loan
Documents (as defined in the Operative Documents). Upon such
execution, delivery and acceptance, from and after the
Transfer Effective Date determined pursuant to such Assignment
and Acceptance (x) the Purchasing Lender thereunder shall be a
party hereto and, to the extent provided in such Assignment
and Acceptance, have the rights and obligations of a Lender
hereunder and under the other Loan Documents with a Commitment
as set forth therein and (y) the transferor Lender thereunder
shall, to the extent provided in such Assignment and
Acceptance be released from its obligations under this
Agreement and under the other Loan Documents (and, in the case
of an Assignment and Acceptance covering all or the remaining
portion of a transferor Lender's rights and obligations under
this Agreement and under the other Loan Documents, such
transferor Lender shall cease to be a party hereto). Such
Assignment and Acceptance shall be deemed to amend this
Agreement to the extent, and only to the extent, necessary to
reflect the addition of such Purchasing Lender and the
resulting adjustment of Commitments and Percentages arising
from the purchase by such Purchasing Lender of all or a
portion of the rights and obligations of such transferor
Lender under this Agreement, the Notes and the other Loan
Documents. On or prior to the Transfer Effective Date
determined pursuant to such Assignment and Acceptance, the
Borrower at its own expense, shall execute and deliver to the
Administrative Agent in exchange for any surrendered Note, a
new Note to the order of such Purchasing Lender in an amount
equal to the Commitments assumed by it pursuant to such
Assignment and Acceptance, and, if the transferor Lender has
retained a Commitment or Borrowing hereunder, a new Note to
the order of the transferor Lender in an amount equal to the
Commitments or Borrowings retained by it hereunder. Such new
Notes shall be dated the Initial Borrowing Date and shall
otherwise be in the form of the Notes replaced thereby. The
Notes surrendered by the transferor Lender shall be returned
by the Administrative Agent to the Borrower marked
"cancelled."
(c) Upon its receipt of an Assignment and Acceptance executed by a
transferor Lender and a Purchasing Lender (and, in the case of
a Purchasing Lender that is not then a Lender or an affiliate
thereof, consented to by the Borrower, the Administrative
Agent and the Issuing Bank (if the consent of the Borrower and
the Administrative Agent and the Issuing Bank is required))
and the Administrative Agent, together with
94
<PAGE>
payment to the Administrative Agent hereunder of a
registration and processing fee of $2,500 and to the
Administrative Agent (as defined in the Participation
Agreement) the registration and processing fee referred to in
Section 6.3 of the Participation Agreement (provided, a Lender
being replaced pursuant to SECTION 4.15 shall have no
obligation to pay such registration and processing fees), the
Administrative Agent shall (i) promptly accept such Assignment
and Acceptance and (ii) on the Transfer Effective Date
determined pursuant thereto give notice of such acceptance and
recordation to the Lenders and the Borrower.
(d) The provisions of the foregoing CLAUSES (B) and (C) shall not
apply to or restrict, or require the consent of or any notice
to any Person to effectuate, the pledge or assignment by any
Lender of its rights under this Agreement and its Notes to any
Federal Reserve Bank.
(e) If, pursuant to this SECTION 14.6 any interest in this
Agreement or any Note is transferred to any transferee (a
"TRANSFEREE") which is organized under the laws of any
jurisdiction other than the United States or any State
thereof, the transferor Lender shall cause such Transferee,
concurrently with the effectiveness of such transfer, (i) to
represent to the transferor Lender (for the benefit of the
transferor Lender, the Administrative Agent, the Issuing Bank,
the Documentation Agent and the Borrower) that under
applicable law and treaties no taxes will be required to be
withheld by the Administrative Agent, the Borrower or the
transferor Lender with respect to any payments to be made to
such Transferee in respect of the Loans or Letters of Credit,
(ii) to furnish to the transferor Lender (and, in the case of
any Purchasing Lender, the Administrative Agent, the Issuing
Bank, the Documentation Agent and the Borrower) either U.S.
Internal Revenue Service Form 4224 or U.S. Internal Revenue
Service Form 1001 (wherein such Transferee claims entitlement
to complete exemption from U.S. federal withholding tax on all
interest payments hereunder) and (iii) to agree (for the
benefit of the transferor Lender, the Administrative Agent,
the Issuing Bank, the Documentation Agent and the Borrower) to
provide the transferor Lender (and, in the case of any
Purchasing Lender, the Administrative Agent, the Issuing Bank,
the Documentation Agent and the Borrower) a new Form 4224 or
Form 1001 upon the expiration or obsolescence of any
previously delivered form and comparable statements in
accordance with applicable U.S. laws and regulations and
amendments duly executed and completed by such Transferee, and
to comply from time to time with all applicable U.S. laws and
regulations with regard to such withholding tax exemption.
(f) On the Effective Date, the aggregate principal balance of the
obligations outstanding under the Original Credit Agreement is
$195,780,000 (the
95
<PAGE>
"Prior Indebtedness") as shown on SCHEDULE II, and Borrower
represents for itself and each Lender represents and warrants
for itself, that its outstanding loans and letter of credit
reimbursement obligations, if any, under the Original Credit
Agreement as of the Effective Date are as set forth in the
second column of SCHEDULE II. Lenders hereby sell, assign,
transfer and convey, and Lenders (including, without
limitation, those Lenders not previously a party to the
Original Credit Agreement) hereby purchase and accept so much
of the Prior Indebtedness and all of the rights, titles,
benefits, interests, privileges, claims, liens, security
interests, and obligations existing and to exist (collectively
the "INTERESTS") such that each Lender's Percentage of the
outstanding Loans and Commitments under the Original Credit
Agreement as amended and restated by this Agreement shall be
as set forth in SCHEDULE II as of the Effective Date. The
foregoing assignment, transfer and conveyance are without
recourse to the Lenders and without any warranties whatsoever
as to title, enforceability, collectibility, documentation or
freedom from liens or encumbrances, in whole or in part, other
than the warranty by each Lender that it has not sold,
transferred, conveyed or encumbered such Interests. If as a
result thereof, a Lender's Percentage of the outstanding
Borrowings under this Agreement is less than its outstanding
loans and letter of credit reimbursement obligations under the
Original Credit Agreement on the Effective Date, the
difference set forth in the last column of SCHEDULE II shall
be remitted to such Lender by the Administrative Agent upon
receipt of funds from the other Lenders shown in the last
column of SCHEDULE II on the Effective Date. Each Lender so
acquiring a part of such outstanding loans and letter of
credit reimbursement obligations assumes its Percentage of the
outstanding Borrowings, Commitments, rights, titles,
interests, privileges, claims, liens, security interests,
benefits and obligations under this Agreement and the Security
Documents. Lenders are proportionately released from the
obligations assumed by Lenders so acquiring such obligations
and, to that extent, the Lenders so released shall have no
further obligation under the Original Credit Agreement, as
amended and restated hereby. The Borrower hereby represents
and warrants that it has no defenses, offsets or counterclaims
to the Prior Indebtedness or its obligations or rights under
the Original Credit Agreement, this Agreement or the Security
Documents, including, without limitation, the Interests being
assigned pursuant to this SECTION 14.6(F). Any Loans
outstanding under the Original Credit Agreement on the
Effective Date bearing interest at a Eurodollar Interest Rate
(as defined in the Original Credit Agreement) shall be deemed
continued as a Loan under this Agreement at such Eurodollar
Interest Rate and for the Interest Period with respect thereto
under the Original Credit Agreement.
96
<PAGE>
SECTION 14.7 PAYMENT OF COSTS, EXPENSES AND TAXES. The Borrower agrees to
pay on demand all out-of-pocket costs and expenses of the Administrative Agent,
the Collateral Agent, the Issuing Bank and the Documentation Agent (including,
without limitation, the reasonable fees and out-of-pocket expenses of Messrs.
Mayer, Brown & Platt, and any and all other special counsel for the Agents, and
of local counsel, if any, who may be retained by said special counsel) in
connection with (i) the preparation, negotiation, execution, delivery,
syndication and administration of this Agreement, the Notes, the Guaranties, the
Security Documents, and all other instruments or documents provided for herein
or delivered or to be delivered hereunder or in connection herewith, (ii) the
preparation, negotiation, execution and delivery of any and all amendments,
supplements, renewals, restatements, rearrangements, extensions, substitutions,
or modifications to this Agreement, the Notes, the Guaranties, the Security
Documents, and all other instruments or documents provided for herein or
delivered or to be delivered hereunder or in connection herewith except for
those (excluding the preparation of new Notes) incurred in connection with
SECTION 14.6 unless such sale, assignment, or transfer under SECTION 14.6
results from the exercise of Borrower's rights under SECTION 4.15, and (iii) the
enforcement by the Lenders, the Administrative Agent, the Issuing Bank, the
Collateral Agent and the Documentation Agent of, or the protection of rights
under, this Agreement, the Notes, the Guaranties, the Security Documents, any
such other instruments or documents or any collateral security. The
Administrative Agent, the Collateral Agent, each Lender, the Issuing Bank and
the Documentation Agent agree to the extent feasible, and to the extent a
conflict of interest does not exist in the reasonable opinion of the
Administrative Agent, any Lender, the Collateral Agent, the Issuing Bank, the
Documentation Agent or their counsel, to use the same single counsel (i.e. one
law firm) in connection with the foregoing, to the extent they seek
reimbursement for the expenses thereof from the Borrower. Such requests for
payment shall be accompanied by invoices containing reasonable details. Each
Lender agrees to reimburse each of the Administrative Agent, the Collateral
Agent, the Issuing Bank and the Documentation Agent on demand for such Lender's
PRO RATA share (based upon its respective Percentage) of any such costs or
expenses not paid by the Borrower. In addition, the Borrower agrees to pay, and
to save the Administrative Agent, the Collateral Agent and the Documentation
Agent and the Lenders harmless from all liability for, any stamp or other taxes
which may be payable in connection with the execution or delivery of this
Agreement, the Borrowings hereunder, or the issuance of the Notes, the Letters
of Credit, or of any other instruments or documents provided for herein or
delivered or to be delivered hereunder or in connection herewith. All
obligations provided for in this SECTION 14.7, in the last paragraph of SECTION
2.4.2 and in SECTION 2.6, SECTION 4.9, SECTION 4.10, SECTION 4.12, SECTION 4.14
and SECTION 14.8 shall survive any termination of this Agreement. The
representations and warranties made by the Borrower in this Agreement and in
each other Loan Document shall survive the execution and delivery of this
Agreement and each such other Loan Document.
SECTION 14.8 INDEMNIFICATION PROVISIONS. IN CONSIDERATION OF THE EXECUTION
AND DELIVERY OF THIS AGREEMENT BY THE ADMINISTRATIVE AGENT, THE COLLATERAL
AGENT, THE ISSUING BANK AND THE DOCUMENTATION AGENT AND EACH LENDER, THE
BORROWER HEREBY AGREES TO INDEMNIFY EACH OF THE ADMINISTRATIVE AGENT, THE
COLLATERAL AGENT, THE ISSUING BANK AND THE DOCUMENTATION AGENT AND EACH LENDER
AND THEIR RESPECTIVE DIRECTORS, OFFICERS, AGENTS
97
<PAGE>
AND EMPLOYEES (COLLECTIVELY, THE "INDEMNIFIED PARTIES") FROM AND AGAINST
ANY AND ALL SUITS, LOSSES, LIABILITIES, CLAIMS AND DAMAGES, AND EXPENSES
INCURRED BY ANY OF THE INDEMNIFIED PARTIES RELATING TO, ARISING OUT OF OR BY
REASON OF (I) ANY INVESTIGATION, LITIGATION OR OTHER PROCEEDING RELATED TO ANY
USE MADE OR PROPOSED TO BE MADE BY THE BORROWER OF THE PROCEEDS OF THE
BORROWINGS, OR ANY TRANSACTION FINANCED OR TO BE FINANCED IN WHOLE OR IN PART,
DIRECTLY OR INDIRECTLY WITH THE PROCEEDS OF ANY BORROWING, (II) THE ENTERING
INTO AND PERFORMANCE OF THIS AGREEMENT AND ANY OTHER LOAN DOCUMENT BY ANY OF THE
INDEMNIFIED PARTIES (OTHER THAN EXPENSES OF THE TYPE FOR WHICH THE BORROWER
AGREES TO REIMBURSE PURSUANT TO SECTION 14.7), (III) ANY INVESTIGATION,
LITIGATION OR PROCEEDING RELATED TO ANY ENVIRONMENTAL CLEANUP, AUDIT, COMPLIANCE
OR OTHER MATTER RELATING TO ANY ENVIRONMENTAL LAW OR THE CONDITION OF ANY
FACILITY OR PROPERTY OWNED, LEASED OR OPERATED BY THE BORROWER OR ANY OF ITS
SUBSIDIARIES, OR (IV) THE PRESENCE ON OR UNDER, OR THE ESCAPE, SEEPAGE, LEAKAGE,
SPILLAGE, DISCHARGE, EMISSION, DISCHARGING OR RELEASES FROM, ANY FACILITY OR
PROPERTY OWNED, LEASED OR OPERATED BY THE BORROWER OR ANY SUBSIDIARY THEREOF OF
ANY HAZARDOUS MATERIAL (INCLUDING, WITHOUT LIMITATION, ANY LOSSES, LIABILITIES,
DAMAGES, INJURIES, COSTS, EXPENSES OR CLAIMS ASSERTED OR ARISING UNDER ANY
ENVIRONMENTAL LAW), REGARDLESS OF WHETHER CAUSED BY, OR WITHIN THE CONTROL OF,
THE BORROWER OR SUCH SUBSIDIARY (BUT EXCLUDING ANY SUCH LOSSES, LIABILITIES,
CLAIMS, DAMAGES OR EXPENSES TO THE EXTENT THEY RESULTED FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY OR OF ITS RESPECTIVE
DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES OR RESULTED FROM SUCH INDEMNIFIED
PARTY'S OWN UNEXCUSED BREACH OF ANY MATERIAL PROVISION OF ANY LOAN DOCUMENT),
PROVIDED THAT IT IS THE INTENTION OF THE PARTIES HERETO THAT THE INDEMNIFIED
PARTIES BE INDEMNIFIED IN THE CASE OF THEIR OWN NEGLIGENCE. IF AND TO THE EXTENT
THAT THE FOREGOING UNDERTAKING MAY BE UNENFORCEABLE FOR ANY REASON, THE BORROWER
HEREBY AGREES, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, TO MAKE THE
MAXIMUM CONTRIBUTION TO THE PAYMENT AND SATISFACTION OF EACH OF SUCH LOSSES,
LIABILITIES, CLAIMS, DAMAGES, EXPENSES, FEES AND DISBURSEMENTS WHICH IS
PERMISSIBLE UNDER APPLICABLE LAW. THE COLLATERAL AGENT, THE ADMINISTRATIVE
AGENT, THE DOCUMENTATION AGENT, THE ISSUING BANK AND EACH LENDER AGREE TO THE
EXTENT FEASIBLE, AND TO THE EXTENT A CONFLICT OF INTEREST DOES NOT EXIST IN THE
REASONABLE OPINION OF ANY OF THE COLLATERAL AGENT, THE ADMINISTRATIVE AGENT, THE
DOCUMENTATION AGENT, THE ISSUING BANK OR ANY LENDER OR THEIR COUNSEL, TO USE THE
SAME SINGLE COUNSEL (I.E. ONE LAW FIRM) IN CONNECTION WITH ANY SUCH
INVESTIGATION, LITIGATION OR OTHER PROCEEDING. ALL OBLIGATIONS PROVIDED FOR IN
THIS SECTION 14.8 SHALL SURVIVE ANY TERMINATION OF THIS AGREEMENT, THE PAYMENT
OF THE OBLIGATIONS AND THE ASSIGNMENT OF THE NOTES.
SECTION 14.9 SUBSIDIARY REFERENCES. The provisions of this Agreement
relating to Subsidiaries shall apply only during such times as the Borrower has
one or more Subsidiaries.
SECTION 14.10 SECTION CAPTIONS AND TABLE OF CONTENTS. Section captions
used in, and the Table of Contents to, this Agreement are for convenience of
reference only, and shall not affect the construction of this Agreement.
SECTION 14.11 GOVERNING LAW. THIS AGREEMENT AND EACH NOTE SHALL BE DEEMED
TO BE A CONTRACT MADE UNDER THE LAWS OF THE
98
<PAGE>
STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF SAID STATE. All obligations of the Borrower and
rights of the Collateral Agent, the Administrative Agent, the Issuing Bank, the
Documentation Agent, the Lenders and any other holders of the Notes expressed
herein or in the Notes shall be in addition to and not in limitation of those
provided by applicable law.
SECTION 14.12 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by the different parties on separate
counterparts, and each such counterpart shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same Agreement.
SECTION 14.13 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
the Borrower, the Lenders, the Administrative Agent and the Documentation Agent
and their respective successors and assigns, and shall inure to the benefit of
the Borrower, the Lenders, the Collateral Agent, the Administrative Agent, the
Issuing Bank and the Documentation Agent and the respective successors and
assigns of the Lenders, the Collateral Agent, the Administrative Agent, the
Issuing Bank and the Documentation Agent; PROVIDED, HOWEVER, that the Borrower
may not assign or transfer its rights or obligations hereunder without the prior
written consent of all Lenders; PROVIDED FURTHER, however, that for purposes of
this SECTION 14.13 if the survivor of such a merger is obligated in respect of
all Obligations of the Borrower hereunder and under all other Loan Documents, a
merger permitted pursuant to SECTION 9.3.6 hereof shall not be an assignment or
transfer of the Borrower's rights or obligations hereunder.
SECTION 14.14 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, EACH PARTY HERETO WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR
UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN
THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY
SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 14.15 FORUM SELECTION AND CONSENT TO JURISDICTION. TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY LITIGATION BASED HEREON, OR ARISING OUT
OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN)
OR ACTIONS OF THE DOCUMENTATION AGENT, THE ADMINISTRATIVE AGENT, THE ISSUING
BANK, THE COLLATERAL AGENT, THE LENDERS OR THE BORROWER SHALL BE BROUGHT AND
MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER,
THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY OBLIGOR, COLLATERAL OR OTHER
PROPERTY MAY BE
99
<PAGE>
BROUGHT, AT THE COLLATERAL AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION
WHERE SUCH OBLIGOR, COLLATERAL OR OTHER PROPERTY MAY BE FOUND. TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR
THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO
BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS, BY REGISTERED MAIL, POSTAGE PREPAID, OR BY
PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE
OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN
ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER HAS OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OF NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 14.16 SEVERABILITY. Any provision of this Agreement or any other
Loan Document which is prohibited or unenforceable in any jurisdiction shall, as
to such provision and such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this Agreement or such Loan Document or affecting the validity or enforceability
of such provision in any other jurisdiction.
SECTION 14.17 CONFIDENTIALITY. Each Lender agrees that it will use
reasonable efforts not to disclose without the prior written consent of the
Borrower (other than to its employees, affiliates, auditors or counsel or to any
other party hereto) any information with respect to the Borrower, any of its
Subsidiaries or the Parent Company or any of its Subsidiaries which is furnished
pursuant to this Agreement or any other agreement executed pursuant hereto and
which is clearly designated by the Borrower to each Lender in writing as
confidential, PROVIDED that the foregoing shall not apply to, and each Lender
may disclose any such information, (a) as has become generally available to the
public, (b) to any of its examiners or as may be required or appropriate in any
report, statement or testimony submitted to any municipal, state or Federal
regulatory body having or claiming to have jurisdiction over such Lender or to
the Federal Reserve Board or the Federal Deposit Insurance Corporation or
similar
100
<PAGE>
organizations (whether in the United States or elsewhere) or their successors,
(c) as may be required or appropriate in response to any summons or subpoena or
in connection with any litigation, (d) in order to comply with any law, order,
regulation or ruling applicable to such Lender, (e) to the prospective
Transferee, Participant, or Purchasing Lender, in connection with any
contemplated transfer of any of the Notes or any interest therein by such
Lender, PROVIDED, that such prospective Transferee, Participant, or Purchasing
Lender (other than an affiliate of such Lender) executes an agreement with the
Borrower containing provisions substantially identical to those contained in
this SECTION 14.17, (f) with the prior written authorization of the Borrower,
(g) received by such Lender prior to June 6, 1996 or already known by, or in the
possession of such Lender without restrictions on the disclosure thereof at the
time such information was received by the Lender (it being acknowledged by each
of the Lenders that all information received from the Parent Company, any
Subsidiary thereof, or the Borrower prior to June 6, 1996 was confidential) or
(h) in connection with the exercise of any remedies by any Lender, the
Administrative Agent, the Issuing Bank, the Documentation Agent or the
Collateral Agent. Each Lender further agrees that it will use its reasonable
efforts to advise the Borrower, as promptly as practicable, of any disclosure of
information clearly designated by the Borrower to each Lender in writing as
confidential made by such Lender pursuant to CLAUSE (C) of this SECTION 14.17;
PROVIDED, HOWEVER, that the foregoing notwithstanding, such Lender shall have no
obligation to notify the Borrower of any such disclosure pursuant to such CLAUSE
(C) or otherwise and failure to give such notification shall not give rise to a
claim against such Lender.
SECTION 14.18 RELEASE OF PARENT COMPANY GUARANTY. On the Effective Date,
the Parent Company shall be released from its obligations as guarantor under its
Guaranty dated as of June 6, 1996.
SECTION 14.19 NOTICE. THIS WRITTEN AGREEMENT TOGETHER WITH THE OTHER LOAN
DOCUMENTS REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
101
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
TRANSOK, INC.
By:
Name:
Title:
<PAGE>
BANK OF MONTREAL, HOUSTON AGENCY, as
Administrative Agent and as a Lender
By:
Name:
Title:
<PAGE>
CANADIAN IMPERIAL BANK OF COMMERCE,
as Documentation Agent and as a Lender
By:
Name:
Title:
<PAGE>
THE BANK OF NEW YORK
By:
Name:
Title:
<PAGE>
BANKERS TRUST COMPANY
By:
Name:
Title:
<PAGE>
BANQUE PARIBAS
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
CHRISTIANA BANK OG KREDITKASSE
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
CITIBANK N.A.
By:
Name:
Title:
<PAGE>
CREDIT LYONNAIS
By:
Name:
Title:
<PAGE>
CREDIT SUISSE
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
By:
Name:
Title:
<PAGE>
THE FUJI BANK, LIMITED
By:
Name:
Title:
<PAGE>
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By:
Name:
Title:
<PAGE>
LONG TERM CREDIT BANK OF JAPAN,
LIMITED
By:
Name:
Title:
<PAGE>
MELLON BANK, N.A.
By:
Name:
Title:
<PAGE>
NATIONAL WESTMINSTER BANK PLC.,
NEW YORK BRANCH
By:
Name:
Title:
NATIONAL WESTMINSTER BANK PLC.,
NASSAU BRANCH
By:
Name:
Title:
<PAGE>
NATIONSBANK OF TEXAS, N.A.
By:
Name:
Title:
<PAGE>
SOCIETE GENERALE, SOUTHWEST AGENCY
By:
Name:
Title:
<PAGE>
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By:
Name:
Title:
<PAGE>
TORONTO DOMINION (TEXAS), INC.
By:
Name:
Title:
<PAGE>
UNION BANK OF CALIFORNIA, N.A.
By:
Name:
Title:
<PAGE>
UNION BANK OF SWITZERLAND,
HOUSTON AGENCY
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
WELLS FARGO BANK (TEXAS) N.A.
By:
Name:
Title:
<PAGE>
CAISSE NATIONALE DE CREDIT AGRICOLE
By:
Name:
Title:
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By:
Name:
Title:
<PAGE>
BANK OF TOKYO-MITSUBISHI, LTD.
By:
Name:
Title:
<PAGE>
BANK OF NOVA SCOTIA, ATLANTA AGENCY
By:
Name:
Title:
<PAGE>
THE SUMITOMO BANK, LIMITED
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
For purposes of selling, assigning, transferring and conveying its
Interest, the undersigned has caused this Agreement to be executed by its
officer thereunto duly authorized as of the date and year first above written.
BANK OF BOSTON
By:
Name:
Title:
EXHIBIT 10.2
TEJAS GAS CORPORATION
EMPLOYEE STOCK OPTION PLAN
(As Amended and Restated Effective January 1, 1997)
SECTION 1. ESTABLISHMENT AND PURPOSE
1.1 ESTABLISHMENT. Tejas Gas Corporation, a Delaware corporation (the
"Company"), previously established a nonqualified stock option plan for
executive officers of the Company and its subsidiaries, known as the Tejas Gas
Corporation Executive Officers Stock Option Plan, which was amended and restated
effective July 21, 1992 and renamed as the "Tejas Gas Corporation Employee Stock
Option Plan," and was subsequently amended by Amendment dated December 9, 1995
(as so amended, the "Prior Plan") and by further amendment adopted on December
13-14,1996. Effective January 1, 1997, the Prior Plan was amended and restated
in the form of the Plan as set forth herein (the "Plan"). The revisions made by
this amendment and restatement of the Plan shall apply both to outstanding
Options and to Options granted on or after January 1, 1997, except that the
amendments to Section 13.3 below shall apply only to Options granted on or after
January 1, 1997 unless the Optionees holding Options outstanding prior to that
date expressly consent to the amendment of their outstanding Options to reflect
such amendments.
1.2 PURPOSE. The principal purpose of this Plan is to attract, retain
and motivate executive officers and other employees of the Company and its
subsidiaries and to encourage stock ownership by such employees by providing
them with a means to acquire a proprietary interest or to increase their
proprietary interest in the Company.
SECTION 2. DEFINITIONS
2.1 DEFINITIONS. Whenever used herein, the following terms shall have
the respective meanings set forth below:
(a) "BOARD" means the Board of Directors of the Company.
(b) "CODE" means the Internal Revenue Code of 1986, as
amended.
(c) "COMMITTEE" means the Stock Option Committee appointed by
the Board.
(d) "COMPANY" means Tejas Gas Corporation, a Delaware
corporation.
(e) "DATE OF EXERCISE" means the date the Company receives
notice, by an Optionee, of the exercise of an Option pursuant to Section
7 of this Plan.
1
<PAGE>
(f) "ELIGIBLE EMPLOYEE" means an officer or employee of the
Company or a Subsidiary who, in the opinion of the Committee, has an
opportunity to influence the long-term success of the Company or its
Subsidiaries.
(g) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time.
(h) "FAIR MARKET VALUE" on a specified date shall mean, for all
purposes OTHER THAN determining the exercise price of an Option, (i) if
the Stock is listed on a national securities exchange, the closing
selling price per share of the Stock on such national securities
exchange on the date immediately preceding the date of exercise, as
reported in THE WALL STREET JOURNAL or, if there shall have been no such
sale so reported on that date, on the last preceding date on which such
a sale was so reported, or (ii) if the Stock is not so listed, the
closing selling price (or, if not so reported, the mean between the
closing bid and asked price) on the date immediately preceding the date
of exercise, or, if there are no quotations available for such date, on
the last preceding date on which such quotations shall be available, as
reported by the Nasdaq Stock Market, or, if not reported by the Nasdaq
Stock Market, by the National Quotation Bureau, Inc. For the purpose of
determining the exercise price of an Option, "Fair Market Value" shall
mean such closing selling price per share of the Stock as described
above, but determined as of the date of grant of the Option.
(i) "OPTION" means the right to purchase Stock pursuant to this
Plan at the Option Price for a specified period of time.
(j) "OPTIONEE" means an Eligible Employee who has been granted an
Option under this Plan.
(k) "OPTION PRICE" means the price at which an Optionee may
acquire shares of Stock pursuant to the terms of his Option.
(l) "STOCK" means the common stock of the Company, par value $.25
per share.
(m) "SUBSIDIARY" includes any subsidiary of the Company, and any
wholly or partially owned partnerships, joint ventures, limited
liability companies, corporations and other forms of investment by the
Company.
2.2 GENDER AND NUMBER. Except when otherwise indicated by the context,
any masculine terminology when used in this Plan also shall include the feminine
gender, and the definition of any term herein in the singular also shall include
the plural.
2
<PAGE>
SECTION 3. ELIGIBILITY AND PARTICIPATION
3.1 ELIGIBILITY AND PARTICIPATION. The Committee shall determine, within
the limits of the express provisions of the Plan, the Eligible Employees to
whom, and the time or times at which, Options shall be granted under the Plan.
In the event that the Committee designates an Eligible Employee of a Subsidiary
of which less than 50% of the voting power of the capital stock entitled to vote
generally in the election of directors is owned by the Company to receive an
Option grant, management will advise the Committee of the tax consequences to
the Company of any such grant.
SECTION 4. STOCK SUBJECT TO THE PLAN
4.1 NUMBER. Subject to Sections 4.2 and 4.3, the total number of shares
of Stock that may be optioned under the Plan consists of shares subject to
outstanding options under the Prior Plan at December 31, 1996, shares reserved
under the Prior Plan at December 31, 1996 and not subject to outstanding
options, and, subject to stockholder approval at the 1997 Annual Meeting, an
additional 950,000 shares. These shares may consist, in whole or in part, of
authorized but unissued Stock or treasury Stock, not reserved for any other
purpose.
4.2 RESTORATION OF UNPURCHASED STOCK AND STOCK WITHHELD FOR TAX
WITHHOLDING. If an Option expires, is cancelled or terminates for any reason
during the term of this Plan and prior to the exercise thereof in full, the
shares of Stock subject to such Option shall again be available for the grant of
Options thereafter. Any shares of Stock withheld to satisfy tax withholding
requirements under Section 14.1 shall again be available for the grant of
Options thereafter.
4.3 ADJUSTMENT IN SHARES. Subject to the provisions of Section 13
hereof, in the event of any subdivision or consolidation of outstanding shares
of Stock or declaration of a dividend payable in shares of Stock or capital
reorganization or reclassification or other transaction involving an increase or
reduction in the number of outstanding shares of Stock, then (i) the number of
shares of Stock reserved under this Plan, (ii) the number of shares of Stock
issuable pursuant to each Option under this Plan granted before such
transaction, and (iii) the per share Option Price of previously awarded Options
under this Plan shall be proportionately adjusted to reflect such transaction.
Such adjustment to the number of shares of Stock shall reflect the proportional
adjustment to the number of shares of Stock (or such other capital stock as may
be issued in a reclassification) that a stockholder who owned an equivalent
number of shares immediately before the happening of any of the events described
in the preceding sentence would have owned or been entitled to receive after the
happening of any of such events, and the adjustment to the Option Price of a
previously awarded Option shall be determined by dividing the number of shares
of Stock (or other capital stock) subject to the Option after the adjustment by
the aggregate Option Price for all shares that were subject to the Option
immediately prior to the transaction. Except as otherwise provided in Section
13.1 or 13.2, in the event of any consolidation or merger of the Company with
another corporation or entity or the adoption by the Company of a plan of
exchange affecting the Stock or any distribution to holders of Stock of
securities or property (other than cash dividends or
3
<PAGE>
dividends payable in Stock), the Committee shall make such adjustments as it may
deem equitable, including adjustments to avoid fractional shares, to give proper
effect to such event; provided that such adjustments shall only be such as are
necessary to maintain the proportionate interest of the Optionees and preserve,
without exceeding, the value of the Options under this Plan. In the event of a
corporate merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation, the Committee shall be authorized to issue or
assume Options, regardless of whether in a transaction to which Section 424(a)
of the Code applies, by means of substitution of new Options for previously
issued Options or an assumption of previously issued Options.
SECTION 5. DURATION OF PLAN
5.1 DURATION OF THE PLAN. The Plan shall remain in effect until all
Stock subject to it shall have been purchased pursuant to the exercise of
Options.
SECTION 6. OPTIONS
6.1 GRANT OF OPTIONS. Subject to the provisions of Section 4.1, Options
may be granted to Eligible Employees at any time and from time to time as shall
be determined by the Committee. The Committee shall have complete discretion in
determining the number of Options granted to each Optionee, the number of shares
of Stock subject to such Options, and the Option Price to be paid by the
Optionee with respect to such shares; PROVIDED, HOWEVER, that (a) no Optionee
may be granted, during any calendar year, Options for more than 200,000 shares
of Stock, subject to adjustment in like manner as adjustments to the number of
shares of Stock provided in Section 4.3 hereof, and (b) no Option shall have an
Option Price that is less than the Fair Market Value of the Stock on the date of
grant. In making such determinations, the Committee may take into account the
nature of services rendered by such individuals, their present and potential
contributions to the Company and such other factors as the Committee in its sole
discretion shall deem relevant.
6.2 OPTION AGREEMENT. As determined by the Committee on the date of
grant, each Option shall be evidenced by a Stock Option agreement ("Option
Agreement") that shall, among other things, specify the Option Price, the
duration of the Option, and the number of shares of Stock to which the Option
pertains. Each Option granted under the Plan on or after January 1, 1997 shall
expire as of the date prescribed in the Option Agreement (which date shall be no
later than ten years after the date of the Option grant), subject to earlier
expiration under the provisions of Section 8. Each Option granted under the Plan
prior to January 1, 1997 shall expire as of the date prescribed in the Option
Agreement (which date shall be no later than seven years after the date of the
Option grant), subject to earlier expiration under the provisions of Section 8.
6.3 EXERCISE. Except as otherwise provided herein, an Option, after the
grant thereof, shall be exercisable by the Optionee at such rate and times as
may be fixed by the Committee at the time the Option is granted; PROVIDED,
HOWEVER, that an Optionee may exercise any Option in full,
4
<PAGE>
whether or not it is then exercisable, upon the occurrence of such circumstance
or event which, in the sole discretion of the Committee, merits special
consideration.
6.4 PAYMENT. The Option Price upon exercise of any Option shall be
payable to the Company in full either (i) in cash or its equivalent, (ii) by
tendering shares of previously acquired Stock having a Fair Market Value on the
date of exercise equal to the total Option Price, (iii) upon approval by the
Committee, by surrendering all or part of that or any other Option, valued at
Fair Market Value on the date of exercise, or (iv) by any combination thereof.
The proceeds from such payment shall be added to the general funds of the
Company and shall be used for its corporate purposes.
6.5 CANCELLATION OF PREVIOUSLY GRANTED OPTIONS. In the event the Fair
Market Value of the Stock is ever less than the Option Price of any outstanding
Option, the Committee has the authority to cancel such Option and issue in its
place a new substitute Option for the same number of shares at a new Option
Price and subject to the terms of the Plan. The granting of a substitute Option
shall be deemed a new Option.
SECTION 7. WRITTEN NOTICE, ISSUANCE OF STOCK CERTIFICATES, STOCKHOLDER
PRIVILEGES, PARTIAL EXERCISE, AND REGISTRATION.
7.1 WRITTEN NOTICE. An Optionee wishing to exercise an Option shall give
written notice to the Company, in the form and manner prescribed by the
Committee, indicating the number of shares with respect to which such Option is
to be exercised. Full payment for the shares exercised pursuant to an Option
must accompany the written notice.
7.2 ISSUANCE OF STOCK CERTIFICATES. As soon as practicable after the
receipt of written notice and payment, the Company shall, without Stock issue or
transfer taxes to the Optionee or to any other person entitled to exercise an
Option pursuant to the Plan, deliver to the Optionee or such other person a
certificate or certificates for the requisite number of shares of Stock.
7.3 PRIVILEGES OF A STOCKHOLDER. An Optionee or any other person
entitled to exercise an Option under this Plan shall have no rights as a
stockholder with respect to any Stock covered by the Option until the date of
issuance of a certificate for such Stock.
7.4 PARTIAL EXERCISE. An Option may be exercised as to any lesser number
of shares than the full amount for which it could be exercised. Such a partial
exercise of an Option shall not affect the right to exercise the Option from
time to time in accordance with this Plan as to the remaining shares subject to
the Option.
7.5 REGISTRATION. The Company shall endeavor, but shall not be
obligated, to register the Stock to be issued upon exercise of all Options under
the Securities Act of 1933, as amended, as well as any applicable state
statutes. In the event that Stock to be issued upon exercise of an
5
<PAGE>
Option is not so registered, the Company may, as a condition precedent to the
exercise of such Option, require from the Optionee or any transferee under
Section 9.2 (or, in the event of the death of the Optionee or such transferee,
his legal heirs, legatees or distributees) such written representations and
agreements as, in the opinion of counsel for the Company, may be necessary to
ensure that such exercise and subsequent disposition will not involve a
violation of the Securities Act of 1933, as amended, or any other applicable
federal or state statute as then in effect.
SECTION 8. TERMINATION OF SERVICE
8.1 DEATH. If an Optionee's service to the Company and its Subsidiaries
terminates by reason of death, the Option shall be exercisable only to the
extent exercisable as of the date of such Optionee's death, unless the Committee
(either prior to or after such Optionee's death) provides that such Option will
become immediately exercisable in full. Such Option shall expire twelve (12)
months after the date of such Optionee's death, or on its stated expiration
date, whichever period is shorter. The Committee may extend the exercise period
beyond twelve (12) months as it deems appropriate (either prior to or after such
Optionee's death), but in no event shall the exercise period exceed the
expiration date of the Option. Options which were not exercisable as of the date
of such termination of service shall be forfeited and no longer subject to any
right to exercise, unless otherwise provided by the Committee.
8.2 DISABILITY. If an Optionee's service to the Company and its
Subsidiaries terminates by reason of disability (as defined under the federal
Social Security Act of 1935, as amended), the Option shall be exercisable only
to the extent exercisable as of the date of such termination of service and
shall expire three (3) months after the date of such termination, or on its
stated expiration date, whichever period is shorter. Options which were not
exercisable as of the date of such termination of service shall be forfeited and
no longer subject to any right to exercise.
8.3 RETIREMENT OR INVOLUNTARY TERMINATION. In the event the service of
an Optionee is terminated by reason of normal or early retirement (as defined
under the Company's tax-qualified retirement plan or, where pertinent, any
Subsidiary's retirement plan) or the Employer (whether the Company or a
Subsidiary) shall terminate the Optionee's employment for any reason other than
for "Cause," as defined below ("Involuntary Termination Not For Cause"), the
Option shall be exercisable only to the extent exercisable as of the date of
such retirement or termination and shall expire on the date thirty (30) calendar
days after the date of such retirement or termination, or on its stated
expiration date, whichever shall first occur. Except as otherwise provided
herein, Options which were not exercisable as of the date of such termination of
service shall be forfeited and no longer subject to any right to exercise.
"Cause" shall mean any of the following: (a) conviction of the Optionee by a
court of competent jurisdiction of any felony; (b) the Optionee's knowing
failure or refusal to follow reasonable instructions of the Board or reasonable
policies, standards and regulations of the Company or its Subsidiaries, unless
the Optionee reasonably believed in good faith that such failure or refusal was
in the best interests of the Company; (c) the Optionee's continued failure or
refusal to faithfully and diligently perform the usual, customary duties of his
6
<PAGE>
employment with the Company or Subsidiary; (d) the Optionee's continually
conducting himself in an unprofessional, unethical, immoral or fraudulent
manner; or (e) the Optionee's conduct discredits the Company or Subsidiary or is
detrimental to the reputation, character and standing of the Company or
Subsidiary; provided that, if "cause" is defined in any employment agreement
between the Optionee and the Company or Subsidiary in effect at the time of the
Optionee's termination of employment, "cause" shall have the meaning given such
term in such employment agreement and the foregoing clauses (a) through (e)
shall not apply. "Cause" shall not be deemed to occur by reason of conduct
described in clause (b), (c), (d) or (e) of the preceding sentence unless such
conduct continues for 30 days after the Company has provided written notice to
the Optionee of the conduct that constitutes "Cause."
8.4 OTHER TERMINATION. If an Optionee's service shall terminate for any
reason other than death, disability, retirement or Involuntary Termination Not
For Cause, any Options which are unexercised as of the date of such termination
shall be forfeited and no longer subject to any right to exercise.
SECTION 9. RIGHTS OF OPTIONEES
9.1 EMPLOYMENT. Nothing in this Plan shall interfere with or limit in
any way the right of the Company or any Subsidiary to terminate any Optionee's
service at any time, nor confer upon any Eligible Employee any right to continue
in the employ of the Company or any Subsidiary.
9.2 TRANSFERABILITY. Except as otherwise provided herein, no Option
granted under this Plan shall be assignable or otherwise transferable by the
Optionee (or his or her authorized legal representative) during the Optionee's
lifetime and, after the death of the Optionee, other than by will or the laws of
descent and distribution; and any attempted assignment or transfer in violation
of this Section 9.2 shall be null and void. Upon the Optionee's death, the
personal representative or other person entitled to succeed to the rights of the
Optionee (the "Successor Optionee") may exercise such rights. A Successor
Optionee must furnish proof satisfactory to the Company of his or her right to
exercise the Option under the Optionee's will or under the applicable laws of
descent and distribution.
Subject to approval by the Committee in its sole discretion, all or
a portion of the Options granted to an Optionee under the Plan may be
transferable by the Optionee to, to the extent and only to the extent specified
in such approval, (i) the children or grandchildren of the Optionee
("Immediate Family Members"), (ii) a trust or trusts for the exclusive benefit
of such Immediate Family Members ("Immediate Family Member Trusts"), or (iii) a
partnership or partnerships in which such Immediate Family Members have at least
99% of the equity, profit and loss interests ("Immediate Family Member
Partnerships"); provided that the Option Agreement pursuant to which such
Options are granted (or an amendment thereto) must expressly provide for
transferability in a manner consistent with this Section. Subsequent transfers
of transferred Options shall be prohibited except by will or the laws of descent
and distribution, unless such transfers are made to
7
<PAGE>
the original Optionee or a person to whom the original Optionee could have made
a transfer in the manner described herein. No transfer shall be effective unless
and until written notice of such transfer is provided to the Company, in the
form and manner prescribed by the Company. Following transfer, any such Options
shall continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, and, except as otherwise provided herein, the
term "Optionee" shall be deemed to refer to the transferee. The events of
termination of service in Section 8 shall continue to be applied with respect to
the original Optionee, following which the Options shall be exercisable by the
transferee only to the extent and for the periods specified in Section 8.
SECTION 10. LEAVE OF ABSENCE
10.1 LEAVE OF ABSENCE. For Plan purposes a leave of absence, duly
authorized by the Company or any Subsidiary, shall not be deemed a termination
of employment. However, under no circumstances may an Optionee exercise an
Option during any leave of absence, unless authorized by the Committee.
SECTION 11. ADMINISTRATION
11.1 ADMINISTRATION. The Committee shall be responsible for the
administration of the Plan. The Committee, by majority action thereof, is
authorized to interpret the Plan, to prescribe, amend, and rescind rules and
regulations relating to the Plan, provide for conditions and assurances deemed
necessary or advisable to protect the interests of the Company and to make all
other determinations necessary or advisable for the administration of the Plan,
but only to the extent not contrary to the express provisions of the Plan. The
determinations of the Committee, interpretations, or other actions made or taken
pursuant to the provisions of the Plan shall be final and shall be binding and
conclusive for all purposes and upon all persons.
SECTION 12. AMENDMENT, MODIFICATION, AND TERMINATION OF THE PLAN
12.1 AMENDMENT, MODIFICATION, AND TERMINATION OF THE PLAN. The Board may
at any time terminate, and from time to time may amend or modify the Plan;
PROVIDED, HOWEVER, that no amendment, modification, or termination of the Plan
shall in any manner adversely affect any Option granted under the Plan prior to
such amendment, modification or termination without the consent of the Optionee.
8
<PAGE>
SECTION 13. MERGER, CONSOLIDATION OR CHANGE IN CONTROL
13.1 COMPANY SURVIVING CORPORATION. Subject to any required action by
the stockholders of the Company, if the Company shall be the surviving
corporation in any merger, consolidation or reorganization in which holders of
shares of Stock receive other securities in exchange for their Stock, any Option
granted hereunder shall pertain to and apply to the securities to which a holder
of the number of shares of Stock subject to the Option would have been entitled.
13.2 COMPANY NOT SURVIVING CORPORATION. If the Company is merged,
consolidated with, or otherwise reorganized with or into another corporation and
the Company is not the surviving corporation, then (i) the Board of Directors of
the Company or the Board of Directors of any corporation assuming the
obligations of the Company under the Plan shall, as to the unexercised portion
of any Option, make appropriate provision for the protection of such Option by
the substitution on an equitable basis of appropriate securities of the Company,
or of the merged, consolidated or otherwise reorganized corporation, which will
be issuable in respect of the unexercised portion of the Option, or (ii)
immediately prior to such merger, consolidation or other reorganization the
unexercised portion of the Option, whether or not exercisable, shall immediately
be exercisable.
13.3 CHANGE IN CONTROL. If any person, firm or corporation (other than
Frederic C. Hamilton, Charles C. Gates or Jay Precourt or any affiliate (either
directly or through one or more intermediaries) of any of them) shall become the
record or beneficial owner of securities of the Company entitling the owner
thereof to vote more than 50% of all of the votes which may be cast with respect
to matters submitted to a vote of the holders of the Stock, or if all or
substantially all of the assets of the Company are acquired by any person, or if
the Company adopts a plan of liquidation, then all outstanding Options shall
become immediately vested and exercisable, whether or not vested and exercisable
prior thereto.
SECTION 14. TAX WITHHOLDING
14.1 TAX WITHHOLDING. If the Company or a Subsidiary shall be required
to withhold any amounts by reason of any federal, state or local tax rules or
regulations in respect of the payment of cash or the issuance of Stock pursuant
to the exercise of an Option, the Company or such Subsidiary shall be entitled
to deduct and withhold such amounts from any cash payments to be made to the
Optionee or from any shares which would otherwise be delivered to the Optionee
upon exercise (which shares shall be valued at Fair Market Value as of the date
of payment of the Option Price by the Optionee). In any event, the Optionee
shall make available to the Company or such Subsidiary, promptly when requested
by the Company or such Subsidiary, sufficient funds to meet the requirements of
such withholding, and the Company or such Subsidiary shall be entitled to take
and authorize such steps as it may deem advisable in order to have such funds
made available to the Company or such Subsidiary out of any funds or property
due or to become due to the Optionee.
9
<PAGE>
SECTION 15. INDEMNIFICATION
15.1 INDEMNIFICATION. Each person who is or shall have been a member of
the Committee or of the Board shall be indemnified and held harmless by the
Company against and from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by him in connection with or resulting from
any claim, action, suit, or proceeding to which he may be a party or in which he
may be involved by reason of any action taken or failure to act under the Plan
and against and from any and all amounts paid by him in settlement thereof, with
the Company's approval, or paid by him in satisfaction of a judgment in any such
action, suit, or proceeding against him, provided he shall give the Company an
opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive of, and is in addition to, any other
rights of indemnification to which any person may be entitled under the
Company's certificate of incorporation or bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
SECTION 16. REQUIREMENTS OF LAW
16.1 REQUIREMENTS OF LAW. The granting of Options and the issuance of
shares of Stock upon the exercise of an Option shall be subject to all
applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.
16.2 GOVERNING LAW. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Delaware.
SECTION 17. EFFECTIVE DATE
17.1 EFFECTIVE DATE. The Plan was originally adopted effective September
1, 1988 and was approved by a subsidiary of Hamilton Oil Corporation as the sole
stockholder of the Company. The Prior Plan was approved at the 1993 annual
meeting of the stockholders and was amended by the Board in 1995. The Plan, as
amended and restated effective January 1, 1997, shall be effective upon
stockholder approval of the amended and restated Plan at the 1997 annual meeting
of the stockholders. If the amended and restated Plan is not approved at the
1997 annual meeting of the stockholders, then any Options granted hereunder
shall be subject to the terms and conditions of the Prior Plan.
10
<PAGE>
TEJAS GAS CORPORATION
As approved by the
Board of Directors
of the Company on
Secretary
11
EXHIBIT 10.3
TEJAS GAS CORPORATION
DIRECTOR STOCK OPTION PLAN
(As Amended and Restated Effective January 1, 1997)
1. ESTABLISHMENT AND PURPOSE
Tejas Gas Corporation, a Delaware corporation (the "Company"),
previously established the Tejas Gas Corporation Director Stock Option Plan, a
nonqualified stock option plan for nonemployee directors of the Company,
effective March 13, 1992, as amended by the First Amendment thereto effective
March 13, 1992 and as subsequently amended by Amendment dated December 9, 1995
(the "Prior Plan"). Effective January 1, 1997, the Prior Plan was amended and
restated in the form of the Plan as set forth herein (the "Plan"). The revisions
made by this amendment and restatement of the Plan shall apply both to
outstanding options and options granted on or after January 1, 1997, except that
the amendments to the events triggering accelerated exercisability of the
options under Section 5.E below shall apply only to options granted on or after
January 1, 1997 unless the optionees holding options outstanding prior to that
date expressly consent to the amendment of their outstanding options to reflect
such amendments. The purpose of the Plan is to encourage ownership in the
Company by outside directors of the Company whose services are considered
essential to the Company's continued progress and thus to provide them with a
further incentive to continue to serve as directors of the Company. The Plan is
also intended to assist the Company through utilization of the incentives
provided by the Plan to attract and retain experienced and qualified candidates
to fill vacancies in the Board which may occur in the future.
2. ADMINISTRATION
The Plan will be administered by the Board of Directors (the "Board") of
the Company.
Subject to the express provisions of the Plan, the Board will have
complete authority to interpret the Plan; to prescribe, amend, and rescind rules
and regulations relating to it; to determine the terms and provisions of the
respective option agreements in accordance with the provisions of the Plan; and
to make all other determinations necessary or advisable for the administration
of the Plan. The Board's determination on the matters referred to in this
Section 2 will be conclusive.
3. PARTICIPATION IN THE PLAN
The Chairman of the Board and Directors of the Company who are not
employees of the Company or any affiliate of the Company ("Eligible Directors")
shall be eligible to participate in
-1-
<PAGE>
the Plan; provided that the recipient of an option must be serving as an
Eligible Director on the date the option is granted.
4. STOCK SUBJECT TO THE PLAN
The stock subject to the Plan shall consist of shares subject to
outstanding options under the Prior Plan at December 31, 1996, and shares
reserved under the Prior Plan at December 31, 1996 and not subject to
outstanding options ("Common Stock"). Such shares may, as the Board shall from
time to time determine, be either authorized and unissued shares of Common Stock
or issued shares of Common Stock which have been reacquired by the Company. If
any option granted under the Plan expires or terminates for any reason without
having been exercised in full, the shares subject to, but not delivered under,
such option may again become available for the grant of other options under the
Plan.
5. STOCK OPTIONS
Each option granted under this Plan shall be evidenced by a written
agreement in such form as the Company shall from time to time prescribe, which
agreements shall comply with and be subject to the following terms and
conditions:
A. OPTION GRANT DATES. The first grant of options under this Plan
occurred as of March 13, 1992 (the "1992 Options"). An initial grant of
options under this Plan shall be made to each Eligible Director upon his
initial appointment or election as an Eligible Director (the "Initial
Options"). Options shall thereafter be granted annually to each Eligible
Director automatically on the first business day following the Company's
Annual Meeting of Stockholders ("Annual Grant Date"), beginning in 1992.
B. NUMBER OF SHARES. Each Eligible Director serving on the Board at
January 1, 1997 has been awarded an Initial Option to purchase 24,750
shares of Common Stock. Any Eligible Director who first becomes a
Director after January 1, 1997 shall receive an initial grant of Initial
Options covering 24,750 shares on the first Annual Grant Date after
first becoming a Director. Annual awards of options to purchase 2,475
shares of Common Stock have been granted to each Eligible Director on
the Annual Grant Date. Hereafter, annual awards of options to purchase
2,475 shares of Common Stock shall be granted to each Eligible Director
on the Annual Grant Date in each year after the year in which the
Eligible Director is awarded Initial Options. The number of shares of
Common Stock subject to the Initial Option and the annual awards has
been adjusted to reflect stock splits and stock dividends prior to
January 1, 1997.
C. OPTION PRICE PER SHARE. The options granted prior to January 1, 1997
are exercisable at the price established at the time of grant, adjusted
to reflect stock splits and stock dividends prior to January 1, 1997.
All other options granted hereunder shall be exercisable at a price per
share equal to the "Fair Market Value" of the Common Stock
-2-
<PAGE>
on the date of the grant of the option. For all purposes of this Plan
OTHER THAN the determination of the exercise price of an option, the
'Fair Market Value' of a share on a particular date shall be deemed to
be, (i) if the Common Stock is listed on a national securities exchange,
the closing selling price per share of the Common Stock on such national
securities exchange on the date immediately preceding the date of
exercise, as reported in THE WALL STREET JOURNAL or, if there shall have
been no such sale so reported on that date, on the last preceding date
on which such a sale was so reported, or (ii) if the Common Stock is not
so listed, the closing selling price (or, if not so reported, the mean
between the closing bid and asked price) on the date immediately
preceding the date of exercise, or, if there are no quotations available
for such date, on the last preceding date on which such quotations shall
be available, as reported by the Nasdaq Stock Market, or, if not
reported by the Nasdaq Stock Market, by the National Quotation Bureau,
Inc. For the purpose of determining the exercise price of an option
granted hereunder, however, the Fair Market Value shall be deemed to be
such closing selling price per share of the Common Stock as described
above, but determined as of the date of grant of the Option.
D. TRANSFERABILITY OF OPTIONS. Except as otherwise provided herein, no
option granted under this Plan shall be assignable or otherwise
transferable by the optionee (or his or her authorized legal
representative) during the optionee's lifetime and, after the death of
the optionee, other than by will or the laws of descent and
distribution; and any attempted assignment or transfer in violation of
this Section 5.D shall be null and void. Upon the optionee's death, the
personal representative or other person entitled to succeed to the
rights of the optionee (the "Successor Optionee") may exercise such
rights. A Successor Optionee must furnish proof satisfactory to the
Company of his or her right to exercise the option under the optionee's
will or under the applicable laws of descent and distribution. Any
option granted under the Plan by its terms may be transferable by the
optionee to (i) the children or grandchildren of the optionee
("Immediate Family Members"), (ii) a trust or trusts for the exclusive
benefit of such Immediate Family Members ("Immediate Family Member
Trusts"), or (iii) a partnership or partnerships in which such Immediate
Family Members have at least 99% of the equity, profit and loss
interests ("Immediate Family Member Partnerships"); provided that the
stock option agreement pursuant to which such options are granted (or an
amendment thereto) must expressly provide for transferability in a
manner consistent with this paragraph D. Subsequent transfers of
transferred options shall be prohibited except by will or the laws of
descent and distribution, unless such transfers are made to the original
optionee or a person to whom the original optionee could have made a
transfer in the manner described herein. No transfer shall be effective
unless and until written notice of such transfer is provided to the
Company at its corporate office. Following transfer, any such options
shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer, and, except as otherwise
provided herein, the term "optionee" shall be deemed to refer to the
transferee. The events of termination of service on the Board in
paragraphs F and G hereof shall continue to be applied with respect to
the original optionee, following which the options shall be exercisable
by the transferee only to the extent and for the periods specified in
paragraphs F and G.
-3-
<PAGE>
E. EXERCISABILITY AND TERM OF OPTIONS. Except for the 1992 Options
(which are fully vested), each option granted under this Plan shall
become exercisable, on a cumulative basis, in five equal installments,
with the first installment becoming exercisable six months after the
date of grant, and the remaining four installments becoming exercisable
annually commencing on the first anniversary of the date of grant. Each
option granted under the Plan on or after January 1, 1997 shall expire
ten years from the date of the grant and shall be subject to earlier
expiration as herein provided. Each option granted prior to January 1,
1997 shall expire seven years from the date of the grant and shall be
subject to earlier expiration as herein provided. Notwithstanding the
foregoing, if (a) the Company shall execute a definitive agreement to
merge or consolidate with or into another corporation and the Company
shall not be the surviving corporation in the merger (or shall become a
subsidiary of any other corporation party to such agreement) and the
stockholders of the Company shall have approved the terms of such
agreement; (b) the Company shall enter into a definitive agreement to
sell or otherwise dispose of all or substantially all of its assets to
any person, firm or corporation, and the stockholders of the Company
shall have approved the terms of such agreement; or (c) any person or
group, other than Frederic C. Hamilton, Charles C. Gates or Jay Precourt
(or any affiliate (either directly or through one or more
intermediaries) of any of them) shall become the record or beneficial
owner of securities of the Company entitling the owner thereof to vote
more than 50% of all of the votes which may be cast with respect to
matters submitted to a vote of the holders of the Common Stock, then, in
any of such events described in clauses (a), (b) or (c) preceding, all
outstanding options shall become immediately vested and exercisable,
whether or not vested and exercisable prior thereto.
F. TERMINATION OF SERVICE.
1. OPTIONS GRANTED PRIOR TO JANUARY 1, 1997. In the event of the
termination of service on the Board by the holder of any option,
other than by reason of retirement, total and permanent
disability or death as set forth in paragraph G. hereof, the then
outstanding options of such holder granted prior to January 1,
1997 may be exercised only to the extent that they were
exercisable on the date of such termination and shall expire on
the date three months after such termination, or on their stated
expiration date, whichever occurs first. For purposes of this
Plan, the term "by reason of retirement" shall mean mandatory
retirement pursuant to Board policy.
2. OPTIONS GRANTED ON OR AFTER JANUARY 1, 1997. In the event of
the termination of service on the Board by the holder of any
option, other than (i) by reason of retirement (as defined
above), (ii) by the Company for any reason other than for cause
("Involuntary Termination Not For Cause"), or (iii) by reason of
total and permanent disability or death as set forth in paragraph
G. hereof, any options of such holder granted on or after January
1,
-4-
<PAGE>
1997 and unexercised as of the date of such termination shall be
forfeited and no longer subject to any right to exercise.
G. RETIREMENT, INVOLUNTARY TERMINATION, DISABILITY OR DEATH.
1 OPTIONS GRANTED PRIOR TO JANUARY 1, 1997. In the event of
termination of service by reason of retirement (as defined above)
or the total and permanent disability of the holder of any
option, each of the then outstanding options of such holder
granted prior to January 1, 1997 will continue to vest and become
exercisable during such five year period according to the
original vesting schedule set forth in the option agreement and
the holder may exercise the vested installments at any time
within five years after such retirement or disability but in no
event after the stated expiration date of the term of the option.
In the event of the death of the holder of any option, each of
the then outstanding options of such holder granted prior to
January 1, 1997 will immediately vest in full and become
exercisable by the holder's legal representative at any time
within a period of five years after death, but in no event shall
the option be exercised (i) after the stated expiration date of
the term of the option or (ii) less than six months after the
option was granted. However, if the holder dies within five years
following termination of service on the Board by reason of
retirement or total and permanent disability, any option granted
prior to January 1, 1997 shall only be exercisable for two years
after the holder's death or five years after retirement or
termination for total and permanent disability; whichever is
longer, or until the stated expiration date of the term of the
option, if earlier.
2. OPTIONS GRANTED ON OR AFTER JANUARY 1, 1997. In the event of
termination of service by reason of retirement (as defined above)
or Involuntary Termination Not For Cause, each of the then
outstanding options of such holder granted on or after January 1,
1997 will be exercisable only to the extent exercisable as of the
date of such retirement or termination and shall expire on the
date thirty (30) calendar days after the date of such retirement
or termination, or on its stated expiration date, whichever shall
first occur. In the event of termination of service by reason of
the total and permanent disability of the holder, each of the
then outstanding options of such holder granted on or after
January 1, 1997 will be exercisable only to the extent
exercisable as of the date of such termination of service and
shall expire on the date three months after the date of such
termination, or on its stated expiration date, whichever shall
first occur. In the event of the death of the holder of any
option, each of the then outstanding options of such holder
granted on or after January 1, 1997 shall be exercisable only to
the extent exercisable as of the date of such holder's death and
shall expire twelve months after the date of such holder's death,
or on its stated expiration date, whichever period is shorter.
-5-
<PAGE>
H. EXERCISE OF OPTIONS. Options may be exercised only by written
notice to the Company at its corporate office accompanied by
payment of the full consideration for the shares as to which they
are exercised, including any federal, state and/or local income
tax withholding amount due in connection with the exercise. The
purchase price, together with any income tax withholding amount
due, is to be paid in full to the Company upon the exercise of
the option (i) by cash including a personal check payable to the
order of the Company, (ii) by delivering Common Stock previously
held by the optionee for at least six months, valued at Fair
Market Value as of the date of delivery, (iii) by surrendering
all or part of that or any other option, valued at Fair Market
Value as of the date of delivery, or (iv) by any combination
thereof. Shares which otherwise would be delivered to the holder
of an option upon exercise may, at the election of the optionee,
be retained by the Company in payment of any federal, state,
and/or local income tax withholding due in connection with the
exercise, and shall be valued at Fair Market Value as of the date
of payment of the option exercise price by the optionee;
provided, however, that the payment of any amount of withholding
tax by an optionee with shares of Common Stock (whether already
owned by the optionee or retained by the Company from the number
of shares otherwise deliverable to the optionee upon exercise)
shall be subject to the restrictions set forth in the individual
option agreements.
I. NONSTATUTORY OPTIONS. All options granted hereunder shall be
non-statutory options not intended to qualify under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code").
6. ASSIGNMENT
Except as provided in Section 5.D above, the rights and benefits of a
participant under this Plan may not be assigned and any attempted assignment of
such rights and benefits shall be null and void.
7. LIMITATION OF RIGHTS
A. NO RIGHT TO CONTINUE AS A DIRECTOR. Neither the Plan, nor the
granting of an option nor any other action taken pursuant to the Plan,
shall constitute or be evidence of any agreement or understanding,
express or implied, that the Company will retain a Director for any
period of time, or at any particular rate of compensation.
B. NO STOCKHOLDER'S RIGHTS FOR OPTIONEES. An optionee or the optionee's
representative shall have no rights as a stockholder with respect to the
shares covered by the options until the date of the issuance to the
optionee or the optionee's representative of a stock certificate
therefore, and no adjustment will be made for dividends or other rights
for which the record date is prior to the date such certificate is
issued.
-6-
<PAGE>
8. CHANGES IN PRESENT STOCK
A. CORPORATE ACTS. The existence of outstanding options shall not affect
in any manner the right or power of the Company or its stockholders to
make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the capital stock of the Company or
its business or any merger or consolidation of the Company, or any issue
of bonds, debentures, preferred or prior preference stock (whether or
not such issue is prior to, on a parity with or junior to the Common
Stock) or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other
corporate act or proceeding of any kind, whether or not of a character
similar to that of the acts or proceedings enumerated above.
B. ADJUSTMENTS. In the event of any subdivision or consolidation of
outstanding shares of Common Stock or declaration of a dividend payable
in shares of Common Stock or capital reorganization or reclassification
or other transaction involving an increase or reduction in the number of
outstanding shares of Common Stock, then (i) the number of shares of
Common Stock reserved under this Plan, (ii) the number of shares of
Common Stock issuable pursuant to each option under this Plan granted
before such transaction, (iii) the number of shares of Common Stock
issuable pursuant to each option under this Plan granted after such
transaction, and (iv) the per share exercise price of previously awarded
options under this Plan shall be proportionately adjusted to reflect
such transaction. Such adjustment to the number of shares of Common
Stock shall reflect the proportional adjustment to the number of shares
of Common Stock (or such other capital stock as may be issued in a
reclassification) that a stockholder who owned an equivalent number of
shares immediately before the happening of any of the events described
in the preceding sentence would have owned or been entitled to receive
after the happening of any of such events, and the adjustment to the
exercise price of a previously awarded option shall be determined by
dividing the number of shares of Common Stock (or other capital stock)
subject to the option after the adjustment by the aggregate exercise
price for all shares that were subject to the option immediately prior
to the transaction. In the event of any consolidation or merger of the
Company with another corporation or entity or the adoption by the
Company of a plan of exchange affecting the Common Stock or any
distribution to holders of Common Stock of securities or property (other
than cash dividends or dividends payable in Common Stock), the Board
shall make such adjustments as it may deem equitable, including
adjustments to avoid fractional shares, to give proper effect to such
event; provided that such adjustments shall only be such as are
necessary to maintain the proportionate interest of the optionees and
preserve, without exceeding, the value of the options under this Plan.
In the event of a corporate merger, consolidation, acquisition of
property or stock, separation, reorganization or liquidation, the Board
shall be authorized to issue or assume stock options, regardless of
whether in a transaction to which Section 424(a) of the Code applies, by
means of substitution of new options for previously issued options or an
assumption of previously issued options.
-7-
<PAGE>
9. EFFECTIVE DATE AND DURATION OF THE PLAN
The Prior Plan, as originally adopted effective March 13, 1992, was
approved at the 1992 annual meeting of the stockholders. The Plan, as amended
and restated effective January 1, 1997, shall be effective upon stockholder
approval of the amended and restated Plan at the 1997 annual meeting of the
stockholders. If the amended and restated Plan is not approved at the 1997
annual meeting of the stockholders, then any options granted hereunder shall be
subject to the terms and conditions of the Prior Plan. The Plan shall terminate
when all Common Stock subject to the Plan is subject to an option to purchase
(unless earlier discontinued by the Board) but such termination shall not affect
the rights of the holder of any option outstanding on such date of termination.
If, on a date on which options would normally be granted, there is not a
sufficient number of shares available to grant each person otherwise eligible to
receive an option on that date an option to purchase the full number of shares
to which he or she would normally be entitled, options shall be prorated among
optionees according to the number of shares available on such date of grant.
Such optionees shall be deemed to have received the full amount due to them on
such date of grant.
10. AMENDMENT, MODIFICATION, AND TERMINATION OF THE PLAN
The Board may at any time terminate, and from time to time may amend or
modify the Plan; PROVIDED, HOWEVER, that no amendment, modification or
termination of the Plan shall in any manner adversely affect any option granted
under the Plan prior to such amendment, modification or termination without the
consent of the optionee.
11. REQUIREMENTS OF LAW
The granting of options and the issuance of shares of Common Stock upon
the exercise of an option shall be subject to all applicable laws, rules and
regulations and to such approvals by any governmental agencies or national
securities exchanges as may be required.
12. NOTICE
Any written notice to the Company required by any of the provisions of
this Plan shall be addressed to the Secretary of the Company and shall become
effective when it is received.
-8-
<PAGE>
13. GOVERNING LAW
This Plan and all determinations made and actions taken pursuant hereto
shall be governed by the law of the State of Delaware and construed accordingly.
TEJAS GAS CORPORATION
As approved by the
Board of Directors
of the Company on
Secretary
-9-
EXHIBIT 10.15
TEJAS GAS CORPORATION
ANNUAL INCENTIVE PLAN
1. PURPOSE
The Annual Incentive Plan (the "Plan") is designed to recognize,
motivate and reward exceptional accomplishment toward annual corporate
objectives; to attract and retain quality employees; and to be market
competitive.
2. ELIGIBILITY
All regular full-time and regular part-time employees ("Employees") of
Tejas Gas Corporation (the "Company") and its subsidiaries are eligible to
receive awards under the Plan.
3. ADMINISTRATION
As to Employees other than Designated Covered Employees (as defined in
Section 5 below), the Plan shall be administered by the Compensation Committee
of the Board of Directors of the Company (the "Committee"), which shall have the
sole discretion to interpret the Plan, approve preestablished objective
performance measures annually, determine the level to which the performance
measures were attained prior to any payment under the Plan, approve the amount
of awards made under the Plan, and determine who shall receive any payment under
the Plan. As to Designated Covered Employees, the Plan shall be administered by
the Subcommittee (as defined in Section 5 below), which shall have the sole
discretion to interpret the Plan, approve preestablished objective performance
measures annually, certify the level to which the performance measures were
attained prior to any payment under the Plan, approve the amount of awards made
under the Plan, and determine who shall receive any payment under the Plan. The
Committee may delegate authority to officers of the Company to approve the
amount of awards made under the Plan to Employees who are not Designated Covered
Employees. Except for the matters reserved for determination by the Subcommittee
(which are subject to Committee ratification), all decisions and determinations
of the Committee on all matters relating to the Plan shall be conclusive. All
decisions and determinations of the Subcommittee on all matters relating to
Designated Covered Employees under the Plan shall be conclusive upon
ratification by the Committee. Members of the Committee and the Subcommittee
shall not be liable for any action taken or decision made in good faith relating
to the Plan or any award thereunder. Except as provided in this section, only
the Committee shall determine which Employees (other than Designated Covered
Employees) shall receive an award under the Plan and make decisions concerning
the timing, value and amount of any award granted to Employees (other than
Designated Covered Employees) under the Plan. Except as provided in this
section, only the Subcommittee shall determine which Designated Covered
Employees shall receive an award under the Plan and make decisions concerning
the timing, value and amount of any award granted to Designated Covered
Employees under the Plan.
4. INDIVIDUAL PERFORMANCE AWARD LEVELS
Not later than 90 days (the "Establishment Date") after the commencement
of the Plan year (calendar year), individual award levels shall be established,
expressed as specified levels of (i)
<PAGE>
earnings per share before deduction of awards made under the Plan and related
income taxes ("EPS") and (ii) earnings before deduction of awards made under the
Plan, interest, income taxes, depreciation, amortization and, if and to the
extent determined by the Committee (as to Employees other than Designated
Covered Employees) or the Subcommittee (as to Designated Covered Employees),
other financing related expenses ("EBITDA"). Each performance measure will be
weighted as determined by the Committee (as to Employees other than Designated
Covered Employees) or the Subcommittee (as to Designated Covered Employees).
Generally, each performance measure reflects an increase in the Company's actual
performance from the previous Plan year. Three performance award levels will be
established based upon Company performance ("threshold," "target" and "stretch"
goals). Employees will be eligible to receive cash payments based upon a
percentage of base salary if the Company meets the "threshold" performance
levels, with payments increasing (as a percentage of base salary) if the
"threshold" performance level is exceeded or the "target" or "stretch"
performance levels are met or exceeded. For each Plan year, the Subcommittee
will determine which Designated Covered Employees will receive payments under
the Plan and will establish the performance award levels and the percentages of
salary for such individuals not later than the Establishment Date of such Plan
year. For each Plan year, the Committee will determine which Employees (other
than Designated Covered Employees) will receive payments under the Plan and will
establish the performance award levels and the percentages of salary for such
individuals not later than the Establishment Date of such Plan year. No Employee
may receive more than a maximum of $1.5 million under the Plan with respect to
attainment of performance levels during any Plan year.
The establishment of an individual performance criteria for any Employee
shall not give any Employee the right to receive any payment under this Plan.
5. PAYMENT OF AWARDS
Prior to authorizing any payments to Designated Covered Employees under
the Plan, approved written minutes shall be recorded of the Subcommittee meeting
in which certification by the Subcommittee is made that the performance goals
and any other material terms of the Plan were satisfied. The "Subcommittee"
shall be a committee of the Board of Directors comprised of members of the
Committee, who qualify as "outside" Directors within the meaning of Section
162(m) of the Internal Revenue Code, as amended, and the regulations thereunder
("Section 162(m)").
"Designated Covered Employees" shall be those one or more Employees who
are designated as such by the Subcommittee not later than the Establishment Date
of the Plan year. Generally, the Subcommittee will endeavor to designate as
"Designated Covered Employees" for a Plan year those Employees whose (i) awards
under the Plan (when combined with base salary and other non-performance based
compensation) may reasonably be foreseen to exceed the threshold for
nondeductibility by the Company under Section 162(m) and (ii) who would be
"covered employees" under Section 162(m). For Designated Covered Employees,
downward adjustment of the actual award level from the performance award level
may be made at the sole discretion of the Subcommittee. Discretionary upward
adjustment of the actual award level above the performance award level shall not
be allowed for Designated Covered Employees.
2
<PAGE>
For Employees other than Designated Covered Employees, actual individual
award levels may be adjusted upward or downward at the sole discretion of the
Committee based on an Employee's individual performance.
Payments made under this Plan may be made in cash or common stock of the
Company (with an equivalent fair market value on the date of payment) as
determined by the Committee (as to Employees other than Designated Covered
Employees) and the Subcommittee (as to Designated Covered Employees). Cash
payments made under this Plan may be deferred by Employees according to the
terms of the Tejas Gas Corporation Thrift Benefit Restoration Plan and the Tejas
Gas Corporation Thrift Plan. The Committee (as to Employees other than
Designated Covered Employees) and the Subcommittee (as to Designated Covered
Employees) will determine the timing of payments under the Plan and may elect to
make payments over more than one calendar year. There will be no increase in the
amount of payment to Employees (other than Designated Covered Employees) as a
result of any award being paid in installments, except that the Committee (as to
Employees other than Designated Covered Employees) may, in its sole discretion,
increase such payments by an amount based on a rate of interest that the
Committee shall determine is reasonable or the actual rate of return of a
specific investment selected by the Committee. There will be no increase in the
amount of payment to Designated Covered Employees as a result of any award being
paid in installments, except that the Subcommittee may, in its sole discretion,
increase such payments by an amount based on a rate of interest that the
Subcommittee shall determine is reasonable or the actual rate of return of a
specific investment selected by the Subcommittee.
6. UNFUNDED NATURE OF PLAN
This Plan shall constitute an unfunded mechanism for the Company to pay
incentive compensation to Employees from its general assets. No fund or trust is
created with respect to the Plan, and no Employee shall have any security or
other interest in the assets of the Company.
7. PROHIBITION AGAINST ASSIGNMENT OR ENCUMBRANCE
No right, title, interest or benefit hereunder shall ever be liable for
or charged with any of the torts or obligations of an Employee, or be subject to
seizure by any creditor or an Employee or any person claiming under an Employee.
No Employee nor any person claiming under an Employee shall have the power to
sell, transfer, pledge, anticipate or dispose of any right, title, interest or
benefit hereunder in any manner until the same shall have been actually
distributed free and clear of the terms of the Plan.
8. PLAN NOT AN EMPLOYMENT CONTRACT
The Plan does not give any Employee the right to be continued in
employment, and all Employees remain subject to change of salary, transfer,
change of job, discipline, layoff, discharge or any other change of employment
status.
3
<PAGE>
9. SEVERABILITY
In the event any provision of the Plan shall be held invalid or illegal
for any reason, any illegality or invalidity shall not affect the remaining
parts of the Plan, but the Plan shall be construed and enforced as if the
illegal or invalid provision had never been inserted, and the Company shall have
the privilege and opportunity to correct and remedy such questions of illegality
or invalidity by amendment as provided in the Plan.
10. WITHHOLDING OF TAXES
The Company shall have the right to deduct from any payment made under
the Plan any federal, state or local taxes required by law to be withheld with
respect to such awards.
11. APPLICABLE LAW
The Plan shall be governed and construed in accordance with the laws of
the State of Texas, except to the extent such laws are preempted by an
applicable federal law.
12. EFFECTIVE DATE OF PLAN
The Plan shall be considered effective as of January 1, 1997. If the
Plan is not approved by the stockholders, the Plan will be effective only as to
employees who are not "covered employees" under Section 162(m).
13. AMENDMENT AND TERMINATION OF THE PLAN
The Committee (as to Employees other than Designated Covered Employees)
and the Subcommittee (as to Designated Covered Employees) may modify or
terminate the Plan at any time without prior notice to or consent of Employees;
provided that, without the approval of the stockholders of the Company, no such
amendment shall be made that would change the class of Employees eligible to
receive awards under the Plan, base the award on a performance measure other
than EPS and EBITDA, or increase the maximum individual award payment under the
Plan.
4
EXHIBIT 10.24
FIRST AMENDMENT TO AMENDED AND RESTATED
SECURED CREDIT AGREEMENT
among
TEJAS NATURAL GAS COMPANY,
as the Borrower
and
CERTAIN LENDING INSTITUTIONS,
as the Lenders
and
BANK OF MONTREAL,
CANADIAN IMPERIAL BANK OF COMMERCE
and
CITIBANK, N.A.,
as Co-Agents for the Lenders
and
CANADIAN IMPERIAL BANK OF COMMERCE,
as Administrative Agent for the Lenders
Dated as of December 20, 1996
<PAGE>
FIRST AMENDMENT TO
AMENDED AND RESTATED SECURED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED SECURED CREDIT
AGREEMENT, dated as of December 20, 1996 (herein called this "First Amendment")
is entered into by and among TEJAS NATURAL GAS COMPANY, a Nevada corporation
(the "Borrower"), the various financial institutions as are or may from time to
time become parties hereto (collectively the "Lenders"), BANK OF MONTREAL,
acting through certain of its U.S. branches or agencies ("BMO"), CANADIAN
IMPERIAL BANK OF COMMERCE, acting through certain of its U.S. branches or
agencies ("CIBC") and CITIBANK, N.A. ("Citibank"), as co-agents (BMO, CIBC and
Citibank in such capacity, together with any successor(s) thereto in such
capacity, collectively called the "Co-Agents") for the Lenders, and CIBC, as
administrative agent (in such capacity, together with any successor(s) thereto
in such capacity, the "Administrative Agent") for the Lenders.
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders, the Co-Agents and the Administrative
Agent have heretofore entered into an Amended and Restated Secured Credit
Agreement, dated as of January 12, 1995 (the "Credit Agreement");
WHEREAS, the TAHC Credit Facility has been amended as set forth in that
certain First Amendment to Amended and Restated Secured Credit Agreement dated
as of December 20, 1996 (the "First Amendment to TAHC Credit Facility") among
TAHC, certain financial institutions, BMO, CIBC and Citibank, as co-agents, and
CIBC, as administrative agent;
WHEREAS, the Borrower, the Lenders, the Co-Agents and the Administrative
Agent now desire to amend the Credit Agreement in certain respects, as
hereinafter provided,
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the Borrower, the Lenders, the Co-Agents and the
Administrative Agent hereby agree as follows:
I. Amendments to Credit Agreement.
A. The definitions of "Eurodollar Interest Rate" and "Stockholders' Equity
in Section 1.1 of the Credit Agreement are respectively amended and restated in
their entirety to read as follows:
Eurodollar Interest Rate - shall mean, with respect to each
Eurodollar Loan for any Eurodollar Interest Period, a rate per annum
(rounded upwards, if necessary, to the nearest integral multiple of
the number of decimal points displayed on Telerate
1
<PAGE>
Page 3750, or any successor or similar service, or if neither such
Telerate Page 3750 nor any successor or similar service is available
and such rate is determined using Reference Lenders, one
one-hundredth of one percent (1/100%)), equal to (i) the average of
the offered quotations appearing on Telerate Page 3750 (or if such
Telerate Page shall not be available, any successor or similar
service as may be selected by the Agents and the Borrower) as of
11:00 a.m., London time (or as soon thereafter as practicable), two
(2) Eurodollar Business Days prior to the beginning of such
Eurodollar Interest Period, and (ii) if neither such Telerate Page
3750 nor any successor or similar service is available, then the
quotient of (x) the arithmetic average of the quotation by each
Reference Lender (notified to the Administrative Agent by such
Reference Lender) of the rate of interest per annum at which
deposits in Dollars in immediately available funds are offered to
such Reference Lender two (2) Eurodollar Business Days prior to the
beginning of such Eurodollar Interest Period by prime banks in the
interbank Eurodollar market as at or about 10:00 a.m., New York City
time, for delivery on the first day of such Eurodollar Interest
Period, in each case for a period equal to such Eurodollar Interest
Period and in an amount equal to the proposed Eurodollar Loan of
such Reference Lender to which such Eurodollar Interest Period
relates, divided by (y) the remainder of one (1) minus the decimal
equivalent of the applicable Eurocurrency Reserve Percentage. If on
any occasion any Reference Lender is unable, or for any reason
fails, so to notify the Administrative Agent by 11:00 a.m., New York
City time, two (2) Eurodollar Business Days before the first day of
such Eurodollar Interest Period, the applicable Eurodollar Interest
Rate shall be determined on the basis of each quotation furnished by
those of the Reference Lenders which so notify the Administrative
Agent at or prior to said 11:00 a.m.
Stockholders' Equity - shall mean, as of the time any
determination thereof is to be made, (i) at a time when the Borrower
is a corporation, the sum of the Borrower's capital stock (which
shall exclude treasury stock and any capital stock subject to
mandatory redemption by the issuer at the option of the holder
thereof) and additional paid-in capital, plus retained earnings
(minus accumulated deficit), and (ii) at a time when the Borrower is
a limited liability company, the sum of all membership interests of
all members of the Borrower, all as shown on the consolidated
balance sheet of the Borrower and its Subsidiaries (but excluding
SPVHCs) and based on GAAP (except to the extent of the exclusion of
the SPVHCs).
B. The definition of "Permitted Investments" in Section 1.1 of the Credit
Agreement is amended (i) by deleting the phrase "Standard & Poors Corporation"
appearing in clauses (b), (c) and (d) of such definition and substituting
therefor the phrase "Standard & Poors Ratings Group" and (ii) by inserting the
word "or" at the end of clause (a) immediately after the semicolon appearing at
the end of such clause.
2
<PAGE>
C. Section 4.14 of the Credit Agreement is amended (i) by inserting the
word "actual" immediately before the word "loss" appearing in the second line of
such Section and (ii) by inserting the phrase "(but not any penalty or premium)"
immediately after the word "incur" appearing in the third line of such Section.
D. The definition of "Person" in Section 1.1 of the Credit Agreement is
amended by inserting the phrase "limited liability company" immediately after
the word "corporation," appearing in the first line of such definition.
E. Section 8.4(a) of the Credit Agreement is amended by deleting the
phrase "financial condition, operations, assets, business, properties or
prospects of TAHC and its Subsidiaries (taken as a whole) or of the Borrower and
its Subsidiaries (taken as a whole)" appearing in the last four lines of such
Section and substituting therefor the phrase "consolidated business condition
(financial or otherwise), operations, performance or properties of TAHC and its
Subsidiaries (taken as a whole) or of the Borrower and its Subsidiaries (taken
as a whole)".
F. Section 8.5 of the Credit Agreement is amended by deleting the phrase
"financial condition, operations, assets, business, properties or prospects of
the Borrower and its Subsidiaries (taken as a whole)" appearing in the seventh
through ninth line of such Section and substituting therefor the phrase
"consolidated business condition (financial or otherwise), operations,
performance or properties of the Borrower and its Subsidiaries (taken as a
whole)".
G. Section 9.3.4 of the Credit Agreement is amended and restated in its
entirety to read as follows:
SECTION 9.3.4Liens. Not, and not permit any of its Subsidiaries to,
create or permit to exist any Lien with respect to any Assets (it being
understood that any Asset sold, transferred, conveyed, assigned or
otherwise disposed of to any Person (other than to the Borrower or any of
its Subsidiaries) as permitted by Section 9.3.8 of the TAHC Credit
Facility (other than Sections 9.3.8(iv) and 9.3.8(xiv) of the TAHC Credit
Facility)) shall not be subject to the provisions of this Section 9.3.4
upon the consummation of such sale, transfer, conveyance, assignment or
disposition) now owned or hereafter acquired, except (i) those in favor of
the Collateral Agent for the benefit of the Lenders, (ii) the types of
Liens referred to in Section 8.6 of the TAHC Credit Facility, (iii) the
Lien in favor of Seller created under the Seller Guaranty as in effect on
September 15, 1993, (iv) Liens on (A) cash collateral, (B) letters of
credit or (C) Permitted Investments pledged as collateral in favor of
counterparties to Hedging Obligations of the type described in clause (b)
of the definition of "Hedging Obligations" and permitted by Section
9.3.3(vii), and (v) Liens permitted pursuant to the TAHC Credit Facility,
as such TAHC Credit Facility is amended or modified from time to time
other than Liens created by pledge, mortgage, encumbrance or otherwise on
the assets comprising the South System (as defined in the Purchase
Agreement); provided that in the event the TAHC Credit Facility is
terminated or ceases to be in full force and effect
3
<PAGE>
the Liens permitted pursuant to the TAHC Credit Facility as in effect
immediately prior to such termination or cessation shall be permitted
under this clause (v).
H. Section 11.3.2 of the Credit Agreement is amended and restated in its
entirety to read as follows:
SECTION 11.3.2 Material Adverse Change. There shall have been
no material adverse change, in the opinion of the Majority Lenders,
(i) since June 30, 1996, in the consolidated business condition
(financial or otherwise), operations, performance or properties of
(a) the Borrower or (b) TAHC and its Subsidiaries (taken as a
whole), (ii) since the Effective Date, affecting the rights and
remedies of the Lenders under the Loan Documents, or (iii) since the
Effective Date, in the ability of the Borrower or the Guarantors to
perform their respective Obligations under the Loan Documents to
which they are a party.
I. Section 12.1.6 of the Credit Agreement is amended by inserting the
phrase "any Co-Agent or the Administrative Agent at the request of" immediately
before the phrase "any Lender" appearing in the last line of such Section.
J. Section 12.1.7 of the Credit Agreement is amended by inserting the
phrase "(taken as a whole)" immediately after the word "respect" appearing in
the fifteenth line of such Section.
K. Section 12.1.8 of the Credit Agreement is amended (i) by inserting the
phrase "and Liens of the type permitted by Sections 8.6(i), (iii) and (xviii) of
the TAHC Credit Facility" immediately after the word "Borrower" appearing in the
seventh line of such Section, (ii) by inserting the phrase "or membership
interests" immediately after the word "stock" appearing in the ninth line of
such Section and (iii) by inserting the phrase "or as a result of any
transactions permitted by Section 9.3.6 of the TAHC Credit Facility" immediately
after the word "Facility" appearing in the last line of such Section.
L. Section 12.2 of the Credit Agreement is amended (i) by inserting the
phrase "with respect to the Borrower" immediately after the word "occur"
appearing in the second line of such Section and (ii) by deleting the phrase "or
Section 12.1.4" appearing immediately after the phrase "Section 12.1.1"
appearing in the last sentence of such Section and substituting therefor the
phrase ", or Section 12.1.4 with respect to the Borrower,".
M. Section 13.5 of the Credit Agreement is amended by inserting the phrase
"guaranty or" immediately after the word "any" appearing in clause (ii) in the
tenth line of such Section.
N. Section 14.6(a) of the Credit Agreement is amended by deleting the
phrase "natural gas" appearing in the fourth line of such Section and
substituting therefor the word "Hydrocarbons".
4
<PAGE>
O. Section 14.13 of the Credit Agreement is amended by inserting the
following phrase at the end of such Section immediately before the final period:
"; and provided further that for purposes of this Section 14.13 if
the survivor of such a merger is obligated in respect of all
Obligations of the Borrower hereunder and under all other Loan
Documents, a merger permitted pursuant to Section 9.3.6 of the TAHC
Credit Facility shall not be an assignment or transfer of the
Borrower's rights or obligations hereunder."
P. Schedules I and II to the Credit Agreement are amended and restated to
read as set forth in Schedules I and II, respectively, hereto. All references in
any Loan Document to Schedules I or II to the Credit Agreement shall be deemed
to refer to Schedule I or II, respectively, hereto.
II. Reallocation of Commitments. On the Amendment Effective Date
(hereinafter defined), the aggregate principal balance of the obligations
outstanding under the Credit Agreement is $0 (the "Prior Indebtedness") as shown
on Schedule II hereto, and Borrower represents for itself, and each Lender
represents and warrants for itself, that the Borrower's outstanding loans and
letter of credit reimbursement obligations, if any, under the Credit Agreement
as of the Amendment Effective Date are $0. Lenders hereby sell, assign, transfer
and convey, and Lenders (including, without limitation, those Lenders not
previously a party to the Credit Agreement) hereby purchase and accept so much
of the Prior Indebtedness and all of the rights, titles, benefits, interests,
privileges, claims, liens, security interests, and obligations existing and to
exist (collectively the "Interests") such that each Lender's Percentage of the
outstanding Loans and Commitments under the Credit Agreement as amended by this
First Amendment shall be as set forth in Schedule II hereto as of the Amendment
Effective Date. The foregoing assignment, transfer and conveyance are without
recourse to the Lenders and without any warranties whatsoever as to title,
enforceability, collectibility, documentation or freedom from liens or
encumbrances, in whole or in part, other than the warranty by each Lender that
it has not sold, transferred, conveyed or encumbered such Interests. If as a
result thereof, a Lender's Percentage of the outstanding Borrowings under the
Credit Agreement as amended by this First Amendment is less than its outstanding
loans and letter of credit reimbursement obligations under the Credit Agreement
on the Amendment Effective Date, the difference set forth in the last column of
Schedule II shall be remitted to such Lender by the Administrative Agent upon
receipt of funds from the other Lenders shown in the last column of Schedule II
on the Amendment Effective Date. Each Lender so acquiring a part of such
outstanding loans and letter of credit reimbursement obligations assumes its
Percentage of the outstanding Borrowings, Commitments, rights, titles,
interests, privileges, claims, liens, security interests, benefits and
obligations under the Credit Agreement as amended by this First Amendment and
the Security Documents and the Intercreditor Agreement. Lenders are
proportionately released from the obligations assumed by Lenders so acquiring
such obligations and, to that extent, the Lenders so released shall have no
further obligation under the Credit Agreement as amended by this First Amendment
and the Intercreditor Agreement. The Borrower hereby represents and warrants
that it has no defenses, offsets or counterclaims to the Prior Indebtedness or
its obligations or rights under
5
<PAGE>
the Credit Agreement, this First Amendment or the Security Documents, including,
without limitation, the Interests being assigned pursuant to this Section II.
Each Lender confirms that it has received a copy of the Bank/Exxon Agreement and
represents, warrants and agrees that it has acquired its Interests subject in
all respects to the terms and provisions of the Bank/Exxon Agreement. Any Loans
outstanding under the Credit Agreement on the Amendment Effective Date bearing
interest at a Eurodollar Interest Rate shall be deemed continued as a Loan under
the Credit Agreement as amended by this First Amendment at such Eurodollar
Interest Rate and for the Interest Period with respect thereto under the Credit
Agreement.
III. Effectiveness. The effectiveness of this First Amendment is
conditioned upon (a) receipt by the Administrative Agent of the following, each
duly executed and each (except for the Notes of which only one original shall be
signed for each Lender) in sufficient number of signed counterparts to provide
one for each Co-Agent and each Lender (except for the Notes of which only one
original shall be signed for each Lender):
(i) The documents, instruments and opinions required to be delivered
pursuant to Sections III(i) through III(iii) of the First Amendment to
TAHC Facility;
(ii) a certificate, in form and substance satisfactory to the
Co-Agents, of the Secretary or an Assistant Secretary and the President or
a Vice President of the Borrower and each Guarantor, together with the
signatures and incumbency of officers of the Borrower and each Guarantor
and a certified copy of the resolutions with respect to the transactions
contemplated herein;
(iii) (for delivery to the Borrower) those existing Notes of the
Borrower in favor of those Lenders whose Original Designated Maximum
Commitments have increased, decreased or terminated as shown on Schedule
II, marked "exchanged" or, in the case of a financial institution that
will no longer be a Lender, marked "cancelled";
(iv) (for delivery to each Lender whose Original Designated Maximum
Commitment has increased or decreased) new Notes, duly executed by the
Borrower, substantially in the form of Exhibit A to the Credit Agreement,
dated the Amendment Effective Date and with other appropriate insertions
as to payee and principal amount, payable to the order of each such
Lender, respectively, in a maximum principal amount equal to such Lender's
Original Designated Maximum Commitment, as amended hereby; and
(v) such other documents as any Co-Agent or any Lender may
reasonably request;
and (b) satisfaction of the condition precedent that the purchase of and payment
for the A-Notes and the B-Notes so as to reallocate the commitments under the
Participation Agreement of the financial institutions party thereto shall have
been concurrently consummated.
6
<PAGE>
IV. Reaffirmation of Representations and Warranties. To induce the
Lenders, the Co-Agents and the Administrative Agent to enter into this First
Amendment, the Borrower hereby reaffirms, as of the date hereof, its
representations and warranties contained in and incorporated by reference in,
Article VIII of the Credit Agreement, as amended hereby, and in all other
documents executed pursuant thereto (except to the extent such representations
and warranties relate solely to an earlier date) and additionally represents and
warrants as follows:
(i) The execution and delivery of this First Amendment and the
Consents (as defined in the First Amendment to TAHC Credit Facility) and
the performance by the Borrower and the Guarantors of their respective
Obligations under this First Amendment, the Credit Agreement as amended
hereby, and the Consents are within the Borrower's and the Guarantors'
respective corporate, limited liability company or partnership powers, as
the case may be, have been duly authorized by all necessary corporate,
limited liability company or partnership action, as the case may be, have
received all necessary governmental consents, authorizations, orders and
approvals (if any shall be required), and do not and will not contravene
or conflict with any provision (a) of Law, (b) of the charter, bylaws,
certificate of formation, limited liability company agreement or
partnership agreement of the Borrower or any Guarantors or (c) of any
material agreement binding upon the Borrower or any Guarantor or any of
them.
(ii) This First Amendment and the Credit Agreement as amended hereby
are, and the Consents, when duly executed and delivered will be, legal,
valid and binding obligations of the Borrower and each Guarantor party
thereto enforceable against each of the Borrower and such Guarantors in
accordance with their respective terms subject as to enforcement only to
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and general
principles of equity.
(iii) No litigation (including, without limitation, derivative
actions and take-or-pay actions), arbitration proceedings or governmental
proceedings are pending or to the best knowledge of the Borrower and its
Subsidiaries threatened against the Borrower, any of its Subsidiaries or
any SPV which would, if adversely determined, materially and adversely
affect the consolidated business condition (financial or otherwise),
operations, performance or properties of the Borrower and its Subsidiaries
(taken as a whole) (excluding any rulemaking or similar proceedings of
general applicability to natural gas pipelines and any appeal or petition
for review related thereto) or continued operations of the Borrower and
its Subsidiaries or which purports to affect the legality, validity or
enforceability of this First Amendment, the Credit Agreement as amended
hereby, the Notes, the Consents or any other Loan Document, except as set
forth in Exhibit 8.5 to the Credit Agreement.
(iv) No Event of Default or Unmatured Event of Default has occurred
and is continuing as of the date hereof.
7
<PAGE>
V. Defined Terms. Except as amended hereby, terms used herein when defined
in the Credit Agreement shall have the same meanings herein unless the context
otherwise requires. "Amendment Effective Date" means the first Business Day to
occur on which all conditions to the effectiveness of this First Amendment set
forth in Section III hereof shall have been satisfied or waived by all Lenders,
which will in no event be later than December 31, 1996.
VI. Reaffirmation of Credit Agreement. This First Amendment shall be
deemed to be an amendment to the Credit Agreement, and the Credit Agreement, as
amended hereby, is hereby ratified, approved and confirmed in each and every
respect. All references to the Credit Agreement herein and in any other
document, instrument, agreement or writing shall hereafter be deemed to refer to
the Credit Agreement as amended hereby.
VII. Governing Law. THIS FIRST AMENDMENT SHALL BE DEEMED TO BE A CONTRACT
MADE UNDER THE INTERNAL LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE.
All obligations of the Borrower and rights of the Collateral Agent, the
Administrative Agent, the Co-Agents, the Issuing Bank, the Lenders and any other
holders of the Notes expressed herein or in the Notes shall be in addition to
and not in limitation of those provided by applicable law.
VIII. Severability. Whenever possible each provision of this First
Amendment shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this First Amendment shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this First Amendment.
IX. Execution in Counterparts. This First Amendment may be executed in any
number of counterparts and by the different parties on separate counterparts,
and each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same agreement.
X. Section Captions. Section captions used in this First Amendment are for
convenience of reference only, and shall not affect the construction of this
First Amendment.
XI. Successors and Assigns. This First Amendment shall be binding upon the
Borrower, the Lenders, the Co-Agents and the Administrative Agent and their
respective successors and assigns, and shall inure to the benefit of the
Borrower, the Lenders, the Collateral Agent, the Co-Agents, the Issuing Bank and
the Administrative Agent and the respective successors and assigns of the
Lenders, the Collateral Agent, the Co-Agents, the Issuing Bank and the
Administrative Agent; provided, however, that the Borrower may not assign or
transfer its rights or obligations hereunder without the prior written consent
of all Lenders; provided, further, however, that the successors and
8
<PAGE>
assigns of the parties hereto will take their interests subject to the terms and
provisions of the Bank/Exxon Agreement.
XII. Waiver of Jury Trial. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, EACH PARTY HERETO WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS FIRST AMENDMENT OR UNDER
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING
RELATIONSHIP EXISTING IN CONNECTION WITH THIS FIRST AMENDMENT, AND AGREES THAT
ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY.
XIII. Notice. THIS WRITTEN FIRST AMENDMENT TOGETHER WITH THE CREDIT
AGREEMENT, THE CONSENTS AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be duly executed as of the day and year first above written.
TEJAS NATURAL GAS COMPANY
By:
Name:
Title:
<PAGE>
CANADIAN IMPERIAL BANK OF COMMERCE, as
Administrative Agent, as a Co-Agent, and as
a Lender
By:
Name:
Title:
<PAGE>
BANK OF MONTREAL, HOUSTON AGENCY, as a
Co-Agent and as a Lender
By:
Name:
Title:
<PAGE>
CITIBANK, N.A.
as a Co-Agent and as a Lender
By:
Name:
Title:
<PAGE>
THE BANK OF NEW YORK
By:
Name:
Title:
<PAGE>
BANKERS TRUST COMPANY
By:
Name:
Title:
<PAGE>
BANQUE PARIBAS
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
CHRISTIANIA BANK OG KREDITKASSE
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
CREDIT LYONNAIS
By:
Name:
Title:
<PAGE>
CREDIT SUISSE
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
By:
Name:
Title:
<PAGE>
THE FUJI BANK, LIMITED
By:
Name:
Title:
<PAGE>
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By:
Name:
Title:
<PAGE>
LTCB TRUST COMPANY
By:
Name:
Title:
<PAGE>
NATIONAL WESTMINSTER BANK PLC., NEW YORK
BRANCH
By:
Name:
Title:
NATIONAL WESTMINSTER BANK PLC., NASSAU
BRANCH
By:
Name:
Title:
<PAGE>
NATIONSBANK OF TEXAS, N.A.
By:
Name:
Title:
<PAGE>
SOCIETE GENERALE, SOUTHWEST AGENCY
By:
Name:
Title:
<PAGE>
THE CHASE MANHATTAN BANK
By:
Name:
Title:
<PAGE>
TORONTO DOMINION (TEXAS), INC.
By:
Name:
Title:
<PAGE>
UNION BANK OF CALIFORNIA, N.A.
By:
Name:
Title:
<PAGE>
UNION BANK OF SWITZERLAND,
HOUSTON AGENCY
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
WELLS FARGO BANK (TEXAS) N.A.
By:
Name:
Title:
<PAGE>
BANK OF AMERICA ILLINOIS
By:
Name:
Title:
<PAGE>
THE BANK OF NOVA SCOTIA, ATLANTA AGENCY
By:
Name:
Title:
<PAGE>
THE SUMITOMO BANK, LIMITED
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
For purposes of selling, assigning, transferring and conveying its
Interests, the undersigned has caused this First Amendment to be executed by its
officer thereunto duly authorized as of the date and year first above written.
THE FIRST NATIONAL BANK OF BOSTON
By:
Name:
Title:
EXHIBIT 10.26
FIRST AMENDMENT TO AMENDED AND RESTATED
SECURED CREDIT AGREEMENT
among
TEJAS-ACADIAN HOLDING COMPANY,
as the Borrower
and
CERTAIN LENDING INSTITUTIONS,
as the Lenders
and
BANK OF MONTREAL,
CANADIAN IMPERIAL BANK OF COMMERCE
and
CITIBANK, N.A.,
as Co-Agents for the Lenders
and
CANADIAN IMPERIAL BANK OF COMMERCE,
as Administrative Agent for the Lenders
Dated as of December 20, 1996
<PAGE>
FIRST AMENDMENT TO
AMENDED AND RESTATED SECURED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED SECURED CREDIT
AGREEMENT, dated as of December 20, 1996 (herein called this "FIRST AMENDMENT")
is entered into by and among TEJAS-ACADIAN HOLDING COMPANY, a Delaware
corporation (the "BORROWER"), the various financial institutions as are or may
from time to time become parties hereto (collectively the "LENDERS"), BANK OF
MONTREAL, acting through certain of its U.S. branches or agencies ("BMO"),
CANADIAN IMPERIAL BANK OF COMMERCE, acting through certain of its U.S. branches
or agencies ("CIBC") and CITIBANK, N.A. ("CITIBANK"), as co-agents (BMO, CIBC
and Citibank in such capacity, together with any successor(s) thereto in such
capacity, collectively called the "CO-AGENTS") for the Lenders, and CIBC, as
administrative agent (in such capacity, together with any successor(s) thereto
in such capacity, the "ADMINISTRATIVE AGENT") for the Lenders.
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders, the Co-Agents and the Administrative
Agent have heretofore entered into an Amended and Restated Secured Credit
Agreement, dated as of January 12, 1995 (the "CREDIT AGREEMENT");
WHEREAS, the Borrower, the Lenders, the Co-Agents and the Administrative
Agent now desire to amend the Credit Agreement in certain respects, as
hereinafter provided,
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the Borrower, the Lenders, the Co-Agents and the
Administrative Agent hereby agree as follows:
I. AMENDMENTS TO CREDIT AGREEMENT.
A. The definitions of "AGGREGATE DISTRIBUTIONS AND INVESTMENTS,"
"EURODOLLAR INTEREST RATE," "RSN," "SHAREHOLDER'S EQUITY," "TRANSFER," and
"UNUSED ASSET TRANSFER ALLOWANCE" in Section 1.1 of the Credit Agreement are
respectively amended and restated in their entirety to read as follows:
AGGREGATE DISTRIBUTIONS AND INVESTMENTS - shall mean at the
time any determination thereof is to be made, the sum of (i) all
Distributions made in accordance with SECTION 9.3.1(i), (ii) the
aggregate amount of all Equity Investments in excess of $40,000,000
in the aggregate made in accordance with SECTION 9.3.5(xix), (iii)
the aggregate amount of principal and interest payments on the TSNs
made in accordance with SECTION 9.3.1(ii), (iv) loans made and not
repaid pursuant to
<PAGE>
SECTION 9.3.5(xviii)(b) to the Parent Company in excess of
$150,000,000, made on or after December 31, 1994, to and including
the date of such determination, (v) the sum of (a) the aggregate
Fair Market Value of Assets Transferred in excess of $40,000,000 in
any fiscal year of the Borrower (other than any amount attributable
to a Transfer or any portion thereof for which the Unused Asset
Transfer Allowance is applied) PLUS (b) the aggregate Fair Market
Value of Assets Transferred in excess of the lesser of (x)
$80,000,000 and (y) the Unused Asset Transfer Allowance during the
period from the Effective Date to such date of determination as
permitted by SECTION 9.3.8(iii) and (vi) loans made and not repaid
pursuant to SECTION 9.3.5(xvii)(d) to any SPV, any SPVHC or any
other Subsidiary of the Borrower that is not a Material Subsidiary
in excess of $35,000,000 in the aggregate for all such loans to such
Persons.
EURODOLLAR INTEREST RATE - shall mean, with respect to each
Eurodollar Loan for any Eurodollar Interest Period, a rate per annum
(rounded upwards, if necessary, to the nearest integral multiple of
the number of decimal points displayed on Telerate Page 3750, or any
successor or similar service, or if neither such Telerate Page 3750
nor any successor or similar service is available and such rate is
determined using Reference Lenders, one one-hundredth of one percent
(1/100%)), equal to (i) the average of the offered quotations
appearing on Telerate Page 3750 (or if such Telerate Page shall not
be available, any successor or similar service as may be selected by
the Agents and the Borrower) as of 11:00 a.m., London time (or as
soon thereafter as practicable), two (2) Eurodollar Business Days
prior to the beginning of such Eurodollar Interest Period, and (ii)
if neither such Telerate Page 3750 nor any successor or similar
service is available, then the quotient of (x) the arithmetic
average of the quotation by each Reference Lender (notified to the
Administrative Agent by such Reference Lender) of the rate of
interest per annum at which deposits in Dollars in immediately
available funds are offered to such Reference Lender two (2)
Eurodollar Business Days prior to the beginning of such Eurodollar
Interest Period by prime banks in the interbank Eurodollar market as
at or about 10:00 a.m., New York City time, for delivery on the
first day of such Eurodollar Interest Period, in each case for a
period equal to such Eurodollar Interest Period and in an amount
equal to the proposed Eurodollar Loan of such Reference Lender to
which such Eurodollar Interest Period relates, divided by (y) the
remainder of one (1) minus the decimal equivalent of the applicable
Eurocurrency Reserve
2
<PAGE>
Percentage. If on any occasion any Reference Lender is unable, or
for any reason fails, so to notify the Administrative Agent by 11:00
a.m., New York City time, two (2) Eurodollar Business Days before
the first day of such Eurodollar Interest Period, the applicable
Eurodollar Interest Rate shall be determined on the basis of each
quotation furnished by those of the Reference Lenders which so
notify the Administrative Agent at or prior to said 11:00 a.m.
RSN - shall mean one or more revolving subordinated promissory
notes from the Borrower payable to the Parent Company in the form of
EXHIBIT 9.3.3B.
STOCKHOLDERS' EQUITY - shall mean, as of the time any
determination thereof is to be made, (i) at a time when the Borrower
is a corporation, the sum of the Borrower's capital stock (which
shall exclude treasury stock and any capital stock subject to
mandatory redemption by the issuer at the option of the holder
thereof) and additional paid-in capital, PLUS retained earnings
(MINUS accumulated deficit), and (ii) at a time when the Borrower is
a limited liability company, the sum of all membership interests of
all members of the Borrower, all as shown on the consolidated
balance sheet of the Borrower and its Subsidiaries (but excluding
SPVHCs) and based on GAAP (except to the extent of the exclusion of
the SPVHCs).
TRANSFER - shall mean (i) a sale, transfer, conveyance,
assignment or other disposition of an Asset (or related Assets)
having a Fair Market Value in excess of $100,000, or (ii)
destruction as a result of a casualty of an Asset (or related
Assets) having a Fair Market Value in excess of $500,000 in the
aggregate for any such casualty.
UNUSED ASSET TRANSFER ALLOWANCE - shall mean, as of the time
any determination thereof is to be made, the positive difference, if
any, of (a) $58,300,000 plus (b) the product of (i) $40,000,000
times (ii) the number of fiscal years of the Borrower ended during
the period from January 1, 1997 to such determination date MINUS (c)
the aggregate Fair Market Value of all Assets Transferred during the
period from the Effective Date to such determination date as
permitted by SECTION 9.3.8(iii) (other than any amount attributable
to a Transfer or any portion thereof made pursuant to CLAUSE (b)(2)
of SECTION 9.3.8(iii)).
3
<PAGE>
B. Section 1.1 of the Credit Agreement is hereby further amended by adding
the following definitions in appropriate alphabetical order:
HYDROCARBONS - shall mean collectively, natural gas, oil,
condensate and other liquid and gaseous hydrocarbons, including
natural gas or liquid products extracted from gas.
PERMITTED BUSINESS - shall have the meaning assigned to such
term in SECTION 9.3.11.
C. The definition of "PERMITTED INVESTMENTS" in Section 1.1 of the Credit
Agreement is amended (i) by deleting the phrase "Standard & Poors Corporation"
appearing in clauses (b), (c) and (d) of such definition and substituting
therefor the phrase "Standard & Poors Ratings Group" and (ii) by inserting the
word "or" at the end of clauses (a) and (c) immediately after the semicolon
appearing at the end of such clauses.
D. The definition of "PERSON" in Section 1.1 of the Credit Agreement is
amended by inserting the phrase "limited liability company" immediately after
the word "corporation," appearing in the first line of such definition.
E. Section 5.5(i) of the Credit Agreement is amended by inserting the
phrase "five (5) Business Days after" immediately after the letter "(A)"
appearing in the fourth and eighth lines of such Section.
F. Section 4.14 of the Credit Agreement is amended (i) by inserting the
word "actual" immediately before the word "loss" appearing in the second line of
such Section and (ii) by inserting the phrase "(but not any penalty or premium)"
immediately after the word "incur" appearing in the third line of such Section.
G. Section 4.15 of the Credit Agreement is amended by deleting the phrase
"that reduces the amount in SECTION 5.3" appearing in the seventh line of such
Section.
H. Section 8.1 of the Credit Agreement is amended by deleting the phrase
"financial condition, business, operations and prospects of the Borrower, or the
Borrower and its Subsidiaries taken as a whole" appearing in the ninth and tenth
lines of such Section and substituting therefor the phrase "consolidated
business condition (financial or otherwise), operations, performance or
properties of the Borrower and its Subsidiaries (taken as a whole)".
I. Sections 8.4(a), 8.5, 8.16(a), 8.16(b)(i), 8.16(b)(ii), 8.16(c),
8.16(d), 8.16(f), 8.16(h), 8.16(i), the first sentence of Section 8.17, the last
sentence of
4
<PAGE>
Section 8.17, and Sections 9.2.8, 9.2.9 and 9.3.10 of the Credit
Agreement are amended by deleting the phrase "financial condition, operations,
assets, business, properties or prospects of the Borrower and its Subsidiaries
(taken as a whole)" appearing in such Sections and substituting therefor the
phrase "consolidated business condition (financial or otherwise), operations,
performance or properties of the Borrower and its Subsidiaries (taken as a
whole)".
J. Section 9.1.1 of the Credit Agreement is amended by inserting the
phrase "showing compliance with SECTION 9.4 and" immediately after the word
"Borrower" appearing in the fifth to last line of such Section.
K. Section 9.1.2 of the Credit Agreement is amended by inserting the
following sentence at the end of such Section after the final period:
Such quarterly financial statements shall be accompanied by a certificate
(which certificate shall not be part of such quarterly financial
statements) from a duly authorized financial officer of the Borrower, and
showing compliance with SECTION 9.4 and containing a statement by such
authorized officer that in examining the financial statements and the
covenants contained in SECTION 9.4 such authorized officer did not become
aware of any Event of Default or Unmatured Event of Default, or if the
authorized officer has become aware of any such event, describing it and
the steps, if any, being taken to cure it.
L. Section 9.1.5 of the Credit Agreement is amended by deleting the word
"may" appearing in the seventh line of such Section and substituting therefor
the phrase "should reasonably be expected to".
M. Section 9.2.2 of the Credit Agreement is amended (1) by inserting the
phrase "during any period an Event of Default shall have occurred and be
continuing, but in no event more frequently than once per calendar quarter"
immediately before the phrase ", a certificate" appearing in clause (i) in the
sixth line of such Section and (2) by deleting the date "March 31st" appearing
in the tenth line of such Section and substituting the date "November 1st".
N. Section 9.3.1(i) of the Credit Agreement is amended by deleting the
amount "$30,000,000" appearing in the third line of such Section and
substituting therefor the amount "$35,000,000".
O. Section 9.3.3(xix) of the Credit Agreement is amended by deleting the
amount "$30,000,000" appearing in the last line of such Section and substituting
therefor the amount "$35,000,000".
5
<PAGE>
P. Section 9.3.3(xix) of the Credit Agreement is amended by deleting the
phrase "not exceed $30,000,000 at any time" appearing in the last line of such
Section and substituting therefor the phrase "not at any time exceed the sum of
(x) $35,000,000 plus (y) the positive difference, if any, between (1)
Incremental Earnings to the date of determination, if any, and zero if no
Incremental Earnings to such date MINUS (2) Aggregate Distributions and
Investments to and including such time;".
Q. Section 9.3.4 of the Credit Agreement is amended and restated in its
entirety to read as follows:
SECTION 9.3.4 LIENS. Not, and not permit any of its Subsidiaries to,
create or permit to exist any Lien with respect to any Assets (it being
understood that any Asset sold, transferred, conveyed, assigned or
otherwise disposed of to any Person (other than to the Borrower or any of
its Subsidiaries) as permitted by SECTION 9.3.8 (other than Sections
9.3.8(iv) and 9.3.8(xiv))) shall not be subject to the provisions of this
SECTION 9.3.4 upon the consummation of such sale, transfer, conveyance,
assignment or disposition) now owned or hereafter acquired, except
(i) those in favor of the Collateral Agent for the benefit of the
Lenders, the Alternate Facility Provider and other parties to
the Intercreditor Agreement;
(ii) the Liens referred to in CLAUSES (vii), (viii), (xi), and
(xiii) of SECTION 8.6 and the types of Liens referred to in
the other clauses of SECTION 8.6;
(iii) the Lien in favor of Exxon created under the Seller Guaranty
as in effect on September 15, 1993;
(iv) Liens on (A) cash collateral, (B) letters of credit or (C)
Permitted Investments pledged as collateral in favor of
counterparties to Hedging Obligations of the type described in
CLAUSE (B) of the definition of "HEDGING OBLIGATIONS" and
permitted by SECTION 9.3.3(vii);
(v) Liens or encumbrances on Receivables created in connection
with a Receivables Financing permitted pursuant to SECTION
9.3.19 and Liens or encumbrances on the rights of the Borrower
or any of its Subsidiaries related to such Receivables which
are transferred to the purchaser of such Receivables in
connection with
6
<PAGE>
any such permitted Receivables Financing; PROVIDED that such
Liens secure only, or such encumbrances relate solely to, the
obligations of the Borrower or any of its Subsidiaries in
connection with such Receivables Financing;
(vi) Liens on Assets securing Indebtedness of Capitalized Lease
Obligations provided such Liens attach solely to the assets
subject of the capitalized lease;
(vii) Liens on Assets of SPVHCs;
(viii) Liens granted by Tejas Gas Holding, Inc. (f/k/a Gulf Energy
Holding, Inc.) on the capital stock of TGI, PROVIDED that
under the terms of such Liens no personal judgment or
deficiency and no attachment, execution or other writ of
process shall be sought, issued or levied upon or against
Tejas Gas Holding, Inc. or any assets, properties or funds of
Tejas Gas Holding, Inc. other than such capital stock of TGI;
and
(ix) Liens in favor of the LEDCO Sellers securing the LEDCO Earnout
Obligation.
R. Section 9.3.5 of the Credit Agreement is amended and restated in its
entirety to read as follows:
SECTION 9.3.5 GUARANTIES, LOANS, ADVANCES OR INVESTMENTS. Not, and
not permit any of its Subsidiaries to, become or be a guarantor or surety
of, endorse or otherwise become or be contingently liable upon (by direct
or indirect agreement, contingent or otherwise, or by operation of law, to
provide funds for payment, to supply funds to, or otherwise invest in, a
debtor, or otherwise assure a creditor against loss) the debt, obligation,
undertaking or other liability of any other Person, or otherwise become or
be responsible in any manner (whether by agreement to purchase any
obligations, stock, assets, goods or services, or to supply or advance any
funds, assets, goods or services, or otherwise) with respect to, any
undertaking of any other Person, or make or permit to exist any loans or
advances to or investments in any other Person, except for
(i) (a) the endorsement, in the ordinary course of collection, of
instruments payable to the Borrower or any of its Subsidiaries
or to the order of the Borrower or any of its Subsidiaries and
(b) advances and prepayments to trade creditors
7
<PAGE>
and employees incurred in the ordinary course of business;
(ii) the Guaranties (including the guaranty by the Borrower of the
Amended TNGC Credit Facility);
(iii) guaranties or similar assurances (other than the Seller
Guaranty as in effect on September 15, 1993) incurred by the
Borrower or its Subsidiaries in respect of obligations of the
Borrower or Subsidiaries of the Borrower or of any SPV
permitted hereunder and incurred in the ordinary course of a
Permitted Business provided that such obligations so
guarantied are not Funded Debt or lease obligations other than
Funded Debt or lease obligations permitted hereunder;
(iv) the guaranty by the Borrower or its Subsidiaries of Hedging
Obligations of the Borrower or Subsidiaries of the Borrower
permitted under SECTION 9.3.3(vii);
(v) the Seller Guaranty as in effect on September 15, 1993;
(vi) the ADP Guaranties and the Purchase Agreement;
(vii) [Intentionally omitted];
(viii) [Intentionally omitted];
(ix) [Intentionally omitted];
(x) [Intentionally omitted];
(xi) the guaranty by Acadian of the EGC Demand Notes, or the
investment by Acadian in, or the loan by Acadian to,
Evangeline Gas Corp. or Evangeline Gulf Coast of up to
$1,000,000, or Acadian's guaranty of Evangeline Gulf Coast's
obligations as account party relative to letters of credit
issued as credit support for the EGC Demand Notes, PROVIDED
that Acadian's guaranties, investments and loans permitted
under this SECTION 9.3.5(xi) shall not exceed $1,000,000 in
the aggregate;
(xii) the guaranty by Acadian of any Indebtedness of Evangeline Gulf
Coast to Evangeline of up to $15,000,000, or the guaranty by
Acadian of the
8
<PAGE>
Indebtedness of Evangeline Gulf Coast relative to the
EGC-Evangeline Letter of Credit, or the investment by Acadian
in, or the loan by Acadian to, Evangeline Gulf Coast or
Evangeline Gas Corp. of up to $15,000,000, PROVIDED that (a)
Acadian's guaranties, investments and loans permitted under
this SECTION 9.3.5(xii) and under SECTION 9.3.5(xi) PLUS (b)
the Indebtedness of Acadian permitted under SECTION 9.3.3(xx)
PLUS (c) the Indebtedness of Acadian under the Evangeline Debt
Service Reserve Guaranty to the extent such Indebtedness under
such guaranty is not secured by, and reduced by drawings on,
the Acadian-Evangeline Letter of Credit or the EGC-Evangeline
Letter of Credit, shall not exceed $15,000,000 in the
aggregate for all such Indebtedness, guaranties, investments
and loans;
(xiii) the guaranty by Acadian in favor of the Evangeline
Noteholders and the trustee therefor, not to exceed $3,500,000
at any time, of interest and principal payments on the 8.79%
Senior Secured Notes (Series A) and 9.87% Senior Secured Notes
(Series B) of Evangeline to the extent, and only to the
extent, of 50% of the amount by which the balance of the
Evangeline Debt Service Reserve Account falls below
$8,000,000, PROVIDED that the amount of such guaranty, as
determined as of December 31, 1992, shall automatically and
permanently decrease by 50% of any increase in the balance of
the Evangeline Debt Service Reserve Account after December 31,
1992 and such guaranty shall automatically and irrevocably
terminate when the balance of the Evangeline Debt Service
Reserve Account first equals or exceeds $8,000,000;
(xiv) guaranties and indemnities by the Borrower or any of its
Subsidiaries pursuant to a Receivables Financing of the
Borrower or any Subsidiary of the Borrower (other than a
Receivables Financing of an SPVHC) permitted hereunder;
(xv) [Intentionally omitted];
(xvi) [Intentionally omitted];
(xvii) (a) loans from the Borrower to its Material Subsidiaries
pursuant to Indebtedness permitted under SECTION 9.3.3(v); (b)
loans from any Subsidiary of the Borrower to any Material
Subsidiary of the Borrower pursuant to Indebtedness permitted
9
<PAGE>
under SECTION 9.3.3(xv); loans from any Subsidiary of the
Borrower to the Borrower pursuant to Indebtedness permitted
under SECTION 9.3.3(xvi); (c) loans from any Subsidiary of the
Borrower that is not a Material Subsidiary to any Subsidiary
of the Borrower that is not a Material Subsidiary pursuant to
Indebtedness permitted under SECTION 9.3.3(xxiii); and (d)
loans from the Borrower or from a Material Subsidiary of the
Borrower to any SPV, any SPVHC or any other Subsidiary of the
Borrower that is not a Material Subsidiary not to exceed an
aggregate principal amount equal to the sum of (x) $35,000,000
plus (y) the positive difference, if any, between (1)
Incremental Earnings to the date of such loan, if any, and
zero if no Incremental Earnings to such date MINUS (2)
Aggregate Distributions and Investments to and including the
date of such loan (without giving effect to such loan on such
date) for all such loans;
(xviii) loans from the Borrower to the Parent Company not to exceed
an aggregate principal amount equal to the sum of (a)
$201,000,000 (excluding accrued and unpaid interest), PLUS (b)
so long as no Event of Default or Unmatured Event of Default
has occurred and is continuing or would occur as a result of
any such loan, an amount equal to the positive difference, if
any, of (x) $150,000,000 PLUS Incremental Earnings PLUS
Incremental Losses to the date of such loan MINUS (y)
Aggregate Distributions and Investments to and including the
date of such loan (without giving effect to such loan on such
date); PROVIDED that (i) the Borrower may not make any loan to
the Parent Company after the Closing Date permitted by the
foregoing clause (a) if an Unmatured Event of Default of the
type described in SECTION 12.1.1, 12.1.2, 12.1.4, 12.1.8,
12.1.9, 12.1.15, or 12.1.16, or Event of Default has occurred
and is continuing or would occur as a result of any such loan,
(ii) the obligations of the Parent Company with respect to any
such loan is evidenced by a promissory note of the Parent
Company payable to the order of the Borrower (as from time to
time amended, modified or supplemented, a "PARENT COMPANY
10
<PAGE>
NOTE"), (iii) such promissory note is endorsed and delivered
by the Borrower to the Collateral Agent as collateral pursuant
to the terms of, and subject to the Liens created under, the
Notes Security Agreement and (iv) the Indebtedness evidenced
by such notes ranks PARI PASSU with all senior unsecured debt
of the Parent Company;
(xix) Equity Investments by the Borrower or any of its Subsidiaries
in any one or more Persons that is not the Borrower or a
Material Subsidiary of the Borrower in an aggregate amount not
to exceed at the time of such Equity Investment the sum of (a)
$40,000,000 PLUS (b) the positive difference, if any, between
(1) Incremental Earnings to such date, if any, and zero if no
Incremental Earnings to such date and (2) all Aggregate
Distributions and Investments to and including such date
(without giving effect to Equity Investments on such date);
PROVIDED that any such Subsidiary, partnership or joint
venture is not engaged in any business activities other than a
Permitted Business and PROVIDED FURTHER that any Equity
Investment permitted to be made pursuant to this CLAUSE (xix)
in excess of $40,000,000 will only be made in cash;
(xx) Equity Investments in Material Subsidiaries;
(xxi) Guaranties by the Borrower and its Subsidiaries of required
equity contributions by any one or more SPVHCs in one or more
SPVs not to exceed in the aggregate for all such guaranties at
any time outstanding the positive difference, if any, of (a)
the positive difference, if any, between (x) Incremental
Earnings to such date, if any, and zero if no Incremental
Earnings to such date and (y) all Aggregate Distributions and
Investments to and including such date (without giving effect
to Equity Investments made on such date and to loans made
pursuant to SECTION 9.3.5(xvii)(d) on such date) PLUS (b)
$75,000,000 MINUS (c) the aggregate outstanding principal
amount of all loans made in accordance with SECTION
9.3.5(xvii)(d) (after giving effect to such loans made on such
date) MINUS (d) the aggregate of all Equity Investments made
in accordance with
11
<PAGE>
SECTION 9.3.5(xix) (after giving effect to such Equity
Investments made on such date);
(xxii) Equity Investments by SPVHCs in SPVs and loans by SPVHCs to
SPVs;
(xxiii) Permitted Investments;
(xxiv) Equity Investments outstanding as of the Effective Date and
set forth in EXHIBIT 9.3.5 (xxiv);
(xxv) [Intentionally omitted];
(xxvi) [Intentionally omitted];
Further, the Borrower will not, and will not permit any of its Subsidiaries to,
supply or advance any funds to or make additional investments in GEGAP or Gulf
Energy Development Corporation after an Event of Default or Unmatured Event of
Default has occurred or would occur as a result of any such supplying, advance
or investment.
S. Section 9.3.6 of the Credit Agreement is amended and restated in its
entirety to read as follows:
SECTION 9.3.6 RESTRICTIONS ON FUNDAMENTAL CHANGES. Without the prior
written consent of the Required Lenders, not, and not permit any of its
Subsidiaries to, be a party to any merger into or consolidation with, or
purchase or otherwise acquire all or substantially all of the assets of,
any other Person, except that (1) the Borrower or any of its Subsidiaries
may merge into or consolidate with any other Person and the Borrower or
any of its Subsidiaries may purchase or otherwise acquire the assets of
any other Person, IF upon the consummation of any such merger,
consolidation, purchase or acquisition, (A) the Borrower, or if the
Borrower is not a party to such merger, such Subsidiary, is the surviving
corporation and the nature of its business is not materially changed from
its core Hydrocarbons transportation, construction, procurement, sales,
leasing, storage, transmission, gathering, marketing, processing and other
related activities, (B) the Borrower or such Subsidiary has the power and
authority under the pertinent agreement, as applicable, and under
applicable law, to subject the assets of such acquired Person or the
assets so acquired to the provisions of this Agreement, including, without
limitation, SECTION 9.3.4, (C) the Borrower or such Subsidiary does so
subject such assets to the provisions of this Agreement, including without
limitation, SECTION 9.3.4, and (D) no Event of Default or Unmatured Event
of Default shall have occurred,
12
<PAGE>
exist or be continuing or shall result after giving effect to such merger,
consolidation, purchase or acquisition and (2) the Borrower or any
Subsidiary of the Borrower may merge into, or consolidate with, or
purchase or otherwise acquire the assets of, any other Subsidiary of the
Borrower (other than an SPVHC), if (A) the surviving entity (if either
such Subsidiary is a Guarantor) shall be the Borrower, a Subsidiary that
is liable with all other Guarantors pursuant to a Guaranty for all
obligations of the Borrower under this Agreement and the Notes (and, if
TNGC is a party to such merger, consolidation, purchase or acquisition, a
Subsidiary that is also liable for all obligations of TNGC under the
Amended TNGC Credit Facility, the TNGC Notes and each other Loan Document
to which TNGC is a party), or a Subsidiary that is liable for all
obligations of the Borrower under this Agreement and each other Loan
Document to which the Borrower is a party (and, if TNGC is a party to such
merger, consolidation, purchase or acquisition, a Subsidiary that is also
liable for all obligations of TNGC under the Amended TNGC Credit Facility,
the TNGC Notes and each other Loan Document to which TNGC is a party), (B)
the Collateral Agent shall have received documentation duly executed by
the surviving entity in form and substance satisfactory to the Required
Lenders and the Co-Agents, which documentation shall at a minimum consist
of (x) the execution and delivery of a Guaranty or restated Guaranty (if
the surviving Subsidiary is not a Guarantor prior to the consummation of
such merger or consolidation but is a Material Subsidiary or a Subsidiary
which directly owns an interest in a Guarantor) and supporting
documentation substantially similar to the documentation described in
SECTION 11.1, as applicable (and, if TNGC is a party to such merger,
consolidation, purchase or acquisition, an assumption agreement of the
obligations of TNGC under or in connection with, among others, the Amended
TNGC Credit Facility, the TNGC Notes and the Security Documents to which
TNGC is a party and supporting documentation substantially similar to the
documentation described in SECTION 11.1, as applicable), or (y) the
execution and delivery of an assumption agreement of the obligations of
the Borrower under or in connection with, among others, this Agreement,
the Notes and the Security Documents (if the Borrower merges or
consolidates with a Subsidiary and such Subsidiary is the surviving
entity) and supporting documentation substantially similar to the
documentation described in SECTION 11.1, as applicable (and, if TNGC is a
party to such merger, consolidation, purchase or acquisition, an
assumption agreement of the obligations of TNGC under or in connection
with, among others, the Amended TNGC Credit Facility, the TNGC Notes and
the Security Documents to which TNGC is a party and supporting
documentation substantially similar to the documentation described in
SECTION 11.1, as applicable), and (C) no Event of
13
<PAGE>
Default or Unmatured Event of Default shall have occurred and be
continuing or would otherwise be existing after or result from such merger
or consolidation. The Borrower shall not, and shall not permit any of its
Subsidiaries to, sell or dispose of any capital stock of any Subsidiary of
the Borrower except for (i) the Transfer of a Storage Facility Interest as
permitted under SECTION 9.3.8(VII) or to a Guarantor as permitted by
SECTION 9.3.8(IV) and (ii) the Transfer of minority interests in any
Subsidiary of the Borrower pursuant to SECTION 9.3.8(IX).
T. Sections 9.3.8(ii) and 9.3.8(iii) of the Credit Agreement are amended
and restated in their entirety to read as follows:
(ii) the Transfer of any Asset or Assets; PROVIDED that (x) the
Commitment Amount is reduced as a result thereof in accordance with
SECTION 5.5, (y) promptly, and in any event within five (5) Business
Days after the receipt by the Borrower or such Subsidiary of the Net
Proceeds of such Transfer, the Borrower shall provide the
Administrative Agent with written notice of such Transfer, of the
amount of the Fair Market Value and the Net Proceeds thereof, and of
the Borrower's election to make such Transfer pursuant to this
CLAUSE (ii), and (z) in the event of any Transfer of any Asset or
related Assets with a Fair Market Value estimated by the Borrower in
good faith to be in excess of $25,000,000 to any SPVHC, any SPV, the
Parent Company or any Affiliate of the Parent Company (other than to
the Borrower or a Subsidiary of the Borrower), the Lenders shall
have received a written appraisal (dated a date, and using a method
of appraisal and assumptions, reasonably acceptable to the Required
Lenders), from an independent appraiser reasonably acceptable to the
Required Lenders, of the Fair Market Value of such Asset; PROVIDED
that neither a Distribution pursuant to SECTION 9.3.1(i) nor an
Equity Investment in an SPV otherwise permitted by the terms of this
Agreement are Transfers for purposes of this CLAUSE (ii);
(iii) at any time after the Effective Date, (a) the Transfer of any Asset
or Assets having a Fair Market Value at the time of Transfer of
$40,000,000 or less in the aggregate for all such Transfers in any
fiscal year, and (b) the Transfer of any Asset or Assets having a
Fair Market Value at the time of such Transfer equal to or less than
the sum of (1) the lesser of (x) $80,000,000 and (y) the then Unused
Asset Transfer Allowance PLUS (2) the lesser of (x) $50,000,000 and
(y) the sum of Incremental Earnings PLUS Incremental Losses, to the
date of such Transfer MINUS Aggregate Distributions to and including
14
<PAGE>
the date of such Transfer (without giving effect to such Transfer on
such date); PROVIDED that (A) promptly, and in any event within
fifteen (15) days after the receipt by the Borrower or such
Subsidiary of the Net Proceeds of such Transfer, the Borrower shall
provide the Administrative Agent with written notice of such
Transfer, of the amount of the Fair Market Value and the Net
Proceeds thereof, and of the Borrower's election to make such
Transfer pursuant to this SECTION 9.3.8(iii) and as to whether such
Transfer is treated as a Transfer pursuant to clause (A), (b)(1) or
(b)(2) of this SECTION 9.3.8(iii), and (B) in the event of any
Transfer of any Asset (or related Assets) with a Fair Market Value
estimated by the Borrower in good faith to be in excess of
$25,000,000 to any SPVHC, any SPV, the Parent Company or any
Affiliate of the Parent Company (other than to the Borrower or a
Subsidiary of the Borrower), the Lenders shall have received a
written appraisal (dated a date, and using a method of appraisal and
assumptions, reasonably acceptable to the Required Lenders), from an
independent appraiser reasonably acceptable to the Required Lenders,
of the Fair Market Value of such Asset; PROVIDED that neither a
Distribution pursuant to SECTION 9.3.1(i) nor an Equity Investment
in an SPV otherwise permitted by the terms of this Agreement are
Transfers for purposes of this SECTION 9.3.8(iii);
U. Section 9.3.11 of the Credit Agreement is amended and restated in its
entirety to read as follows:
SECTION 9.3.11 BUSINESS ACTIVITIES. The Borrower will not
engage in any business other than acting as the holding company of
the Subsidiaries and the Restricted Entities; the Borrower will
not permit any of its Subsidiaries to engage in any business
activities other than Hydrocarbon transportation, construction,
procurement, sales, leasing, storage, transmission, gathering,
marketing, processing and other related business activities
("PERMITTED BUSINESS").
V. Section 9.3.12 of the Credit Agreement is amended by deleting the
phrase "natural gas transmission, construction, gathering, storage, leasing,
marketing, sales, procurement and processing and related activities" and
substituting therefor the phrase "Permitted Businesses".
W. Section 9.3.16 of the Credit Agreement is amended by inserting the
phrase "OR SECTION 9.3.8(ix)" immediately before the word "herein" appearing in
the last line of such Section.
15
<PAGE>
X. Section 11.3.2 of the Credit Agreement is amended and restated in its
entirety to read as follows:
SECTION 11.3.2 MATERIAL ADVERSE CHANGE. There shall have
been no material adverse change, in the opinion of the Majority
Lenders, (i) since June 30, 1996, in the consolidated business
condition (financial or otherwise), operations, performance or
properties of the Borrower and its Subsidiaries (taken as a
whole), (ii) since the Effective Date, affecting the rights and
remedies of the Lenders under the Loan Documents, or (iii) since
the Effective Date, in the ability of the Borrower or the
Guarantors to perform their respective Obligations under the Loan
Documents to which they are a party.
Y. Section 12.1.6 of the Credit Agreement is amended by inserting the
phrase "any Co-Agent or the Administrative Agent at the request of" immediately
before the phrase "any Lender" appearing in the last line of such Section.
Z. Section 12.1.7 of the Credit Agreement is amended by inserting the
phrase "(taken as a whole)" immediately after the word "respect" appearing in
the ninth line of such Section.
AA. Section 12.1.8 of the Credit Agreement is amended (i) by inserting the
phrase "and Liens of the type permitted by SECTIONS 8.6(i), (iii) and (xviii) of
this Agreement" immediately after the word "Borrower" appearing in the fifth
line of such Section, (ii) by inserting the phrase "or membership interests"
immediately after the word "stock" appearing in the sixth line of such Section
and (iii) by inserting the phrase "or as a result of any transactions permitted
by SECTION 9.3.6" immediately after the phrase "SECTION 9.3.8(ix)" appearing in
the last line of such Section.
AB. Section 12.2 of the Credit Agreement is amended (i) by inserting the
phrase "with respect to the Borrower" immediately after the word "occur"
appearing in the second line of such Section and (ii) by deleting the phrase "or
SECTION 12.1.4" appearing immediately after the phrase "SECTION 12.1.1"
appearing in the last sentence of such Section and substituting therefor the
phrase ", or SECTION 12.1.4 with respect to the Borrower,".
AC. Section 13.5 of the Credit Agreement is amended by inserting the
phrase "guaranty or" immediately after the word "any" appearing in clause (ii)
in the seventh line of such Section.
AD. Section 14.6(a) of the Credit Agreement is amended by deleting the
phrase "natural gas" appearing in the third line of such Section and
substituting therefor the word "Hydrocarbons".
16
<PAGE>
AE. Section 14.13 of the Credit Agreement is amended by inserting the
following phrase at the end of such Section immediately before the final period:
"; and PROVIDED FURTHER that for purposes of this SECTION 14.13 if
the survivor of such a merger is obligated in respect of all
Obligations of the Borrower hereunder and under all other Loan
Documents, a merger permitted pursuant to SECTION 9.3.6 hereof shall
not be an assignment or transfer of the Borrower's rights or
obligations hereunder."
AF. Schedules I and II and Exhibit 8.5 to the Credit Agreement are amended
and restated to read as set forth in Schedules I and II and Exhibit 8.5,
respectively, hereto. All references in any Loan Document to Schedules I or II
or Exhibit 8.5 to the Credit Agreement shall be deemed to refer to Schedule I or
II or Exhibit 8.5, respectively, hereto.
II. REALLOCATION OF COMMITMENTS. On the Amendment Effective Date
(hereinafter defined), the aggregate principal balance of the obligations
outstanding under the Credit Agreement is $443,800,000 (the "Prior
Indebtedness") as shown on SCHEDULE II hereto. Lenders hereby sell, assign,
transfer and convey, and Lenders (including, without limitation, those Lenders
not previously a party to the Credit Agreement) hereby purchase and accept so
much of the Prior Indebtedness and all of the rights, titles, benefits,
interests, privileges, claims, liens, security interests, and obligations
existing and to exist (collectively the "INTERESTS") such that each Lender's
Percentage of the outstanding Loans and Commitments under the Credit Agreement
as amended by this First Amendment shall be as set forth in SCHEDULE II hereto
as of the Amendment Effective Date. The foregoing assignment, transfer and
conveyance are without recourse to the Lenders and without any warranties
whatsoever as to title, enforceability, collectibility, documentation or freedom
from liens or encumbrances, in whole or in part, other than the warranty by each
Lender that it has not sold, transferred, conveyed or encumbered such Interests.
If as a result thereof, a Lender's Percentage of the outstanding Borrowings
under the Credit Agreement as amended by this First Amendment is less than its
outstanding loans and letter of credit reimbursement obligations under the
Credit Agreement on the Amendment Effective Date, the difference set forth in
the last column of SCHEDULE II shall be remitted to such Lender by the
Administrative Agent upon receipt of funds from the other Lenders shown in the
last column of SCHEDULE II on the Amendment Effective Date. Each Lender so
acquiring a part of such outstanding loans and letter of credit reimbursement
obligations assumes its Percentage of the outstanding Borrowings, Commitments,
rights, titles, interests, privileges, claims, liens, security interests,
benefits and obligations under the Credit Agreement as amended by this First
Amendment and the Security Documents and the
17
<PAGE>
Intercreditor Agreement. Lenders are proportionately released from the
obligations assumed by Lenders so acquiring such obligations and, to that
extent, the Lenders so released shall have no further obligation under the
Credit Agreement as amended by this First Amendment and the Intercreditor
Agreement. The Borrower hereby represents and warrants that it has no defenses,
offsets or counterclaims to the Prior Indebtedness or its obligations or rights
under the Credit Agreement, this First Amendment or the Security Documents,
including, without limitation, the Interests being assigned pursuant to this
SECTION II. Each Lender confirms that it has received a copy of the Bank/Exxon
Agreement and represents, warrants and agrees that it has acquired its Interests
subject in all respects to the terms and provisions of the Bank/Exxon Agreement.
Any Loans outstanding under the Credit Agreement on the Amendment Effective Date
bearing interest at a Eurodollar Interest Rate shall be deemed continued as a
Loan under the Credit Agreement as amended by this First Amendment at such
Eurodollar Interest Rate and for the Interest Period with respect thereto under
the Credit Agreement.
III. EFFECTIVENESS. The effectiveness of this First Amendment is
conditioned upon (a) receipt by the Administrative Agent of the following, each
duly executed and each (except for the Notes, of which only one original shall
be signed for each Lender) in sufficient number of signed counterparts to
provide one for each Co-Agent and each Lender:
(i) the opinion of Messrs. Hutcheson & Grundy, L.L.P., counsel for
the Borrower and certain Subsidiaries of the Borrower, in substantially
the form of EXHIBIT A;
(ii) a consent, acknowledgment and agreement as to each of the
Guaranties duly executed by each Guarantor or the Borrower, as the case
may be, in substantially the form of EXHIBITS B, C, D and E hereto
(collectively the "CONSENTS");
(iii) a certificate, in form and substance satisfactory to the
Co-Agents, of the Secretary or an Assistant Secretary and the President or
a Vice President of the Borrower and each Guarantor together with the
signatures and incumbency of officers of the Borrower and each Guarantor
and a certified copy of the resolutions with respect to the transactions
contemplated herein;
(iv) (for delivery to the Borrower) those existing Notes of the
Borrower in favor of those Lenders whose Original Designated Maximum
Commitments have increased, decreased or terminated as shown on SCHEDULE
II, marked "exchanged" or, in the case of a financial institution that
will no longer be a Lender, marked "cancelled";
18
<PAGE>
(v) (for delivery to each Lender whose Original Designated Maximum
Commitment has increased or decreased) new Notes, duly executed by the
Borrower, substantially in the form of Exhibit A to the Credit Agreement,
dated the Amendment Effective Date and with other appropriate insertions
as to payee and principal amount, payable to the order of each such
Lender, respectively, in a maximum principal amount equal to such Lender's
Original Designated Maximum Commitment, as amended hereby;
(vi) such other documents as any Co-Agent or any Lender may
reasonably request; and
(b) satisfaction of the conditions precedent that the purchase of and
payment for the A-Notes and the B-Notes so as to reallocate the commitments
under the Participation Agreement of the financial institutions party thereto
shall have been concurrently consummated.
IV. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES. To induce the
Lenders, the CoAgents and the Administrative Agent to enter into this First
Amendment, the Borrower hereby reaffirms, as of the date hereof, its
representations and warranties contained in Article VIII of the Credit
Agreement, as amended hereby, and in all other documents executed pursuant
thereto (except to the extent such representations and warranties relate solely
to an earlier date) and additionally represents and warrants as follows:
(i) The execution and delivery of this First Amendment and the
Consents and the performance by the Borrower and the Guarantors of their
respective Obligations under this First Amendment, the Credit Agreement as
amended hereby, and the Consents are within the Borrower's and the
Guarantors' respective corporate, limited liability company or partnership
powers, as the case may be, have been duly authorized by all necessary
corporate, limited liability company or partnership action, as the case
may be, have received all necessary governmental consents, authorizations,
orders and approvals (if any shall be required), and do not and will not
contravene or conflict with any provision (a) of Law, (b) of the charter,
bylaws, certificate of formation, limited liability company agreement or
partnership agreement of the Borrower or any Guarantors or (c) of any
material agreement binding upon the Borrower or any Guarantor or any of
them.
(ii) This First Amendment and the Credit Agreement as amended hereby
are, and the Consents, when duly executed and delivered will be, legal,
valid and binding obligations of the Borrower and each Guarantor party
thereto enforceable against each of the Borrower and such Guarantors in
accordance with their respective terms subject as to enforcement only to
19
<PAGE>
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and general
principles of equity.
(iii) No litigation (including, without limitation, derivative
actions and take-or-pay actions), arbitration proceedings or governmental
proceedings are pending or to the best knowledge of the Borrower and its
Subsidiaries threatened against the Borrower, any of its Subsidiaries or
any SPV which would, if adversely determined, materially and adversely
affect the consolidated business condition (financial or otherwise),
operations, performance or properties of the Borrower and its Subsidiaries
(taken as a whole) (excluding any rulemaking or similar proceedings of
general applicability to natural gas pipelines and any appeal or petition
for review related thereto) or continued operations of the Borrower and
its Subsidiaries or which purports to affect the legality, validity or
enforceability of this First Amendment, the Credit Agreement as amended
hereby, the Notes, the Consents or any other Loan Document, except as set
forth in EXHIBIT 8.5 to the Credit Agreement.
(iv) No Event of Default or Unmatured Event of Default has occurred
and is continuing as of the date hereof.
V. RELEASE OF STELLMAN TRANSPORTATION COMPANY PLEDGED STOCK. The Lenders
hereby authorize the Collateral Agent to release from the Pledge Agreement from
TGC, and deliver to the Borrower, the certificate evidencing the shares of
Capital Stock of Stellman Transportation Company, together with all stock powers
related thereto.
VI. DEFINED TERMS. Except as amended hereby, terms used herein when
defined in the Credit Agreement shall have the same meanings herein unless the
context otherwise requires. "AMENDMENT EFFECTIVE DATE" means the first Business
Day to occur on which all conditions to the effectiveness of this First
Amendment set forth in SECTION III hereof shall have been satisfied or waived by
all Lenders, which will in no event be later than December 31, 1996.
VII. REAFFIRMATION OF CREDIT AGREEMENT. This First Amendment shall be
deemed to be an amendment to the Credit Agreement, and the Credit Agreement, as
amended hereby, is hereby ratified, approved and confirmed in each and every
respect. All references to the Credit Agreement herein and in any other
document, instrument, agreement or writing shall hereafter be deemed to refer to
the Credit Agreement as amended hereby.
VIII. GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE DEEMED TO BE A CONTRACT
MADE UNDER THE INTERNAL LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES
SHALL BE GOVERNED BY AND CONSTRUED IN
20
<PAGE>
ACCORDANCE WITH THE LAWS OF SAID STATE. All obligations of the Borrower and
rights of the Collateral Agent, the Administrative Agent, the Co-Agents, the
Issuing Bank, the Lenders and any other holders of the Notes expressed herein or
in the Notes shall be in addition to and not in limitation of those provided by
applicable law.
IX. SEVERABILITY. Whenever possible each provision of this First Amendment
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this First Amendment shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this First Amendment.
X. EXECUTION IN COUNTERPARTS. This First Amendment may be executed in any
number of counterparts and by the different parties on separate counterparts,
and each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same agreement.
XI. SECTION CAPTIONS. Section captions used in this First Amendment are
for convenience of reference only, and shall not affect the construction of this
First Amendment.
XII. SUCCESSORS AND ASSIGNS. This First Amendment shall be binding upon
the Borrower, the Lenders, the Co-Agents and the Administrative Agent and their
respective successors and assigns, and shall inure to the benefit of the
Borrower, the Lenders, the Collateral Agent, the CoAgents, the Issuing Bank and
the Administrative Agent and the respective successors and assigns of the
Lenders, the Collateral Agent, the Co-Agents, the Issuing Bank and the
Administrative Agent; PROVIDED, HOWEVER, that the Borrower may not assign or
transfer its rights or obligations hereunder without the prior written consent
of all Lenders; PROVIDED, FURTHER, HOWEVER, that the successors and assigns of
the parties hereto will take their interests subject to the terms and provisions
of the Bank/Exxon Agreement.
XIII. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, EACH PARTY HERETO WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS FIRST AMENDMENT OR UNDER
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING
RELATIONSHIP EXISTING IN CONNECTION WITH THIS FIRST AMENDMENT, AND AGREES THAT
ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY.
21
<PAGE>
XIV. NOTICE. THIS WRITTEN FIRST AMENDMENT TOGETHER WITH THE
CREDIT AGREEMENT, THE CONSENTS AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be duly executed as of the day and year first above written.
TEJAS-ACADIAN HOLDING COMPANY
By:
Name:
Title:
<PAGE>
CANADIAN IMPERIAL BANK OF
COMMERCE,
as Administrative Agent, as a Co-Agent, and
as a Lender
By:
Name:
Title:
<PAGE>
BANK OF MONTREAL, HOUSTON AGENCY,
as a Co-Agent and as a Lender
By:
Name:
Title:
<PAGE>
CITIBANK, N.A.
as a Co-Agent and as a Lender
By:
Name:
Title:
<PAGE>
THE BANK OF NEW YORK
By:
Name:
Title:
<PAGE>
BANKERS TRUST COMPANY
By:
Name:
Title:
<PAGE>
BANQUE PARIBAS
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
CHRISTIANIA BANK OG KREDITKASSE
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
CREDIT LYONNAIS
By:
Name:
Title:
<PAGE>
CREDIT SUISSE
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
By:
Name:
Title:
<PAGE>
THE FUJI BANK, LIMITED
By:
Name:
Title:
<PAGE>
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By:
Name:
Title:
<PAGE>
LONG TERM CREDIT BANK OF JAPAN,
LIMITED
By:
Name:
Title:
<PAGE>
NATIONAL WESTMINSTER BANK PLC.,
NEW YORK BRANCH
By:
Name:
Title:
NATIONAL WESTMINSTER BANK PLC.,
NASSAU BRANCH
By:
Name:
Title:
<PAGE>
NATIONSBANK OF TEXAS, N.A.
By:
Name:
Title:
<PAGE>
SOCIETE GENERALE, SOUTHWEST AGENCY
By:
Name:
Title:
<PAGE>
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By:
Name:
Title:
<PAGE>
TORONTO DOMINION (TEXAS), INC.
By:
Name:
Title:
<PAGE>
UNION BANK OF CALIFORNIA, N.A.
By:
Name:
Title:
<PAGE>
UNION BANK OF SWITZERLAND,
HOUSTON AGENCY
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
WELLS FARGO BANK (TEXAS) N.A.
By:
Name:
Title:
<PAGE>
BANK OF AMERICA ILLINOIS
By:
Name:
Title:
<PAGE>
THE BANK OF NOVA SCOTIA, ATLANTA
AGENCY
By:
Name:
Title:
<PAGE>
THE SUMITOMO BANK, LIMITED
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
For purposes of selling, assigning, transferring and conveying its
Interests, the undersigned has caused this First Amendment to be executed by its
officer thereunto duly authorized as of the date and year first above written.
THE FIRST NATIONAL BANK OF BOSTON
By:
Name:
Title:
EXHIBIT 11.1
TEJAS GAS CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE(1)
(UNAUDITED)
Twelve Months Ended December 31,
--------------------------
1996 1995 1994
- --------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Weighted average number of common shares
outstanding(2) ................................... 18,756 17,352 17,225
Incremental common shares resulting from
assumed exercise of stock options based
on the stock's daily average market price ........ 261 219 513
- --------------------------------------------------------------------------------
Weighted average number of common shares
outstanding and common equivalent shares
for primary calculation .......................... 19,017 17,571 17,738
Incremental common shares resulting from
assumed exercise of stock options based
on the more dilutive of the stock's daily
average market price or ending price ............. 131 63 --
- --------------------------------------------------------------------------------
Weighted average number of common shares
outstanding and common equivalent shares
assuming full dilution ........................... 19,148 17,634 17,738
- --------------------------------------------------------------------------------
Net earnings applicable to common stock ............. $35,079 $24,544 $22,153
- --------------------------------------------------------------------------------
Earnings per common share on consolidated
statements of earnings(2):
Weighted average number of common shares
outstanding ......................................... 18,756 17,352 17,738
- --------------------------------------------------------------------------------
Earnings per common share ........................... 1.87 1.41 1.25
- --------------------------------------------------------------------------------
Earnings per common and common equivalent share:
Primary earnings per common share ................... $ 1.84 $ 1.40 $ 1.25
- --------------------------------------------------------------------------------
Fully-diluted earnings per common share ............. $ 1.83 $ 1.39 $ 1.25
- --------------------------------------------------------------------------------
(1) Weighted average number of Common Shares outstanding and primary and
fully-diluted earnings per common share, and stock prices used in the
above calculation have been restated to reflect the following: (i) a
three-for-two split of the Common Stock effected in the form of a stock
dividend payable to stockholders of record as of April 26, 1996 and (ii) a
dividend of one-tenth of one share of Common Stock payable to stockholders
of record as of July 27, 1995.
(2) The earnings per share reported on the Consolidated Statements of Earnings
for 1996 and 1995 do not reflect the dilutive effect of the stock options
because the dilution is less than 3%.
EXHIBIT 21.1
TEJAS GAS CORPORATION
SUBSIDIARIES AND RELATED ENTITIES
(as of March 1, 1997)
State of
Name Organization
- ---- ------------
Tejas-Acadian Holding Company Delaware
Tejas Gas Corp. Nevada
Tejas Hydrocarbons Company Nevada
Tejas Gas Transmission Company Texas
Gulf Coast Natural Gas Company (1) Texas
GC Marketing Company (1) Texas
Tejas Gas Systems, Inc. Texas
Hydrocarbon Development Corp. Texas
Tejas-Gulf Corporation Texas
Tejas Gas Holding, Inc. Delaware
Tejas Gas International, Ltd Cayman Islands
Tejas Gas de Mexico, S. de R.L. de C.V. (2) Mexico
Tejas Gas Latin America, Ltd. Cayman Islands
Gulf Energy Development Corporation Delaware
Gulf Energy Pipeline Company Delaware
Gulf Energy Marketing Company Delaware
Gulf Energy Liquids Company Nevada
Gulf Energy Gas Company Delaware
Gulf Energy Gathering & Processing Corporation Delaware
Valley Gas Transmission, Inc. Delaware
Bay City Realty, Inc. Texas
East Texas Industrial Gas Company Texas
Cypress-Sabine Gas Company Texas
Stellman Transportation Company Texas
Acadian Gas Corporation Nevada
Acadian Acquisition Corporation Delaware
LEDCO Acquisition Company, Inc. Delaware
LEDCO Inc. Louisiana
Louisiana State Gas Corporation Louisiana
LEDCO Gas Gathering, Inc. Louisiana
Delta Gas Inc. Louisiana
Acadian Consulting Corporation Delaware
MCN Acadian Gas Pipeline Corp. Delaware
MCN Pelican Interstate Gas Corp. Delaware
MCN Pelican Transmission Corp. Delaware
TXO-Acadian Gas Pipeline Corp. Delaware
Evangeline Gulf Coast Gas Corporation Texas
Evangeline Gas Corp (3) Delaware
Evangeline Gas Pipeline Company, L.P. (3) Texas
<PAGE>
ACADIAN GAS GROUP PARTNERSHIPS (4)
Acadian Gas Pipeline System Delaware
Calcasieu Gas Gathering System Texas
Neches Pipeline System Delaware
Pelican Transmission System Texas
Pontchartrain Natural Gas System Texas
Tejas-Magnolia Energy, L.L.C. (5) Delaware
Spindletop Gas Distribution System Texas
Tejas Natural Gas Company Nevada
Tejas Gas Pipeline Company Nevada
Tejas Pipeline Holding Company Nevada
Tejas North Pipeline Partnership (6) Delaware
Tejas South Pipeline Partnership (6) Delaware
Tejas Gas Services Company Nevada
Tejas Gas Marketing Company Nevada
Cypress Gas Pipeline Company Delaware
Cypress Gas Marketing Company Delaware
Tejas Transok Holding Company Delaware
Transok, Inc. Delaware
Transok Properties, Inc. Delaware
Tejas and Transok Energy, Inc. Delaware
Transok Gas Company Delaware
Tejas Oklahoma Pipeline Services, L.L.C. (7) Delaware
Tejas Oklahoma Natural Gas, Inc. Delaware
Tejas Oklahoma Marketing Company Delaware
Transok Gas Processing Company Delaware
Tejas Oklahoma Newco, Inc. Delaware
TRANSOK PARTNERSHIPS (8)
Downtown Plaza II (8) Oklahoma
Southwest Gathering (8) Texas
Southwest Joint Venture (8) Texas
Mistletoe Gathering System (8) Oklahoma
Roger Mills Gas Gathering System (8) Texas
Tejas Coral Holding Company Delaware
Tejas Coral GP Company Delaware
Coral Energy Resources Services Company (9) Delaware
Tejas Coral Energy Company Delaware
Tejas Coral Resources Company Delaware
CORAL PARTNERSHIPS AND SUBSIDIARIES (10)
Coral Energy, L.P. (10) Delaware
Coral Gas Marketing Company (11) Delaware
Coral Norstar, L.L.C. (12) Delaware
Coral Power, L.L.C. (12) Delaware
Coral GP Company (11) Delaware
Coral Energy Resources, L.P. (11) Delaware
Coral Finance, L.P. (11) Delaware
Redwood Marketing, L.L.C. (11) Delaware
Coral Redwood, L.L.C. (13) Delaware
Catex Coral Energy, L.L.C. (11) Delaware
<PAGE>
- ----------------------
(1) Tejas Gas Transmission Company owns 50% of the partnership interests in
each of Gulf Coast Natural Gas Company and GC Marketing Company.
Unaffiliated entities own the remaining interests.
(2) Tejas Gas International, Ltd owns 80% and Tejas Gas Latin America, Ltd.
owns 20%.
(3) Evangeline Gulf Coast Gas Corporation owns a 45.05% equity interest in
Evangeline Gas Corp. and a 45% partnership interest in Evangeline Gas
Pipeline Company, L.P. Unaffiliated entities own the remaining interests.
(4) The partnership interests in the Acadian Gas Group Partnerships are owned
by subsidiaries of Acadian Gas Corporation.
(5) The common equity interests in Tejas-Magnolia Energy, L.L.C. are owned by
MCN Interstate Gas Corp. and Pontchartrain Natural Gas System. Magnolia
Energy Venture Trust, an unaffiliated entity, owns preferred units.
(6) The partnership interests in the pipeline partnerships are owned by Tejas
Gas Pipeline Company and Tejas Pipeline Holding Company. The partnerships
lease pipeline systems to Tejas Gas Pipeline Company.
(7) Tejas and Transok Energy, Inc. and Tejas Oklahoma Natural Gas, Inc. each
own a 24.5% interest and Transok, Inc. owns a 51% interest.
(8) Transok, Inc. owns a 50% or greater equity interest in each of these
entities. Unaffiliated entities own the remaining interests.
(9) Tejas Coral GP Company owns 20%, and an unaffiliated corporation owns 80%.
(10) Coral Energy, L.P. is a partnership venture between subsidiaries of Shell
Oil Company (1/2 equity), an unaffiliated corporation, and subsidiaries of
Tejas Coral Holding Company (1/2 equity).
(11) Wholly owned subsidiaries of Coral Energy, L.P. (and/or its direct wholly
owned subsidiaries).
(12) Coral Energy, L.P. owns 99%, and Coral GP Company owns 1%.
(13) Redwood Marketing, L.L.C. owns 49%, Coral GP Company owns 1%, and Energy
Management Resources Inc., an unaffiliated corporation, owns 50%.
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS'
Tejas Gas Corporation:
We consent to the incorporation of by reference in the following
Registration Statements: No. 33-32792, 33-44615 and 333-18349 on Form S-8 for
Tejas Gas Corporation Thrift Plan, No. 33-31724 and 33-54946 on Form S-8 for
Tejas Gas Corporation Employee Stock Option Plan, No. 33-47779 on Form S-8 for
Tejas Gas Corporation Director Stock Option Plan, No. 33-64895 on Form S-8 for
Tejas Gas Corporation Director Stock Award Plan and No. 333-06207 on Form S-3
for Tejas Gas Corporation Common Stock Offering, appearing in this Annual Report
on Form 10-K of Tejas Gas Corporation for the year ended December 31,1996.
DELOITTE & TOUCHE LLP
Houston, Texas
March 27, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 45,247
<SECURITIES> 0
<RECEIVABLES> 395,444
<ALLOWANCES> 0
<INVENTORY> 45,389
<CURRENT-ASSETS> 517,331
<PP&E> 1,526,499
<DEPRECIATION> 217,261
<TOTAL-ASSETS> 1,904,548
<CURRENT-LIABILITIES> 488,651
<BONDS> 849,755
50,682
460
<COMMON> 5,138
<OTHER-SE> 435,862
<TOTAL-LIABILITY-AND-EQUITY> 1,904,548
<SALES> 2,107,967
<TOTAL-REVENUES> 2,107,967
<CGS> 1,856,837
<TOTAL-COSTS> 1,962,891
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44,106
<INCOME-PRETAX> 68,888
<INCOME-TAX> 25,416
<INCOME-CONTINUING> 43,472
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,472
<EPS-PRIMARY> 1.87
<EPS-DILUTED> 1.87
</TABLE>
